Klamath County Commissioners may take action within the next month on a $4.5 million loan requested by Klamath Falls City Schools, but no action has been set in stone, according to Commissioner Derrick DeGroot.
The loan request aims to help fill gaps in the budget to complete Klamath Union High School’s renovation project.
The loan request, which would be paid over the course of about 20 years with an estimated 3.5 percent interest, would be used to finish renovations to the performance and fine arts building under construction on KU’s campus, tagged at $7.5 million to $8 million. The total project is approximately $49.5 million, including costs for the academic building, the majority of which was completed this summer.
If approved, it would be the first time the county would loan to a school district, which is made possible by House Bill 3435 approved in 2017, co-sponsored by State Rep. E. Werner Reschke.
DeGroot testified in support of the bill in Salem, and said he believes it is very important for Klamath County to have additional options for getting the best return possible for funds contain in the Local Government Investment Pool (LGIP).
“In 2013, the return on that pool was just over a half of a percent, and has been historically very low, so having the ability to increase the county’s return on those dollars I think is very important,” DeGroot said.
The Secure Rural Schools fund currently has between $22 million and $24 million, according to DeGroot.
“The funds that are in this account are dedicated to our roads, we have the ability to help improve our schools, and we have the ability to help fund the sheriff’s patrol,” DeGroot said.
“These dollars — as they sit right now — are in good shape, but they’re from Secure Rural Schools, and those dollars don’t look to be reauthorized (in the Legislature). In fact, the last authorization expired the first of October this month … I understand people’s concerns about how these dollars get invested or how they get spent. It’s the board’s goal to make these dollars last as long as possible and while we have them in the account, increase the return.”
DeGroot said the likelihood that the SRS funding may be reauthorized as well as as the needs of the Sheriff’s Office will be taken into consideration with a decision on the loan request.
While DeGroot confirmed he would likely vote yes to approve the loan, he emphasized the board is still weighing the loan request and that no action has been taken yet.
“It has the potential to be a win-win for an investment within the community and for the county to increase the return and have a better investment,” DeGroot said. “But at the same time, we understand that the school qualifies for a bank loan just like like many other school districts have qualified for bank loans,” DeGroot said, “and they don’t need us to complete this project … they’re well qualified for a bank loan and they would get one if they asked.”
DeGroot’s comments reference remarks made by the school board that they could seek a loan from another agency if they needed to do so.
DeGroot, a KU alum, said he feels no pressure to approve the loan but that he does want to see the renovations to the school completed, whether its through the help of the county or through a loan from another agency.
“We’re just making sure that when we finalize the loan, that it meets the requirements set forth by the house bill that gives us the ability to do this, and at the same time, is the right investment for the community,” DeGroot said.
Paul Hillyer, superintendent of city schools, expressed confidence that commissioners would likely approve the loan request during an interview with the H&N on Wednesday.
“We’ll just draw on the money as we need it,” Hillyer said, referring to the loan amount, “maybe on a quarterly or monthly basis.
“That first year, all we will be paying is the interest on whatever it is we draw out our first year,” Hillyer added. “And then starting the second year, then we’ll start paying off the principal of the loan.
“Commissioners are determining whether or not it’s going to be a variable interest rate loan, depending on what the government pool account interest rate is. It could go up or down depending on that.”
Hillyer said city schools hopes to have the arts building, under construction by Diversified Contractors, Inc., completed by June 2019.