Archive for Bonds

PRESCOTT VALLEY, YAVAPAI COLLEGE AND NAU END JOINT LANDLORD/TENANT EXPERIMENT

TOWN TO RETURN $3.75 MILLION PLUS AN ESTIMATED $600,000 IN INTEREST

Ten years ago Yavapai Community College loaned the town of Prescott Valley $3.75 million. The loan was intended to help finance construction of a town library and space for a college facility. The idea behind the loan appears to have been to entice Northern Arizona University to create an experimental three-year program  located in Prescott Valley. NAU wasn’t prepared to invest in the project. The Community College would be the landlord of the educational facilities portion of the library—about 12,000 square feet plus a 120 car parking area adjacent the library. (The library consisted of a total of about 55,000 square feet.)

The construction project proceeded and by September 2008 Yavapai Community College said it was offering to lease the Community College facility to NAU. (The property is often referred to as a “condominium.”) NAU leased the facility and classes began in 2010. Documents suggest that Yavapai College would offer lower division programs and curricula leading to associate degrees (and when appropriate, selected certification programs); and Northern Arizona University would provide upper division and graduate programs and curricula leading to baccalaureate and graduate degrees.”  

As a part of the initial agreement, if the relationship fell through at some point in the future the College could demand that the town of Prescott Valley return the $3.75 million plus interest. By 2016 the experiment in terms of joint sharing teaching responsibilities appears to have collapsed. The College administrators decided to end the relationship and ask for their money back. However, negotiations for return of the money did not receive formal Governing Board approval until the May 9, 2017 meeting. 

The College hopes to close the deal with Prescott Valley by June 30, 2017.

Under the agreement executed with the town of Prescott Valley, the College had the option of receiving either the fair market value of the facility or the $3.75 million investment plus interest. Because the market value of the facility was placed at $2 million, the College at the May meeting indicated it would ask return of the original loan of $3.75 million plus interest. The interest is estimated at $600,000.

It should be noted that as a part of the agreement between the University and the Community College there was to be an annual report made to the Governing Board. However, the Blog has not been able find any such report. The Blog also has not been able to identify the amount of money, if any, NAU paid to Yavapai Community College as a part of the lease agreement. Finally, because a portion of the original loan came from the 2000 $69.5 million General Bond issue, the returned money must be used for construction projects.  Dr. Ewell said it could be used for the ongoing Prescott Valley construction or for other projects in the District.

It is anticipated that NAU will construct its own facility or find more space in the not too distant future in Prescott Valley.  Other relationships with the Community College appear to be continuing.

The brief six-minute discussion between Dr. Ewell and the Governing Board about the return of the money can be reviewed in the video below.

HOW WAS $69.5 MILLION BOND ISSUE SPENT?

Final 2012 report shows 86% of bond benefits flowed to West County Projects while taxpayers there pay only an estimated 62% in property taxes on the bond

After almost five years, there are still persons asking how the College spent the General Obligation Bond of $69.5 million approved in 2000. To answer that question, the Blog went back to the final spending report issued by the College and posted on the June, 2012 agenda.   

Based on that report, it appears that 86% of the bond proceeds went to projects on the west side of Yavapai County, which has 2/3 or the total County population.  The remaining 14% went to the east side of the County which has about 1/3 of the total County population.  

The bond is paid through secondary property taxes.  Because the Sedona taxing district lies within the east side of the County and has a large amount of expensive property, it is estimated that taxpayers in Sedona and the Verde Valley pay about 38% on the secondary bond each year but receive only 14% of the benefit from it. 

The short one-minute video that follows sets out the data as it was provided to the District Governing Board by the College at the June,  2012 Board meeting.  Most residents living on the east side of the County consider the allocation of revenue to build and upgrade the Verde Valley as unfair when compared to the building and upgrading of facilities on the west side of the County.  See if you don’t agree.

Different methods of raising bond money explained

Community College uses variety of bonds to finance capital projects; student tuition helps with payment of Pleadged Revenue Obligation bonds and Revenue Bonds

Many Verde Valley residents are confused over how the Community College raises money for projects by selling bonds.  At the February Governing Board meeting, Vice President Clint Ewell outlined  the different bonds the College now uses.  He said there are three types of bonds.  They are:  General Obligation bonds, Pledged Revenue Obligation bonds, and Revenue bonds.

BondsThe General Obligation bonds are approved by voters and used for capital projects.  The last time voters in Yavapai County approved General Obligation bonds was in the year 2000 when they approved issuance of $69.5 million dollars in bonds for the Community College. 

Rather than seek voter approval for bonds to support a capital project, College administrators with Governing Board approval can issue “Pledged Revenue Obligation bonds. In the annual financial report issued in June, 2014 the College explained that it used this process in April 2011 when the Community College  District issued $14,000,000 of pledged revenue obligations. The $14,000,000 was used to prepay a capital lease and $9,435,487 was used to construct the Prescott Chiller Water Plant and Clarkdale Central Plant.  According to the June, 2014 Community College Financial Report, “Pledged revenue obligations and revenue bonds are repaid from tuition, fees, rentals, and other charges to students, faculty, and others.”

When it came to financing most of the $7 million dollars to renovate two of the student residence halls on the Prescott campus, the Administration with agreement of the Governing Board issued $5 million dollars in Revenue bonds to pay for construction.  This process also avoided asking for voter approval of the project.  According to the June, 2014 Community College Financial Report, “revenue bonds are repaid from tuition, fees, rentals, and other charges to students, faculty, and others.”   

The Chair of the Governing Board theorized that this process seemed like a fair one when it came to the student residence halls.  Under this theory, the user pays for the construction.  The problem is that the user don’t pay enough  in annual annual rental fees to cover the principal and interest.  Therefore, the facilities must be subsidized at least in part by student tuition.  The result is that thousands of students who pay tuition never use the residence halls but  nevertheless pay for their construction.

 In a statement in the June, 2014 Financial Report, the Community College stated the following:   “Annual principal and interest payments on the pledged revenue obligations and bonds are expected to require less than 17.2% of tuition, fees,  dormitory rentals, and bookstore income. In the current year, total revenues of $10,751,131 were pledged to cover the principal and interest paid of $1,846,981.”  [Video to follow when available.]