KYLE MURPHYStaff Writer

Earlier in October, the Board of Mayor and Aldermen approved a request from the Tullahoma City Schools Board of Education to issue construction loan debt for the completion of the Jack. T Farrar Elementary project.

Prior to the Oct. 14 BoMA meeting, the TCS school board approved to send two resolutions to the city board for their consideration and approval. The first resolution was to give notice of the intent to issue the bond and the second resolution gave the structure of how the loan will be issued and how it will be managed.

According to TCS Finance Director Hank Jordan, in early 2021 the school district engaged with a third-party company to review the school facilities, where the decision was made to rebuild Jack T. Farrar Elementary School. He informed the board in October 2021 it was determined by both school and city boards, City Finance Director Sue Wilson and using estimates from engineering firms that it would take out a $15 million bond to complete the project. He said over the next 18 months, as designs and plans were finalized, inflation in the construction market caused the estimated cost to rise to $19.1 million.

“Those estimates we originally got at $15 million were based on 2019, 2020 construction cost,” Jordan said.

Jordan said the school board was moving forward with plans to pull from reserves, which was at $10.2 million for the school year, to pay the extra cost of $4 million, yet he said there will be an extra $2 million costs in engineering, low voltage, construction administration fees and so on.

Jordan said he spoke with Sue and she asked if the school district had considered taking out an additional construction loan instead of using the reserves. He took this information to the school board and looked at the capacity to service the loan, where it was decided with the current sinking fund debt the school district can service the additional loan on top of other existing loans.

He added he thought it was prudent to save their reserves for other buildings needing improvements, as well as the recent growth in the city.

“We know that Tullahoma is experiencing a lot growth or planned growth and it is stressing out elementary schools currently, so we know we will need to address that at some point,” Jordan said.

 When opened to questions, Alderman Busch Thoma asked what the terms of the loan were, and other specific questions regarding the loan. Kevin Krushenski, representative of the Tennessee Municipal Bond Fund (TMBF) said the loan will be a municipal tax exempt debt, adding the loan agreement will be a three-year draw period, where the school board will only be owed the interest on the amount that’s outstanding and the interest rate would be fixed at 4.85% for five years. After five years, the bank can revisit the rate and notify both TMBF and the board if the rate changes, where the board would have 90 days to decide how to proceed.

Thoma asked about the agreement being backed by the city of Clarksville. Krushenski said when TMPF was being set up, the city of Clarksville was an instrumental participant, and they created the public building authority that TMBF administers.

“It is simply the public building authority city of Clarksville in name only,” he said. “The purchaser of this loan will be Citizens Tri-County Bank and they’ve been fantastic to work with over the last four years so we are happy they are a part of the program.”

Alderman Bobbie Wilson asked would the city be able to cover the loan with the sinking fund if sales tax revenue were to continue to decrease. Sue answered and said the city will have the capacity to able to fund it. She added that should there be any kind of issues with sales tax funding there was still a large reserve to pull from.

Mayor Lynn Sebourn asked Jordan if the loan will be paid out of the school’s budget, and not the city’s budget, and Jordan said that was correct. Sebourn then asked what the school’s policy was, in terms of its reserves, so the school can service the loan.

Jordan said there were two pots of reserves. The sinking reserve fund, which can only be spent on debt, while the general purpose reserves is for projects like HVAC repairs. When asked if there were any future outstanding projects in the future that will require an additional bond issue, Jordan said he wouldn’t say they do not. Bobbie followed up and asked if the school had a capital improvement plan. Jordan referred to the 2021 report the district conducted on all facilities and said the district knows there are needs but nothing specific has been laid out.

Alderman Kurt Glick asked Sue if the loan would decrease the city’s lending capacity, and she said it would not influence the city’s lending capacity at all since it would done during the current period. She added if the city were to borrow it wouldn’t be until the next year, so the rates wouldn’t impact the city at all. Glick then asked would the school district be able to use the reserves to put up fences around the playgrounds, referring back to complaints the city board heard from citizens in September. Jordan said the reserves would be used for projects like that.

With no further questions or comments, the board voted unanimously approved both resolutions.