Gwinnett School Board capitalizes on ISC to bring more new schools to students ahead of schedule
|When the Gwinnett County Board of Education purchased a former manufacturing facility in November 2004, it gained much more than sorely needed office space for system-level staff whose work supports the teaching and learning in Gwinnett’s 106 schools. The Board also gained a valuable asset that will allow the school system to put more students in classrooms, more quickly than originally anticipated. By leveraging the facility that will become the Instructional Support Center (ISC) at the end of this year, the Board will be able to bring at least two additional elementary schools on line by August 2007.|
“We repeatedly hear the concern of parents and teachers about school overcrowding,” said CEO/Superintendent J. Alvin Wilbanks. “Thanks to the sales tax for schools we have been very aggressive in building classrooms in recent years. But our needs continue to be great and we must do all we can to provide relief for crowded schools as quickly as we can. That is what the community expects and what the Board and I are committed to doing.”
Consistent with that pledge, the Gwinnett County Board of Education gave the green light to leveraging the ISC as a means of financing over 100 more new classrooms. At its July 14 meeting, the Board approved a “sale leaseback” agreement under which it will sell the ISC facility on Old Peachtree Road in Suwanee to the investment partnership Gwinnett Instructional SC, LLC. The school system will enter into an operating lease agreement with the partnership, which will allow the system to repurchase the ISC any time after July 1, 2008.
According to the agreement, the Board will sell the ISC to Gwinnett Instructional SC, LLC for $17 million, which is $4.5 million above the Board’s original purchase price of $12.5 million. The sales price represents a 21 percent return to the school system. The investment partnership will then finance an additional $26 million in necessary renovations and improvements, including furnishings and equipment and relocation of the system’s data center, to convert the former manufacturing plant into an instructional support facility. The school system will retain control over all planning and construction related to the conversion.
As a result of the sale leaseback agreement, sales tax revenue that was budgeted for the ISC will become available for building additional classrooms. In addition, the Board’s lease payments will be significantly below the current market rate for comparable properties. The school system’s cash outlay will be minimized, making more funds available for building classrooms. All told, close to $24 million will be freed up, enough to fund at least two new elementary schools, plus possible additions at existing schools.
“The new schools are planned to relieve the elementaries in the Grayson and Dacula areas, where rapid growth continues. We know those schools will reach the crisis point if we cannot provide classrooms more quickly than our current funds allow,” said Wilbanks. “By opening more than 100 classrooms ahead of schedule, we will be in much better shape going into the next sales tax program, which is critically important as we continue to add students.”
Beginning July 1, 2008, the system will have the option of repurchasing the ISC from the investor partnership at a fixed price. “Our intent, absolutely, is to buy back the facility at the right time economically, but certainly within the 2008-2012 time frame,” said Wilbanks. Although the repurchase price will be moderately higher than the cost of the system completing the improvements with its own funds, the additional cost ultimately will be offset by the economic benefits of building two new schools at today’s construction costs, rather than delaying them until a future building program.
“We are fortunate to have this unprecedented opportunity to do even more to relieve crowding in our schools,” said Wilbanks. “We are leveraging the considerable value of the ISC and building two additional schools which could not be funded in the current capital program. That is good news for students and the citizens of Gwinnett,” said Wilbanks.
Completion of the transaction is expected to occur within two to three months. The Board enlisted the services of Merchant Capital, LLC, the investment banking firm that arranged the financing for the school system’s 2004 lease-purchase program, to assemble the investors and execute the transaction on its behalf. Further information will be forthcoming as the final transaction date approaches.