When the Jeffco Public Schools district requested a $567 million bond in 2018, voters said yes, by a slim margin. Over the next few weeks, the newspaper will take a closer look at the 2018 Bond and …
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When the Jeffco Public Schools district requested a $567 million bond in 2018, voters said yes, by a slim margin.
Over the next few weeks, the newspaper will take a closer look at the 2018 Bond and Capital Improvement Program, the 6-year project that’s overhauling, and in some cases rebuilding, schools across Jefferson County.
The program has provided many of the improvements, repairs and new facilities as promised, but critics say millions in cost overruns and a lack of transaprency have plagued it from the start.
In a series of stories the paper will explore and explain more about the bond, its finances, the construction issues, the extent to which promises have been delivered and critiquing where the district has perhaps fallen short.
The bond’s start
Starting off with a brief overview of the program and financial model used by Jeffco Schools, we’ll begin where all of the best stories do — at the beginning.
According to Jeffco Schools’ Chief Operating Officer, Steve Bell, the origins of the program can be traced back to 2009. That’s the year the district began working on developing a comprehensive plan known as the Summary of Findings. Bell said the document provides the District with a foundation to evaluate all of the buildings in their asset base.
“We determined that we needed to spend a lot of time and some resources to develop a master plan for our district going forward by evaluating the condition of every facility that we had, what the needs were — and those are evaluated on 12 systemic features within each building,” he said. “In that Summary of Findings, there’s something called an FCI, which is a Facility Condition Index that gives us a numerical evaluation for the condition of each building.”
In 2016, Jeffco Schools also created a District-wide Facility Master Plan to coincide with a bond measure that was going to be on the ballot that year. According to Tim Reed, the District’s Executive Director, Facilities & Construction Management, the 2016 plan looked at all of the District’s facilities, determined what their deficiencies were and recommended closures and consolidations.
The 2016 bond measure was rejected by voters.
But the Master Plan was dusted off and changes were made to the document in an attempt to make a bond measure more palatable to voters in 2018. Although there is some overlap between them, the Summary of Findings and Facility Master Plan are two different documents. They were not created for the same purpose, Bell said.
On Nov. 6, 2018, Jeffco voters approved the measure known as the Jeffco 5B Bond Request, by a margin of less than 2,000 votes.
By passing 5B, Jeffco voters gave the thumbs-up to increase property taxes over several years in order to fund a $567 million dollar bond issuance.
A school bond issuance is a type of loan. The District gets a large lump sum of money up-front and taxpayers pay it off with interest over several years. The money, in this case, $567 million comes from the sale of bonds purchased by investors. Bonds, especially highly-rated municipal bonds, are considered to be a safe investment. They’re also tax-exempt, which makes them even more attractive to certain investors. In some cases, market conditions make investors willing to bid up the price of the bond on the open market. In other words, investors pay more for the bond than its face value. That extra money investors pay is called the premium.
Because of IRS rules requiring 85% of bond money for capital projects to be spent within the first three years, the district wouldn’t have been able to spend the money fast enough if it issued all of the bonds at one time. So, Jeffco Schools issued the bonds in two phases. In 2018, the district issued $325 million in bonds and made an additional $50 million in premiums. That gave the district the money to start multiple projects. In the fall of 2020, Jeffco Schools issued the remaining bonds, and because interest rates had fallen to an all-time low, the premium came in even higher at $68 million. To be clear, the premium is extra money that came as a result of both planning and good luck when the bonds were issued.
One sore spot with critics is the ways in which the district has seen fit to use the premium money and an estimated $11 million in bond interest
A huge chunk of the money for the Capital Improvement Program, comes from the bond money. Another big source of funding comes from a process called capital transfer. In this case, the district is transferring $20 million per year for the bond project’s six years from the general fund, into the bond program. Capital transfer dollars are spent each year for maintenance and upkeep of the district’s buildings.
If you add the $120 million from capital transfer to the $567 million from the bonds, plus the $118 million in premiums and throw in the $11 million in interest earned, it amounts to the lion’s share of funding for the overall program — $816 million. There may be a bit more from interest added into the pot at some point, but for now, that is the size and the funding sources for the District’s Capital Improvement Plan.
In the next installment of this series, we’ll take a look at the program’s considerable cost overruns and changes in the scope of individual projects that might not match voter expectations.
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