A local building authority is an entity designed to secure a specific type of financing for major building projects. City and county councils and school boards use them to issue lease revenue bonds.
Those are an increasingly common way for governments to pay for construction projects without asking voters to pay more taxes.
The Wasatch County School District is the latest to follow that path as it considers expanding to address overcrowding and rapid growth.
According to GSBS Architects, a consultant for the school district, Wasatch High School was nearly 500 students over capacity in the 2021-2022 school year. A study GSBS conducted recommended building a new high school in Wasatch County as soon as possible and a new elementary school soon after.
“Of the full basket of types of bonds that are out there, school districts have very few options,” said Matt Dugdale, school district bond advisor. “This is really just their second arrow in the quiver, and their quiver only has two arrows.”
General obligation bonds, which the district has historically used to pay for construction, must be approved by voters.
According to Dugdale, school districts can pay back lease revenue bond debt out of their existing budgets but also may raise taxes if needed to pay off those bonds. That requires a Truth in Taxation process.
“It's becoming more and more common because it allows you to get to the market quickly,” said Randall Larsen, school district bond attorney. “Your neighbors in the Park City School District recently used it to complete their bonding project because rates weren't too far away from their general obligation, and they wanted to get in while the interest rate didn't climb further nor did construction costs.”
Issuing lease revenue bonds could help the board avoid a repeat of 2019, when voters rejected a general obligation bond to build a new high school. In a public hearing last month, supporters and opponents of that effort agreed that seeking and failing to pass another general obligation bond would be the worst possible outcome.
The board can now convene as the local building authority. It’s required to hold a public hearing before issuing a lease revenue bond.
Also at Tuesday’s meeting, the board authorized the district to restructure up to $14 million in debt payments it’s making for the current Wasatch High School. That move allows the business office to capitalize on market opportunities like lower interest rates.
“This could happen in two weeks, where we could have this done and the prepayment of some principal,” Business Administrator Keith Johansen said. “So, this doesn't obligate us to do anything, unless the interest rate is favorable for us.”
Larsen said the district will look for opportunities to take advantage of low rates and costs. The superintendent, business administrator and board chair can authorize new general obligation bonds for that purpose. General obligation bonds specifically for refinancing do not require the public to vote in favor.
A recording of Tuesday’s meeting is available on the Wasatch County School District YouTube page.
