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Schools, colleges can move forward with capital projects under $1.25B bond issue

By MARY SELL, Alabama Daily News

Most Alabama K-12 public school systems will get millions of dollars to make capital improvements under a $1.25 billion bond issuance approved Thursday by the Alabama Public School and College Authority.

A formula approved by lawmakers this spring doles out a base of $400,000 to each K-12 system, then more based on enrollment and a previous education funding formula. At about $977,000, Linden City Schools in the only system getting less than $1 million. The state’s largest system, Mobile County Schools, will receive about $61.7 million, according to information from the Alabama Department of Finance.

Alabama’s four-year universities will receive a combined $217.8 million and the Alabama Community College System will receive $120 million.

State Superintendent Eric Mackey said this is the biggest influx of state-issued bond money to K-12 ever.

“Who it means the most for are the poor school systems that don’t have the capacity to go out to the market for their own money, so they will get a little bit out of this,” Mackey said.

Education entities can use the money for construction projects and repairs on their campuses. The bond issue was a priority this year for Ivey.

“During my State of the State address, ahead of the 2020 Regular Session, I proposed a more than $1 billion bond for Alabama schools, kindergarten through higher education, to put toward various projects and needs,” Ivey said in a statement to Alabama Daily News.

Lawmakers increased that amount to $1.25 billion. 

“Thanks to the Legislature acting on that call, the Alabama Public School and College Authority issued $1.48 billion in bonds to provide funds for capital improvement projects for Alabama’s K-12 schools, community colleges, and institutions of higher education and to refund and retire outstanding obligations of the Authority,” Ivey said. “The Authority realized $27 million in aggregate debt service savings by refunding and retiring outstanding obligations. Even amidst a roller coaster year and COVID-19 derailing the Legislative Session, we remain ever committed to the students and teachers across our state through this record investment.”

Individual School System Bond Issue Funding Totals

Source: Alabama Department of Finance

Besides issuing the $1.25 billion in new bonds, the state is refinancing about $300 million in previous bond money, saving about $24 million, Finance Director Kelly Butler told Alabama Daily News.

The interest rate on the $1.25 billion is 2.17% over 20 years.

“That’s outstanding,” Butler said. “This was a good day to borrow.”

The total debt service on the $1.25 billion and some of the refinanced bonds is about $2 billion, according to information from Finance. The annual repayment will come from tax revenues into the Education Trust Fund.

The legislation allowing the bonds was sponsored by Sen. Arthur Orr, R-Decatur.

“Because the interest rates are so low, the timing is excellent for the state to take advantage of this opportunity,” Orr told Alabama Daily News on Thursday. “There are many school systems across the state that are desperate for capital improvement funding.”

Orr said systems don’t have to spend the money right away. 

“Fortunately, they will have several years until they have to put the money to use because building costs are marginally inflated at the present time.”

Orr said the state has retired a substantial amount of debt in recent years. 

“We had the capacity to take on this bond issue,” he said.

Mackey said that while K-12’s share of the new bond issue is just under $1 billion, that money will be spread among more than 1,600 schools.

“So, it does not mean that you’re going to see brand new campuses going up all over the place,” Mackey said. “What you’re gonna see are roofing projects, classroom additions. I’ve talked to some superintendents that will use it on a new building, but it won’t be enough to do the building itself, they’re combining it with some local capacity to do it. 

“Mostly, what it’s gonna do is help us get over the top with some long-needed classroom expansions or repairs like roofing repairs.”

Butler said schools and universities can now start working on their projects. They must be approved by the Finance Department. 

“They can start that process, if they’re ready, (today),” Butler said.

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