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Article published Nov 26, 2008 Maryville delays school construction; city unable to issue bonds due to global financial crisis
By Matthew Stewart of The Daily Times Staff
Two Maryville school projects, including the construction of Coulter Grove Intermediate School, will be delayed for at least one year as Maryville officials attempt to weather the global financial crisis.
Lending firms temporarily suspended the sale of new bond issuance in September, said City Manager Greg McClain at a joint work session Tuesday. When sales resumed, rates rose sharply, and firms are currently selling very few bonds with long-term maturities.
"We can't get anybody to take our bond issue," said McClain, addressing the city's $25 million bond that will help pay for Maryville's new intermediate school and school renovations. City officials plan to use another $10 million in cash to fund the projects.
Maryville's inability to issue a bond is a warning sign from the bond market, said finance manager Kristine Tallent. "The bond market knows (cities and counties) with gilded credits; and when (lending firms) look at who they are and they have to be postponed it's a (systemic problem)," she said, referring to postponed bond issues for AAA-rated counties such as Williamson County and Virginia's Henrico County.
McClain also noted that it would unwise to issue bonds with the future economic situation still up in the air. The economy could take a further dip before it bounces back, and the city would be locked into paying off the bond with funds that might not be available, said McClain.
SDLqI've apologized to Stephanie 30 times," McClain said, referring to Maryville Schools Director Stephanie Thompson. "I don't see a responsible way to do this. We have to be good stewards of the city's money. If this was my money, I wouldn't do it."
The city of Maryville is also facing a potential $1,047,168 budget shortfall this year. This budget shortfall could have a substantial impact on the school system's budget, which had been seeing a 2-to 4-percent increase in local funding each year, said Director of Schools Stephanie Thompson.
School officials projected a 2 percent increase in sales tax revenues this year, and the school system is now seeing sales tax returns that are 4 percent below these projections, said Thompson.
School officials are already examining their budget. Nearly 85 percent of the school system's budget pays for personnel, which is directly tied to programming, noted Thompson. "There's not too many places we can cut. We're looking at everything we can."School project estimates
Barry Brooke, executive vice president of commercial development for property development and management firm Lawler-Wood, which is acting as the owner's representative on Maryville's school projects, presented preliminary estimates to officials at Tuesday's meeting.
The school system's renovations are currently estimated -- without final drawings -- at nearly $4,934,918, said Brooke. Phase 1 of Maryville High School's expansion project has been projected at $14,951,031 using schematic drawings, he said.
The high school's expansion could potentially cost an estimated $80 million at full buildout, said Brooke.
McClain later recommended delaying property acquisitions and reconsidering Maryville High School's expansion options. "We would truly have to do this (expansion project) in phases. We might not have the borrowing capacity and tax rate to absorb this project for 25 years," explained McClain. "Before we could complete this, we'd need a new school."
A Sept. 12 estimate projected Coulter Grove Intermediate School's total cost at $30,486,039, said Brooke. McClain recommended school officials proceed with certain areas of development such as grading work, utility installations and the widening of Sevierville Road.
"We have $10 million in cash and should move forward as if we were going to build the school," said Councilman Tommy Hunt.
All of Maryville's elementary schools and the high school are already overcrowded, said Thompson.
"As an administrator on the front line, when we're talking about an $800 million (budget) shortfall from the state, and the city's deficit, I think our short-term goal should be operating costs," said Lisa McGinley, Maryville Middle School's principal.
Several officials are also concerned how the intermediate school's postponement could affect the system's already cramped schools. "When the economy slows down, people will build houses faster than we can build schools. We're already overcrowded now," noted school board member Christi Sayles.