Pottsgrove ‘Response’ To Press Makes Financing Case

Mercury Reporter Evan Brandt

Reporter Evan Brandt

POTTSTOWN PA – The following is the verbatim text of an e-mail distributed Feb. 2 (2014; Sunday) by the Pottsgrove School District in response to a Jan. 29 article by Pottstown Mercury reporter Evan Brandt about proposed financing of Pottsgrove High School renovations:

“The Pottsgrove School District wants to respond to a news story in the Pottsgrove Mercury on Friday, January 29, that we feel doesn’t take into consideration the basic tenants of sound, long-term financial planning for the health of a large organization like a school district.

The School District is about to embark on a $30 – 35 million expansion and renovation of Pottsgrove High School, a project that has been under discussion for several years. The district considered two options to finance the cost of the project. One was a straight borrowing of $35 million that would be paid back over the 20-year life of the loan. Another was to take what’s known as ‘wrap around’ debt financing where existing debt is retired and replaced with new borrowings at lower rates. With this option, the district is able to borrow more money while keeping the principal and interest payments roughly the same as they are today and repay the debt in 15 years. It’s essentially like refinancing your home mortgage at a lower rate so that you have enough money to renovate your kitchen while keeping your payments the same. This is the option that the Pottsgrove School Board chose.

Currently we have approximately $6 million dollars in a capital reserve fund to cover improvements at our other four school buildings. The Pottstown Mercury stated that a less expensive option would be to use a half million dollars of that reserve fund to reduce the loan amount for the high school.  Short term, that would mean we’d borrow less money, but we’d leave the district at great risk for having insufficient funds to cover future repairs should a furnace, roof, driveways, etc. need to be replaced or fixed.  If the district has to borrow money for those kinds of expenses at a later date, it would likely require an increase in property taxes – something the district and board would like to avoid whenever possible. Interest rates are currently near an historic low, and any smart financial planner would recommend borrowing funds at the lowest possible rate.

Pottsgrove has an AA bond rating because of its financial prudence. That bond rating allows us to get lower rates. One of the things that bond rating agencies evaluate is the amount of money set aside for emergency repairs.

The borrowing plan that Pottsgrove chose adds very little impact on the district’s tax rate. It’s a financially sound decision that protects the fiscal health of the district, and maintains a safe learning environment for our students.

If you have any questions about the district’s financial decisions, please don’t hesitate to contact Business Manager David Nester 610-327-2277 at dnester@pgsd.org or Superintendent Shellie Feola at 610-327-2277 ext 1011. Additionally, you can contact the school board at schoolboard@pgsd.org.”

Related (to Pottsgrove High reconstruction):

Photo from The Mercury