Adviser says $90M debt for school would add to cost

C’ville credit rating not likely hurt, but $5.5M more payments

Issuing $90 million in debt to build a new high school is doable, but would cost Collierville about $5.5 million in additional payments each year, the town’s financial adviser said Thursday.

Lauren Lowe, director of Public Financial Management Inc., said the town would most likely keep its triple-A credit rating even with the extra debt.

The final decision is up to credit rater Moody’s, she said, but as long as the town shows willingness to find ways to pay back debt, the credit rating should not fall.

Lowe presented a 30year debt scenario to the Board of Mayor and Aldermen during a work session Thursday afternoon.

Based on the current market, Lowe said they would be looking at an interest rate around 3 percent.

If the town was to commit to $90 million in debt just for a new school, Lowe said it’s hard to say how much that would limit the town from doing other capital projects over the next 30 years.

“I think it would be at the will of the board,” she said, adding that changes to the tax base could affect how much debt the city could incur. If the town grows in population, additional debt even after the $90 million is possible, she said.

Town finance director Jane Bevill said the town currently pays about $4 million a year on about $33 million of outstanding general fund debt.

Collierville Schools is pleading its case with the community to get on board with a plan for a new high school and to turn the current Collierville High School into a middle school.

Earlier this week, a public-opinion poll showed residents did not support a tax increase up to 38 cents to pay for a new high school. But the vote was both informal and close, decided by only 38 votes out of 4,426.

The town has turned the reins over to the school board and administration to decide how to move forward.

In the meantime, the town is reviewing its financial options. Lowe did not discuss how much the tax rate would have to increase, but town officials have used the 38-cent number as a likely cap on how high it would go.

Town Administrator James Lewellen said the news that the bond rating would not be affected is a testament to the town’s stable financial plan, made up of a diverse stream of revenues.

“To put schools in and put a $90 million shock to your plan is a pretty good test to your financial plan,” he said.

Vice Mayor Maureen Fraser said it was encouraging to hear that the amount of debt the town has is only a small percentage of what factors into its bond rating. If the town decides to move forward with the new school construction, she said they would still have money to do other capital projects along the way.

“We can afford it, we can do it, and we can maintain our bond rating,” she said.