CLEVELAND, Tenn. - Bradley County leaders are exploring the possibility of using a lease-purchase option as a solution to launching a $14 million overhaul of Lake Forest Middle School, a project that's been cited as a top priority by the county school system for several years.
On Wednesday, the Bradley County Finance Committee heard from architectural firm Cope Associates Inc., representatives of which gave an overview of how such an agreement could benefit the county.
"Where this program works is where the county ... has foreseeable debt-offloading in the future," said Lanis Cope, president and founder of Cope Associates.
The lease-purchase option, offered through Capital Municipal Markets of Denver, buys a municipality time but is not ideal for long-term debt, Cope said. He said a bond would prove less costly after 13 years of annual lease payments.
A lease-purchase also offers flexibility, he said, as the program can be used to finance design, construction and furnishings.
"I would support this if this is the only way we can get Lake Forest built," Commissioner Jeff Morelock said. "Basically what you're doing is kicking a can down the road."
Morelock compared the lease-purchase agreement to similar financing mechanisms used at furniture stores, citing increased costs in the end. He said he recommended that the county fund a bond issue through a property tax increase.
Officials also questioned how annual lease payments would be affected by an agreement between Bradley County and Cleveland that requires the county to raise $1 for city schools for every $2 it raises for the county school system.
The agreement, driven by the relative student enrollment of the two school systems, typically means that Bradley County is required to borrow one-third more for any bond issues for capital education projects of its own. A $21 million bond issue will provide $14 million for Lake Forest Middle School and $7 million to Cleveland City Schools.
Most likely the county will have to share funding with Cleveland City Schools as it makes its annual lease payments as opposed to the lump funding associated with bond issues, said Lynn Burns, financial director for Bradley County.
The Bradley County Finance Committee asked for an opinion from Crystal Freiberg, the county attorney, on the matter.
According to a recent consultation with the County Technical Assistance Service, Burns said, the county also would need to address other concerns, including maintenance requirements and using a fund other than debt service to make lease payments.
The Lake Forest makeover entails the replacement of nearly a dozen classroom pods with a 57-classroom academic building. It is intended to head off at least $6 million in repairs, according to the Bradley County Board of Education.
Paul Leach is based in Cleveland. Email him at email@example.com.