Hartnell lowers debt, mulls new bond

Voters and taxpayers in the Hartnell Community College District were handed a dual-edged sword of news on Tuesday.

First, officials proudly announced the refinancing of a portion of the $131 million Measure H, which will lop off millions of dollars from the total tax debt.

Second, Hartnell is exploring the possibility of placing a new $170 million bond before voters, perhaps as soon as November.

The college Board of Governors has authorized Hartnell President Will Lewallen “to investigate the feasibility of a bond measure.”

“That’s all it is at this point,” Lewallen said.

Earlier, at the news conference held in the board room on the main campus in Salinas, Lewallen announced that the college took advantage of lower interest rates and acted before the recent nosedive in the stock market to refinance Series D of Measure H, which voters passed in 2002.

The bond “transformed” Hartnell, said Lewallen. It paid for major improvements, reconstruction and modernization projects. Among them are the ag-tech focused Alisal Campus in east Salinas, the new STEM building scheduled to open in the fall, and new Learning Resource Center which replaced the old single-story library.

“Saving the taxpayers millions of dollars through this refunding is our way of demonstrating that we are good stewards of the resources entrusted to us by the taxpayers.” Lewallen said.

In all, $94.8 million of issued bonds under Measure H was refinanced. The refinancing will save property taxpayers $175 million over the remaining life of Measure H, Lewallen said. It drops the total tax debt from $540 million to $365 million.

The 2015 General Obligation Refunding Bonds were sold with an average interest rate of 4.25 percent. They expire in 2049.

The tax rate of $31.77 per $100,000 of assessed valuation was reduced to $22.95, said Lewallen.

The debt repayment ratio was reduced from $11.67 per dollar repaid to $3.26 per dollar, he said.

Lewallen emphasized that seeking another bond is strictly in the exploratory stages. He added that the needs are clear: the college’s master facilities plan shows much more major work to be done. Among the projects are to expand the campus in south Monterey County and broaden the nursing and allied health education programs.

Also speaking at Tuesday’s press conference were Hartnell board President Erica Padilla-Chavez, and Deneen Guss, chairwoman of the Measure H Citizens' Oversight Committee.

Padilla-Chavez praised the public-private partnership used in expanding and modernizing the college under Measure H in a financially prudent manner “to improve education across the valley.”

Guss said taxpayers put their trust in the college board and administration to deliver on the promise of “world class learning facilities” through Measure H – and they did.

The refinancing of Measure H was aimed at bond Series D. The first three series of the bond, A, B and C, were issued at rather low interest rates. However, Series D for $48.4 million was issued under the controversial Capital Appreciation Bonds, or CABs. As the recession took hold in 2008, many school districts were forced financially into using CABs, which came with 40-year terms instead of the usual 25 to 30 years for bonds, and at much higher interest rates. CABs were viewed as a costly and risky form of financing that resulted in crippling debt for some districts.

Unlike conventional bonds with shorter terms and payments that begin immediately, CABs postpone the payments for decades. Using a CAB in 2009 bloated the entire Measure H price tag for taxpayers.

Today, a state law now places stringent restrictions on school districts and community colleges considering the use of CABs.

Under the latest refinancing, Lewallen said there are some CABs remaining but “it’s better than what we had … we didn’t lengthen the repayment term. It’s still the same (2049).”

“That was very important to us as we were putting this all together. We were not going to put another burden on the taxpayers,” he said.

Once the new STEM Building opens, Measure H – minus a small project – will be exhausted. “It’ll be a few dollars once we finish up the STEM Center,” Lewallen said.

Meanwhile, next month the college board will hear a report on whether there is community support for another bond to continue improvements and expansion of Hartnell across the geographically vast district.

Some projects targeted under a new bond are spelled out in the college facilities master plan and would include: expansion of the campus in south Monterey County, broadening the enrollment; and modernizing the nursing and allied health programs in Salinas.

“We know our nursing program is fabulous but we can only admit a certain amount each year … and the need is twice that,” said Lewallen

“Even though we’re building this beautiful STEM Center, it’s not enough. … We’re busting at the seams in the STEM fields,” he said. More science labs and facilities are needed in King City and elsewhere to expand the reach of the sciences and ease enrollments on the main campus in Salinas.

Not all of the projects for another bond have been pinpointed, he said.

A survey is under way to gauge community support for a new bond. The board will hear the results at its meeting next month.

Follow Roberto M. Robledo on Twitter @robledo_salnews #salinas. On Facebook, visit: Roberto Robledo community journalist. On Instagram: rrobledo69

What’s next

The Hartnelll College Board of Governors will meet at 5 p.m., Tuesday, Feb. 2 in the board room, 411 Central Ave., Salinas.