On the ballot: What would the $530.7M Wake schools bond buy?

Wake County leaders are asking voters to approve a $530.7 million school facilities bond this election.

Wake County school board members and county commissioners are pushing for the bond as inflation and high interest rates drive concerns about constructions costs.

Voters will decide by Nov. 8 whether to approve the bond, which would fund work during the 2023-24 and 2024-25 school years.

Proponents of the bond argue a voter-approved bond would have a lower interest rate than a bond financed without voter commitment. Without the voter-approved bond, the school system would likely have to scale down its pursuits and obtain a higher-interest bond.

The project list has already been pared down because of inflation. And because the district isn’t growing as quickly as it was a few years ago, it’s now focused more on repairs and renovation than new schools.

“We have some buildings that are 40, 50, 60 years old, and they need significant updating to get up to speed with [heating and air conditioning],” said Tom Oxholm, a former school board member who is now co-chair of the Wake County School Bond committee. “And lighting and safety and security is big this year for all the schools. So it's a lot of things. It's just not normal wear and tear.”

Robert Luebke, senior fellow for effective education at John Locke Foundation, has expressed caution on the bond, though he and the foundation don’t take sides on the issue.

Luebke noted the county’s stagnant student population and the high cost of debt and construction right now. “And I think the economy being like it is—with inflation, higher interest rates, families struggling—I think we really need to look hard at, are there all other alternatives to do this?” Luebke said.

If the bond fails to pass, Oxholm says it’ll cost taxpayers even more, because the work still needs to be done.

“Instead of doing it with a bond that's paid off over 20 years at a low tax rate — and triple-A interest rate — they have to pay for it over four years,” Oxholm said. “And that just means the taxes will go up even more. So that would be not a good choice.”

According to the North Carolina Department of Revenue, Wake County’s 61.95-cent property tax rate ranks 62nd out of the state’s 100 counties. It’s effective tax rate of 60 cents ranks 71st out of 100.

The bond would fund portions of four new schools, portions of major renovations at eight schools and various replacement projects and upgrades for aging equipment at dozens of existing schools. Specifically, it would fund:

• The construction of three new schools
• The planning costs for two more new schools, including the Wendell Elementary relocation
• A major renovation at North Garner Middle School
• Planning for major renovations at six more schools
• About $49 million of work to replace equipment that’s reached the end of its life cycle at dozens of schools, including: heating, ventilation, air conditioning, boiler and chiller replacements at about two dozen schools; replacement of athletic and performing arts equipment at about a dozen schools; replacement of fire alarms at about a dozen schools; replacement of controls at about a dozen schools.

For the people who own a home at the county’s median home value — about $337,000 — property taxes would rise by about $20 per year for the school bond.

With two other bonds on the ballot and rising county expenses, the county anticipates raising property taxes more than that, by as much as about $51 per year to cover all projects.

High needs, rising costs

In North Carolina, the state must fund education, and counties must fund facilities. But in addition to facilities, every North Carolina County also uses local dollars to fund education. During the 2020-21 school year — the latest for which data are available — counties spent about $3.1 billion on education and about $1.4 billion on facilities.

That same year, counties reported having $12.8 billion in facility needs over the next five years that were not funded by a bond on or other existing revenue sources. That total did not include land acquisition, planning costs and several other costs.

The Wake County Public School System listed about $1 billion in needs through June 2026, not including many of the planning costs the system is including in its bond proposal.

The school board has been delaying work for years, according to Jim Martin, a board member who chairs its facilities committee. The district is already well behind scheduled maintenance of school buildings and construction of new ones to relieve overpopulated schools in the western parts of the county.

Construction costs, even with a voter-approved bond, could leave the district needing to cut from some of its plans.

“There's huge concerns about inflation,” Martin said.

County leaders are asking for less than they’d like to and are only asking to fund two years, in part because of inflation, "but the supply chain, the overall cost is a huge concern,” he said.

The school system could try to improve the efficiency of its plans if costs went up too much, but there’s only so much room to do that, Martin said.

On top of that, construction costs are higher than they used to be for reasons that have nothing to do with current inflation and labor market issues. Martin noted less land is available to build schools now and developers of private projects often take the best land available. So the school system has to do more grading and other work to ready a site for building. It also has to build school campuses out wider now than ever before, because of the rising preference for carpooling that necessitates ample space for parents to wait in line to pick up their children and keep carpool lines off of highways.

Voters last considered a schools bond in 2018, when they approved $548 million for new schools and renovations. They approved of bonds of $810 million in 2013, $970 million in 2006, $450 million in 2003, $500 million in 2000 and $250 million in 1996. They rejected a $650 million bond in 1999.

State records show voters in counties that have pursued them approve of the large majority of bond referenda — that is, proposals that elected county commissioners ultimately approve to go on the ballot.

Other, non-voter approved forms of debt are much more common for counties to pursue. They can have higher interest rates and still impact tax rates.

Uneven enrollment

The school system’s enrollment has stagnated since the onset of the COVID-19 pandemic, in part because of an increase in enrollment in charter schools, private schools and home-schools. Some of that enrollment has reverted back to the school system, though its enrollment still remains slightly below what it used to be, while leaders expect it not to reach 160,000 again for a few more years.

At the same time, about two dozen schools, largely in western Wake County, remain “capped” to new students because they have too many already.

“The cheapest solution would be to bus children from high growth areas to areas where we have seats,” Martin said. “But I don't know many people in western Wake County that want to be bused eastern Wake County, where we have the seats. And so because you have areas of the county that are growing, we have to build schools where that growth is even though we have seats other places in the county.”

New system schools would be mostly in the western portions of the county, though renovations and equipment replacement would be more spread throughout the county.