By PAT NEWMAN
pnewman@TheCitizenNews.com

What's the best way to fund new public school construction in Fayette County? There's no perfect solution or quick financial fix, given the options offered by Jim Stephens, finance director for the county school system, and Claude Paquin, a Fayetteville tax attorney.

The two men presented the details of various financial plans Thursday evening during a meeting of the Board of Education's Facilities Advisory and Action Committees.

Stephens outlined how school districts are funded under the Quality Basic Education (QBE) Act in Georgia and what impact House Bill 1187, the Governor's Education Reform Act, will have on local financing.

There are three sources of funding for the school district's maintenance and operation budget, according to Stephens. Local sources make up 44.01 percent of the pie, coming from local ad valorem taxes, other local taxes and fees such as real estate transfer tax, railroad equipment tax, tuition generated by summer school programs evening school and the community school, interest earnings and miscellaneous local receipts.

The big slice, 54.17 percent, comes from the state in the form of the QBE allotment, state grants to include lottery grants for technology equipment and state preschool and other state grants such as those for outdoor classrooms and pay for performance grants.

Federal grants under various “title” programs, primarily for disadvantaged students, fill out the smallest portion of only 1.82 percent.

QBE funding covers 16 direct instructional programs, four separately identified programs such as staff development programs, 10 categorical grants, local fair share and the educational equalization funding grant, Stephens said. Audit tests, explained Stephens, specifies the percentage of money that must be spent in any given area.

The key items impacted by the education reform act require that local five mills or the local fair share remains the same. Increases every year must be based upon tax digest growth. It also requires that the Education Equalization Funding Grant be reduced each year by 25 percent until it hits zero. In fiscal year 2000, the amount is reduced by $2,860,020 with the grant's demise coming in 2004.

Stephens listed four different financing methods for new construction which included state construction grants, special local option sales taxes (SPLOST), general obligation bond issues and other options which included certificates of participation (COPS) and the public facilities authority (PFA) “Both must be paid from operation and maintenance appropriations,” Stephens emphasized. “The Fayette County Board of Education uses 19.84 mills property tax for operations and maintenance. There is no more taxing authority available to support either of these options.” Both of the options also require that the title be held by the lessor, Stephens added.

The most viable still appear to be the bond or SPLOST route for new school construction. Stephens refrained from taking a position on one method over the other, simply citing the advantages and disadvantages of each.

Points cited for SPLOST are:

A very successful financing option throughout Georgia.

Tax is limited to a maximum of five years duration or until the total amount in the referendum is collected.

Can be used as a pay-as-you go by program or can be accelerated by incorporating other financing methods.

Taxes all county residents and others who may do business in Fayette County.

Avoids long-term debt and interest payments.

Can be continued beyond the five-year life only if the voter's recognize the need and approve another SPLOST referendum.

Generates large sum of money over a short span of time.

Sales taxes are no deductible from income taxes.

Does not accrue benefits of inflation that may be seen under a bond issue if inflation occurs over the pay down period.

Stephen's take on a general obligation bond issue states:

It provides immediately available funds for construction projects.

May allow earning of excess interest during construction period within allowable ranges under arbitrage rules.

Requires imposition of property taxes to meet debt service costs over the life of the outstanding issue.

Matches cost with the use of the facility.

Obtains best interest rates available through issuance of tax free bonds.

Obtains best interest rates available through issuance of tax-free bonds.

Obtains 22 percent of proceeds from commercial and industrial segment of the community.

Exempts elderly and certain other property holders from bond taxes.

Existing homestead exemption and governor's new property tax relief exemption cannot be used to reduce the property taxes of the typical homeowner.

Incurs long term debt typically for 20 to 30 years.

Is paid solely by county residents and other property owners.

Last September, SPLOST referendum was turned down by the county voters. The facilities and advisory group is currently seeking the best option to address growth in the schools and is expected to come up with a recommendation in the weeks to come.