Local Building Authority

On January 9, 2018, our Alpine School Board decided to create a Local Building Authority (LBA).  The main reason behind this is to rebuild Scera Park Elementary in Orem in order to consolidate that population of students with Hillcrest.  Hillcrest will be closed but the property will be retained for future use.  Since the original consolidation plan included many more schools and the possible sale of the Hillcrest property, the savings from those closures and the sale of the property would have allowed the Board to pay cash to rebuild Scera Park.  As such, the savings from closing Hillcrest will be close to $800,000 each year, but insufficient to rebuild an school at the cost of $18M.  So, the LBA was created to accomplish this goal.

An LBA is allowed under state law and allows the Board to finance things over time without using property tax increases as collateral for the debt.  School districts in this state are not allowed to use a regular debt scenario like you and I do for a mortgage or a construction loan.  We have to either pay everything off within a year (short-term loan) or use a tax-related funding process.  We could also do something called a revenue loan which would work if we were building a rec center and we could use the fees (the revenue) from that rec center as the payment.

You can read all the information, including the By-Laws and the Articles of Incorporation here. (See Local Building Authority Mtg Documents.pdf)  The LBA is subject to the same open meeting laws as the ASD Board, and all LBA meetings will be held at the same location and place as the ASD Board meetings, when an LBA meeting is required.

The essence is this.  The ASD Board of Education (ASD Board) members automatically become the Board of Trustees of the Alpine Local Building Authority (LBA).  So as members are elected and so forth, the make-up of the LBA changes accordingly.  I had concerns about the ability of the LBA to remove board members and that language was removed from our documents.  The action of the Board on the 9th simply created a non-profit corporation, the LBA.  At the Jan. 23 meeting of the LBA, the proposal will be to seek a loan for the purpose of rebuilding Scera Park.  The LBA gets the "mortgage" for Scera Park and the school is the collateral for the loan.  The ASD Board then signs a lease with the LBA for Scera Park, paying the amount required to cover the cost of the Scera Park loan.  Then the LBA gets the amount agreed to in the lease from the ASD Board and pays the lender for the Scera Park loan.  The LBA, as a non-profit, makes no money in the transaction.  The lease is also written so that upon payment of the loan in full, Scera Park will automatically transfer ownership from the LBA to the ASD Board.  This allows the amount saved from consolidating Hillcrest of nearly $800,000 to be used, annually, to pay off, over time, the Scera Park rebuild.

My opinion of the Pros.  The advantages I see are: 1) The Hillcrest consolidation savings are used to pay-off Scera Park. 2) There is no tax increase required for this transaction and the savings in one area of the budget can be used to pay for buildings.  Currently, this could only be done if we chose to pay cash completely for the building.  We could use our rainy-day fund to pay for Scera Park upfront, and then take 18 years to pay it back.  That decreases our rainy-day fund by about 20% with no guarantee that it would be repaid.  The decrease would also negatively impact our credit rating for future bond rates.  3) It allows for building construction to begin more quickly without going through a bond election and so forth.  In theory, if we had the funds in the budget from savings in other areas, some of the West's growth could be accommodated by accelerating buildings without waiting for the bond cycle in 2020.

My opinion of the Cons.  1) The LBA only requires 24 hour notice for actions that regular board meetings are given.  The LBA can go into debt for any number of buildings, additions, appurtenances either inside or outside the district boundaries with a simple majority vote by the LBA board (aka the ASD Board).  2) The Board could use the LBA to finance things that do not take precedence on a bond by the public.  In short, it could skew our building priorities to reflect more internal priorities instead of those demanded by the people.  Some of the things that might be financed by the LBA board which the public hasn't wanted to see in a bond would be: Clear Creek renovation, District Office renovation, etc.  As long as there is a revenue stream that will cover the annual debt payments to the LBA, the Board can finance things as it sees fit.  This is the essence of Local Control, but it also requires diligence from the people in making sure those who are elected to the Board have an understanding of what they should and shouldn't do in this arena.

By way of information, the following entities have set up LBAs.
Duchesne School District
Granite School District
Jordan School District
Morgan School District
Ogden School District
Piute School District
Sevier School District
South Sanpete School District
South Summit School District
Tooele School District
Uintah School District
Grand County