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Schools

Interim Financing May Aid School Renovations

More funds are needed in addition to what has been raised by Measure E to start construction on the Horace Mann and Hawthorne campuses.

The Board of Education on Wednesday agreed to pursue a plan to start Measure E-related construction on two of the city’s five schools, even though it is unclear if and when the remainder of Measure E funds will become available.

The board asked Chief Facilities Manager Nelson Cayabyab to come up with detailed plans to start construction at in 2012 and in 2013. Compared with the district's other campuses, both K-8 schools are believed to be in the worst condition in terms of earthquake preparedness and meeting state educational specification requirements, such as proper handicap access and appropriate classroom size for the number of pupils.

As Patch , the board learned July 19 that changing market conditions and flat property tax values had voided the Beverly Hills Unified School District’s plans to raise $334 million by 2018 through Measure E. The district’s bond consultant, Keygent, said that assumptions made about the assessed value (AV) of Beverly Hills property was inflated when Measure E passed in 2008. The bond was based on the belief that the AV of property would rise an average of 5.77 percent for 2009 through 2011, but the city’s AV rose just 1.75 percent during that time.

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The BHUSD has $60 million available from selling its first round of Measure E bonds in 2009, which is enough to renovate Horace Mann. An additional $80 million is needed to rebuild Hawthorne and to start the necessary planning of construction at the other three city schools.

Keygent recommended that the district issue $80 million in Bond Anticipation Notes (BANs), a form of interim financing that would allow BHUSD to access bond proceeds five years before the actual issuance of bond sales. The board agreed to consider such an issuance after Keygent executives said they did not believe the BANs would jeopardize BHUSD’s from Standard & Poor's and Moody's Investors Service.

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“The rating agencies consider how likely it would be that the district could eventually issue the bonds necessary to pay off the BANs,” Keygent Managing Director Tony Hsieh told Patch. “The agencies would take comfort in the fact that the district still has more than $200 million in bond-issuance authority under Measure E.” 

The board asked Hsieh to come to its next meeting Aug. 24 with exact details for issuing the $80 million in BANs. Cayabyab will also return with more details on his plan to renovate Horace Mann and Hawthorne, using existing funds and proceeds from the BANs. The board is likely to take formal votes at that meeting on both proposals. 

Without BANs, the only way to move forward with Measure E construction would be to raise the bond tax rate for residents. California’s Proposition 39 gives the board authority to raise the existing rate by a limited amount. Most board members, however, said they were not comfortable doing so without taking the issue to voters.

The board’s decision to pursue initial construction at just two schools is somewhat of a victory for member Steven Fenton, who had argued at the July 19 meeting that the community needed to see school construction begin in order to believe that Measure E would work. Renovations at two campuses would make it easier for the board to ask residents to consider raising taxes further in order to fund construction at the remaining three schools, he said.

Fenton also noted that rebuilding Horace Mann could help the southeast part of Beverly Hills, where more affordable housing is attracting new residents.

“Young families moving into the city are making a beeline for the areas east of Doheny [Drive],” he said. “Horace Mann could become the jewel of the southeast.”

If the board agrees to issue the BANs, the proceeds would be available within three months of its decision, according to Keygent. But such an outcome could become a campaign issue in this fall’s .

“BANS are literally borrowing against future borrowing, and given the unsettled nature of the financial and real estate markets it would be imprudent to make permanent commitments of construction with short-term funding,” Damien Bean, a member of the BHUSD’s Facilities Advisory Committee and a 2011 candidate for school board, told Patch. “This is akin to taking a cash advance on a credit card because you’ve applied for a home equity loan with the bank that hasn’t yet gone through."

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