NEW HANOVER COUNTY — With a school bond expected in 2026, the New Hanover County commissioners and their staff went over debt projections Thursday, most showing the county will max out its debt per capita at some point in the next decade.
READ MORE: New Hanover High long-term needs estimated between $137M and $280M
New Hanover County Chief Finance Officer Eric Credle gave a presentation at the commissioners’ agenda briefing meeting. It covered the county’s debt capacity, policies regarding debt issuance, and potential bond scenarios the county could finance in the upcoming 10 years.
His projections show, when taking into consideration the county’s capital financing outside of the school district, a school bond covering projects other than a New Hanover High School renovation could require the county to change its debt policies or pull money from other sources.
“[The decision-makers] need to consider whether or not putting the vast majority of the dollars toward the New Hanover High is the correct course of action,” Commissioner Dane Scalise said at the meeting, noting he wasn’t advocating one way or the other yet.
The 103-year-old New Hanover High School has long been in need of significant repairs, the most recent work on it costing the county around $8 million after the school’s foundation was found to be failing.
A year ago, the county commissioned a study on the feasibility of repairing and modernizing NHHS. In June, the consultants presented three options: a $280-million rebuild on 70 acres, a $137-million renovation, or a hybrid solution with renovations and new construction ranging from $195 to $230 million. Any solution would require debt financing through county-issued bonds, most likely a general obligation bond that requires voter approval.
The schools district also has identified around $581 million in other potential bond projects, like the Riverlights Elementary School ($43.3 million) and replacements for Pine Valley and Williams elementaries ($166 million combined). The New Hanover County Schools Capital, Bond and Finance Committee, consisting of representatives from NHCS, New Hanover County and the business community, have been tasked with identifying the projects that will be submitted for a bond by the end of October.
NHC Chief Financial Officer Eric Credle presented example scenarios for funding New Hanover High School and other school district capital needs.
- No debt issued
- Issuing a $137 million bond for NHHS renovation
- Issuing a $233 million bond for the NHHS hybrid solution
- Issuing a $300 million bond for NHHS and other school capital needs
- Issuing a $400 million bond for NHHS and other school capital needs
- Issuing a $500 million bond for NHHS and other school capital needs
Each scenario is predicated on the county reserving around $455 million in debt service for its own projected capital needs. These include Holly Shelter Business Park, a Porters Neck fire station, upgrades to the Senior Resource Center and $240 million set aside for a “major project.” Though this hasn’t been decided, Credle used an expansion of the county jail as an example, though county commissioner Rob Zapple indicated identifying another county landfill, as the current one has 20 years left on its life cycle, should be prioritized as well.
In the three highest bond amount scenarios, the debt capacity per capita exceeds the county-imposed cap of $2,200. This cap is designed to keep borrowing, and thus tax burden, proportioned to a community size while also helping to protect credit rating.
In the $300 million, $400 million and $500 million scenarios, the county would exceed the cap around 2034, when the county plans to add its “major project” to the debt rolls.
At $300 million, the per-capita debt capacity peaks at $2,498; at $400 million, it reaches $2,742 and at $500 million it reaches $3,056.
In comparison, the NHHS-only scenarios keep it below $2,200 and the no-bond scenario keeps the per capita amount at a maximum of $1,787, nearly a hundred dollars more than the county’s current per capita is $1,672.
Credle said, though justification could be made for the commissioners voting to raise the per capita allowance, $2,200 “feels about right.”
In its cohort of other North Carolina cities with AAA bond ratings and/or of similar size, a per capita cap of $2,200 puts New Hanover County in the middle of the pack. Guilford County, the City of Concord and the City of Greensboro all have caps at $3,000.
“I would be a little bit concerned if we were to consider a policy change and go up to $3,000 then actually issue debt up to 3,000 because…it would put us to the far extreme right [of our peers],” Credle said.
“All this boils down to what’s going to cost the taxpayers,” Zapple said.
Credle explained $63 million in debt was built into the county’s budget with a property tax rate of 30.6 cents per $100 of value. That debt total is set to be paid down every year, but if the county adds new debt, every $8-million addition would require another penny on the tax rate or be freed up by cutting services.
With a range of $55 million to $65 million per year of debt the county could potentially get by without raising the rate, according to Credle. But exceeding $65 or $70 million, he told commissioners: “You probably are going to be faced with needing to consider a tax rate adjustment.”
Credle also identified other strategies to fund a bond $300 million or above, including raising the per-capita amount, borrowing from the Revenue Stabilization Fund and paying it back, or doing the jail expansion (or other major project) in phases to spread out the funding need across multiple years.
County Manager Chris Coudriet noted commissioners would have to factor “what the community could accept” in debt issuance as well, because voters would be charged with approving the bonds.
Chair Bill Rivenbark raised the question: “I don’t want to be a Debbie Downer, but what if it doesn’t pass?”
No one had a direct answer, though Zapple said the bond projects would need to be strategically picked to include items county-wide, as to affect as many neighborhoods as possible.
Coudriet recommended commissioners, in conjunction with NHCS, decide on the best path forward for NHHS first, then decide on remaining projects.
Rivenbark wanted to know what would make NHHS safe. Two major components of the school’s renovations include better security for its catwalk and transportation drop-offs.
“It may be that phase one and phase two [of the $230-million hybrid solution] create a safe school, not necessarily phases three and four,” Coudriet said. “So there are top line decisions that have to be made over the course of time. It may be that $60 million makes New Hanover functional for 50 more years. It may be that phase one and two make it functional and more modern for 50 years … those are things that we’re going to have to tease out with the board and the board staff.”
The school district’s next Capital, Bond and Finance Committee meeting is on Aug. 27, where the committee is expected to home in on specific projects.
Reach journalist Brenna Flanagan at brenna@localdailymedia.com.
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