The School District of Lancaster board has approved a funding plan for a second phase of proposed school upgrades that should save the district at least $25 million in interest payments.
The board last week approved a plan to borrow $30 million this year, $25 million next year and $15.7 million in 2012 to pay for upgrades to five schools, a former youth group clubhouse and the district's administrative center.
The projects are expected to cost about $70.5 million and take 18 to 24 months to complete after construction begins in late 2010 or early 2011.
The district plans to float the first two bonds totaling $55 million through the Qualified School Construction Bond program.
The federal stimulus-subsidized effort provides school construction bonds at nearly zero interest for schools that have high tax rates and/or poverty levels or are experiencing rapid growth.
The exact interest rate SDL will pay has yet to be determined, but financial planners project it will be less than 1 percent.
Compared with open-market rates of about 4 percent, the QSCB program should save the district $25 million to $30 million in interest payments, said Ken Phillips, managing director of RBC Capital Markets and a financial adviser for the district.
To repay the bonds, the district would incur a relatively small increase in taxes.
SDL's tax rate is projected to rise by 0.170 mills beginning in 2013 and stay at that level until the bonds are paid off in 2035. That increase would boost property taxes for the average district homeowner by about $20 per year, said Matt Przywara, SDL's chief financial officer.
Those projections are based on a 1 percent interest rate on the $55 million QSCB bonds and an average rate of about 4.4 percent on the $15.7 million in traditional bonds.
The district expects to borrow the first $30 million by the end of September.
SDL was one of two Lancaster County districts to qualify for a share of the $600 million in QSCB funding provided for Pennsylvania schools.
The other district is Donegal, which plans to borrow $17 million through the program to pay for a proposed $48 million high school.
SDL's proposed Phase II projects include:
•$17.3 million worth of renovations and new construction at Hand Middle School.
•$14.4 million worth of renovations and new construction at Martin Elementary School.
•$8 million worth of upgrades at Fulton Elementary School.
•$4 million worth of upgrades at Phoenix Academy.
•$3.65 million for the purchase and renovation of the former Boys & Girls Club Steinman Clubhouse for use as classroom space.
•$2 million to convert the top floors of Carter & MacRae Elementary School into district offices.
•$2 million to renovate Scheffy Administrative Center for use as classrooms for Lincoln Middle School.
Construction costs would total about $51.35 million. With architects' fees, contingencies and other "soft costs," the projects are expected to cost about $70.5 million.
The district has appointed architects, but design work has yet to begin.
While phase two planning continues, SDL is completing the $55 million first phase of school upgrades at Wharton, Washington, Ross and Lafayette elementary schools.
Work on those schools is scheduled to wrap up by next year.