Consequences could be tough if board pulls out of building Whale Branch High

February 3, 2009 

The Beaufort County Board of Education will hear tonight from its financial advisers about the consequences of halting construction on Whale Branch High School in Seabrook.

Representatives from McNair Law Firm, the school district's bond counsel, and Ross, Sinclaire & Associates, the district's financial adviser, will attend the meeting.

Board member Joan Deery of Hilton Head Island moved to halt construction on the school after a consultant's report distributed at the Jan. 20 board meeting predicted continued enrollment declines in the part of the county the high school would serve.

A Columbia attorney said the school board should consider several complex issues before deciding whether to stop construction on the school, which was approved by voters in a bond referendum in 2000. The attorney, April Lucas, is a lead partner in the economic development and public finance groups of the law firm Nexsen Pruet.

If the board votes to stop construction, it would have to determine what to do about bonds it has issued to pay for the $35 million project. Ideally, the district would buy back the bonds it issued and thereby avoid raising the property tax rate on school debt service to pay for the project, Lucas said.

But the solution might not be that simple. Depending on the terms of the individual bonds, the district might not be allowed to pay off the debt early, she said.

It's also possible the proceeds would become taxable if the money isn't used for the purpose initially reported to the Internal Revenue Service. Bond lawyers would have to work with the IRS to find a solution, Lucas said.

The board also should consider its bond rating, which is determined by rating agencies such as Moody's and Standard & Poor's, before making a decision, Lucas said.

The agencies would question a district's decision to cancel the project after construction began, which Lucas called "a very unusual circumstance."

"If you have an odd situation, if the district decides today, 'We need it,' and they decide tomorrow, 'No. We don't need it,' how sound is the management of the district?" Lucas asked.

IF YOU GO

•What: County Board of Education meeting

•When: 6 p.m. today

•Where: Beaufort County Council Chambers, 100 Ribaut Road, Beaufort

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