School Committee Approves $30 Million Short-Term Borrowing for Whitman Middle School Project
District forced to seek BAN as "bridge loan" after long-term bond bids fail due to delayed audits
HANSON - May 7 - The Whitman-Hanson Regional School Committee has approved a $30 million short-term borrowing to finance the Whitman Middle School project after challenges in securing long-term bonds.
The short-term borrowing, which matures on March 18, 2026, comes after no bidders stepped forward for the district's planned long-term bond offering.
"On the first, we were going to the market for $30 million worth of bonds. We had two syndicates that were showing interest, but at the deadline, both chose not to bid," explains Stephen Marshall, the district's business official.
One potential bidder indicated they "did not have enough business in order to bid," while another cited issues with the district's delayed audits for fiscal years 2023 and 2024.
The short-term borrowing from Oppenheimer and Company includes a 4.875% interest rate and comes with a $42,000 premium. It will be used to pay an $8 million note due on May 15 and provide $22 million for ongoing project costs.
Committee members expressed concerns about the short-term nature of the borrowing, with Dawn Byers asking about potential risks.
"If we borrow for 25 years, then that's going to push that note for 25 years, and you'll push that amount to the taxpayers over that extended period of time," Marshall explained, with member Glen DiGravio describing the current arrangement as essentially a "bridge loan."
The district plans to refinance the short-term borrowing with long-term bonds once the delayed audits are completed. Officials are confident the FY23 audit will be completed by the end of June, with the FY24 audit expected to follow more quickly.
"We've submitted all of the documents today that have been asked of us to our auditor for FY23," Marshall said. "All of 24 is already in Munis. It makes it much easier."
The audit delays stem from a technology breach several years ago that compromised district financial systems. Committee member Kara Moser emphasized this point for the public.
"This is not financial malpractice on the school committee's part or on our business department's part. It is a direct outcome of that secure technology breach that happened," Moser said.
George Ferro, Assistant Superintendent, explained the technical challenges behind the audit delays.
"Our auditing company only takes the files from Munis. So because there were no files in the 22, you had a system before the breach. Some was in it. Then you had nothing," Ferro said. "The following year we kept everything in Excel, basically, because we were rebuilding Munis."
Committee members also discussed how the district's financial reserves impact its bond rating. Marshall noted that regional school districts face disadvantages compared to municipalities because of caps on their excess and deficiency (E&D) accounts.
"For double-A, triple-A bond ratings, I've heard numbers as high as 15% for free cash in order to get at that top rating, and we're capped at that 5%," Marshall said. "So we might never get to a bond rating that's comparable to a municipality."
The district's current E&D balance stands at approximately $660,000, which represents about 1% of its budget, well below the 5% cap.
Committee members discussed the importance of building reserves through stabilization accounts and contributions to Other Post-Employment Benefits (OPEB) funds, which would help improve the district's bond rating.
Chair Beth Stafford thanked Marshall for his work securing the financing.
"To work through this process and be able to keep the project going on time is very important," Stafford said.
In other business, the committee:
- Heard presentations from Indian Head Elementary School student council members and high school student advisory representatives
- Received updates on the successful passage of school budget articles at both Whitman and Hanson town meetings
- Discussed the upcoming May 17 override votes in both towns that will determine school funding levels
- Approved the reappointment of Dr. Belcher as the school physician
- Accepted donations from the Wampatuck Lodge of Masons ($276) and Hanson Rotary Club ($200) for Hanson Middle School
- Changed the committee's reorganization meeting from May 19 to May 21
The meeting marked Dawn Byers' final session after six years on the committee. Byers received recognition for her financial oversight and advocacy for student-centered policies.
"You have always displayed consistency, diligence, and perseverance to the beliefs that you hold true and strong, and to the students of our district in your role as a member," said Ferro.
Before entering executive session, representatives from the Whitman-Hanson Association addressed the committee with concerns about the state of contract negotiations.
"We've made significant progress in negotiations and good faith bargaining and are apprehensive about how this is going to affect us moving forward with unit A and our other units," said Cindy McGann, speaking for the association.
The association representatives expressed concern that recent changes in school committee representation on the negotiating team have "derailed" the process, bringing it to "a complete standstill."
With Byers resignation from the bargaining team, member Rosemary Hill was appointed to replace her at the School Committee’s February 26 meeting.
"As of right now, we have no further meetings scheduled to negotiate because of this issue," McGann said, urging the committee to "re-evaluate your role and the representation that you have in this process."
Disclosure: South Shore News founder Justin Evans is a current member of the Whitman Select Board.