Washington County mayor feeling rushed to analyze latest school lease proposal

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WASHINGTON COUNTY, Tenn. (WJHL)- Washington County Mayor Joe Grandy was pressed for time Thursday morning. The reason? The latest version of the highly complex proposal for a new Jonesborough school to be leased by the county had come back from the town Wednesday night, complete with numerous changes.

“They sent some more changes this morning,” said Grandy, sounding mildly exasperated. “We are once again backed into a corner of having to review very sophisticated documents with our backs to the wall with a timeline.”

That timeline involves publicly posting the draft of a proposed lease between the town and the county as part of a seven-day public notice for a planned called County Commission meeting Oct. 17. Under the lease, which could be voted on in that Oct. 17 meeting, Jonesborough would bond the project through USDA Rural Development and the county would “lease to own” with payments that cover the note.

“Our last version went to their attorneys Oct. 2,” Grandy said. “It took seven days to get their response and essentially they just unwound all the stuff we put in there, so … we may be in worse shape than when we started.”

While Grandy said he thinks the Rural Development approach to building the school — cost estimates for which have hovered around $30 million — “is a good way for (Jonesborough) to go,” he made it clear the short timeline isn’t his preference. “We’re trying to make the best decisions for all the citizens of Washington County,” Grandy said.

He said the county plans to publish what they’ve received in order to comply with the seven-day public notice rule, “because that’s all we have.” He added, though, that the county “will add commentary to the website with respect to certain areas where we’re still in disagreement.” Grandy said that commentary should be on the county’s website by early next week.

Why the rush?
Jonesborough Mayor Chuck Vest stressed a couple of weeks ago that time was of the essence in finalizing an agreement. Thursday, Grandy said that is related to how long (90 days) Rural Development locks in a maximum interest rate. That “hold” is for a rate of 3.0 percent and began Oct. 1. That gives Jonesborough until Jan. 1 to work on the loan application, after which time the town would have to seek an updated rate that would last through March 2020.

“The nice thing about Rural Development is when it’s sold, if the market rate is 3.5 (percent) in this case they’d use 3.0, but if it’s 2.5 percent they use 2.5,” Grandy said. “It’s a nice instrument in a moving environment.”

Why the caution?
One complexity involves the fact that the county school system wouldn’t own the K-8 facility for at least 20 years (or longer, depending on the loan’s amortization period). That brings with it questions of liability.

No less concerning, though, is the question of whether this approach would withstand potential legal challenges because it diverges from the standard funding model for school construction. Traditionally, counties that include separate city school systems must proportionally share money borrowed for school capital projects.

Washington County avoided that standard recently by using cash reserves to fund the newly constructed Boone Creek K-8 school. Johnson City students have comprised around 47-48 percent of the total student population in the past few years.

As a result, that move — supported by an earlier court precedent in McMinn County — saved county taxpayers in the neighborhood of $30 million. And while Johnson City residents and businesses account for about 60 percent of total county property tax revenues, it left the Johnson City Schools facing an unprecedented situation.

The Jonesborough school proposal is a different animal, Grandy said. The county engaged attorneys from Baker-Donelson to study whether the approach could hold up in court. Grandy said those attorneys have told county representatives, “as long as our lease payments are going to capital improvements, we believe it’s defensible within the statute.”

“That’s why these lease agreements and the details in them are so important,” Grandy said. “We feel like it would be foolish to pay for this advice and not adhere to it.”

SEE ALSO: Washington Co. Commission calls special session to vote on Jonesborough School Plan

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