KYLE MURPHYStaff Writer

The Tullahoma City Schools Board of Education recently approved to send two resolutions to the Board of Mayor and Aldermen regarding the Jack T. Farrar Elementary project.

In the Sept. 24 meeting, the board was presented with two resolutions related to the expansion and renovation of the elementary school. TCS Finance Director Hank Jordan said the first resolution is an initial resolution to authorize the incurrence of indebtedness by the City of Tullahoma not to exceed $6 million, with proceeds designated to cover expenses related to the project. The second resolution would issue the loan and provide the framework for how the loan will be issued. Jordan said if approved, the resolutions will be sent to the Tullahoma Board of Mayor and Aldermen for their consideration at their Oct. 14 meeting,”

 “With the city serving as our funding body, any debt request must be approved by and issued to the city,” Jordan said.

Jordan went over the context of the project and the loan details with the school board, and said for the project itself, the total fixed-cost budget the board approved in June 2024 for the construction portion of the project was $19.1 million. Additional project costs will include an $800,000 contract with Central Technologies for network cabling, security systems, access control and classroom audiovisual equipment. He added the architecture, engineering and construction administration expenses were estimated at $775,000.

“Furthermore, the existing building will be converted into an early childhood education center,” he said. “Altogether, the total projected cost to complete the expansion and renovation is approximately $21 million.”

Jordan reminded the school board members that in 2021, TCS secured a $15 million bond to fund the project. He stated that, based on the then-current estimates, $15 million was expected to cover most of the costs; however, as designs and plans were finalized over the next 24 months, inflation in the construction market caused the estimated cost to rise to $19.1 million. When the board adopted the construction budget, the intention was to use the school district’s general purpose reserves to cover the additional $6 million was the plan, yet after consulting with both City Finance Director Sue Wilson and the schools Finance committee, Jordan said it was wiser to take the construction loan and maintain reserves.  

“Two reasons specifically are that we have the capacity to pay this loan, and we believe we should maintain our reserves for use in emergencies or other smaller projects as needed,” Jordan said.

Some of the details of loan include: the loan is a $6 million fixed-rate draw loan, with disbursements available monthly upon request and need; the interest rate will be locked for five years, where the current offer is 4.85% but the rate could change depending on the timing; the loan has a three year draw period, during which the school district will only be required to pay interest; after the draw period, the principal will be repaid annually over 20 years, while interest will be due semi-annually; and there is a 0.60% loan fee, $36,000, payable at closing which can be drawn from the loan itself.  

Regarding repayment capacity, Jordan said the school district was fortunate to have the capacity to manage the loan thanks to the city’s sinking fund, which was established through a private act specifically to handle school debt service. As of the meeting, the school district is servicing four existing loans, with FY24 debt payments totaling $3,160,000, compared to sales tax sinking fund revenue of $3,050,000.

“While this results in a slight deficit of $110,000, we have $2.5 million in reserves in this account,” Jordan said. “For FY25 and FY26, we anticipate a similar reserve usage. However, we will pay off one of our loans in 2026, and another loan’s annual payments in decrease by $869,000 in 2027.”

If the resolution is approved, the projected annual debt payment in 2028 will be approximately $2.8 million, which is sustainable given the current sinking fund revenue.

“To be clear, we are seeking your approval to send these resolutions to the Board of Mayor and Aldermen for their approval, as the TCS Board of Education cannot approve or borrow money,” Jordan stated.

TCS Chairman Kim Uselton made the motion to approve the resolution to be sent to BoMA, with board member Teresa Lawson. When opened to discussion, board member Pat Welsh said it was important to point out that the city is not paying for the debt, the school system will pay for the debt. Board member Andy Whitt added with the sinking fund there is money set aside to handle this kind of situation as well.

“It helps manage what I would call our reserve working capital, and also gives us flexibility to finish the Farrar project too,” Whitt said.

Uselton said a sinking fund can be set up for anything, and the sales tax sinking fund was set up for TCS years prior, and thank Jordan for all of his work into the matter, as well as Wilson and the Tennessee Municipal Bond Fund for their assistance.

With no further discussion, the board unanimously approve the resolution to be sent to BoMA for its consideration at the Oct. 14 meeting.