Agenda - 11-12-2024; 3 - Additional Discussion on School Capital Funding Policy

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3 Attachment A November 12, 2024 Other Capital Uses The county recognizes that there are expenses that may not be consistent with the Woolpert definitions of priority, nor can be covered in the Current Expense budget. These could include athletic upgrades, component replacements, capital leases, technology purchases. Other Capital Uses will be funded by Recurring Capital and Article 46 Sales Tax Proceeds as described below. Sources of Funds The categories below describe the set sources of funding that the county uses to fund School Capital Improvements. The county supports these investments using Article 40 and Article 42 Sales Tax Proceeds as defined in State Statute § 105-502 (a). Any additional county funding above these required revenues shall come from Property Tax as needed and approved by the Board. Bond Funds and Supplemental Pay-Go In order to meet the funding requirements for the school optimization plan, the County Commissioners voted to seek a $300 M Bond Referendum and to supplement this bond with an additional $100 M of tax supported Pay-Go (or cash) funding. The intent of the bond funds is to fund Maior Projects such as facility replacements and significant renovations as identified by the school districts. The Bond funds are to be allocated between the districts at $174.7 million to Chapel Hill-Carrboro City Schools and $125.3 million to Orange County Schools. The supplemental Pay-Go funds are intended to cover all professional services, project management and design costs related to construction. After the Major Projects are completed, the supplemental pay-go will provide additional annual funding for High Priority Needs and increase the county's annual maintenance funding for the school district portfolio. Annual County Debt Financing The county currently borrows funds on an annual basis to fund both district's annual capital projects, in the amount of$4,429,718 in FY 2025. These funds are currently estimated to increase by 2% annually. These funds will be used to support both district's High Priority Needs. Lottery Proceeds Lottery proceeds represent the state of North Carolina's contribution towards funding school construction. The state currently manages three lottery programs for school capital: Public School Building Capital Fund, Public School Repair and Renovation Fund, and Needs-Based Public School Capital Fund. These funds are allocated by the state to specific school districts, but the county is responsible for applying for and drawing down the state funds. The County shall aggressively apply for and drawn down all funds available to both districts in coordination with school district staff. In cases where the county draws down lottery proceeds to offset debt service costs on prior school debt issuances; the county shall do so. The county will then provide the districts the same amount of funding as Pay-Go, to provide additional flexibility to the districts. These funds will be used to support the districts' High Priority Needs.