$140 million bond issue for school projects is almost complete

J. H. Osborne • Mar 14, 2017 at 10:00 PM

BLOUNTVILLE — On March 31, Wells Fargo Bank will wire slightly more than $140 million to Sullivan County, Kingsport, Bristol and Johnson City, having won a six-way bidding competition for the county's issuance of that amount in bonds to fund school facilities projects for the three systems in the county.

The Sullivan County Commission approved the bond issue in December.

The county sought bids and received six repies. Opened March 8, they offered interest rates ranging from Wells Fargo's winning 3.605005 percent to Bank of Amercia Merrill Lynch's bid of 3.674057 percent, according to public records on file with the county's accounting office.

Closing is scheduled for March 28, to be followed by wire transfers of the proceeds to each entity on March 31.

Each school system's share is based on number of students served. Estimated percentages and proceeds are: Sullivan County Schools, 47.989 percent 9,329 students), about $67.19 million; Kingsport City Schools, 32.341 percent (6,287 students, not including 472 who live in the Hawkins County portion of the city), about $45.28 million; Bristol, Tenn., City Schools, 19.29 percent (3,750 students), about $27 million; and Johnson City Schools, .38 percent (74 students), about $533,000.

Johnson City wasn't originally on the list to get anything, and the system didn't seek to be included. But the bond debt will be paid back over 30 years using revenue generated by the county property tax rate, so legal counsel involved in the bond process said the proceeds must be shared with all those who will be paying those taxes — including Sullivan County property owners — who have been annexed into Johnson City, meaning children there go to Johnson City Schools.

Last month, the Sullivan County Commission amended its December resolution approving the bond issue to include Johnson City in the proceeds.

In all, the $140 million will, including interest, cost about $238 million to pay back over the 30-year life of the bond debt.

When the County Commission voted in favor of the bond issue, it was told it would require an estimated 9 cents on the county's property tax rate to pay it back.

Accounts and Budgets Director Larry Bailey, in answer to a question from the Times-News on Tuesday, said the 9 cents remains a good figure.

According to the Tennessee Comptroller of the Treasury, when Sullivan County's last fiscal year ended on June 30, 2016, the county had total debt of $56 million, or $357 per county resident.

That placed Sullivan County well below the debt level of some surrounding counties. Hawkins County, according to the comptroller's office, had total debt of more than $79.6 million, or $1,401 per county resident. Washington County's numbers for 2016 were listed as not available by the comptroller's office, but for fiscal year 2015, its total debt was more than $155.1 million, or $1,261 per county resident.

Bailey said even with the $140 million bond issue, Sullivan County does not have a relatively large total debt.

According to the comptroller's office, for 2015 — the most recent year for which numbers were available — the estimated total value of property in Sullivan County was more than $13 billion, compared to about $3.78 billion in Hawkins County and $10.27 billion in Washington County.

The school facilities plan has long been talked about as a need and has been developed over the past two and a half years.

The $140 million will allow each of the three school systems (Sullivan County, Kingsport and Bristol) to undertake major building projects and/or modifications to their existing systems. As part of the plan, Kingsport and Sullivan County have agreed Kingsport will pay the county $20 million for Sullivan North High School, raising the county's total take to about $87.19 million.

Sullivan County plans to build a 1,700-student high school in the area near Exit 63 of Interstate 81 and an 800-student middle school in the Sullivan East High School zone and do limited renovations on Sullivan East and convert South and Central high schools to middle schools. Kingsport will build a regional science and technology center at Dobyns-Bennett, convert North into a city middle school and do some work on D-B. Bristol will replace Vance Middle School with a new building.

The Sullivan County Board of Education has picked a 112-acre site behind the former Sam’s Wholesale Club off Exit 63 of Interstate 81, called the Lynn Road site, for a proposed $60 million, 1,700-student high school. They also chose a 69-acre site on Weaver Pike just south of Sullivan East for a proposed $20 million, 800-student middle school, choosing a site that someday could be home to a new elementary school, too.

All three local school systems, the governing bodies of both Bristol, Tenn., and Kingsport, Eastman Chemical Co., and hundreds of other local businesses as represented by the chambers of commerce for both Bristol and Kingsport endorsed the plan.

Bailey said a 30-year bond issue is longer than typical, but in this case it is reasonable because based on history, the schools being funded will likely be used for at least that long.