Frederick County’s school headquarters cost cut by $2.2 million -- Gazette.Net


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The Frederick County Board of Education has shaved $2.2 million from the cost of the school system’s controversial $16.7-million central office building in downtown Frederick.

But some board members said they were disappointed that the school district would have to pay a $470,000 fee — or 3 percent — to refinance their loan with The SunTrust Leasing Corp.

The seven board members voted unanimously on Nov. 14 to refinance the school system’s 25-year lease and reduce their annual interest rate from 4.62 percent to 3.1 percent.

The refinancing will allow the school system to accrue the savings during the life of the lease, which currently costs the school system $1.1 million a year, with the money coming from the operating budget. If the savings came all at once, the system would have saved less money.

Three board members, Donna Crook, James “Jimmy” Reeder Jr. and Brad Young, criticized their predecessors for signing a contract that was too restrictive.

But recently re-elected board member Kathryn “Katie” B. Groth, who served when the contract was approved, defended the decision.

“Who knew in 2007 what was going to happen?.... We just made the decision with the best information we had at the time,” Groth said, referring to the country’s economic recession.

But Crook, who was also on the board at the time, disagreed.

“I knew. I spoke loudly about this,” said Crook, who has voted consistently against any spending on the central office project.

Crook, who was defeated in this year’s primary election, opposed the agreement in 2007. She also voted against the school system’s $497 million budget in 2010 because it included $2 million for the central office.

“It was a horrible deal,” Crook said. “We are not going to pay for this, the children are going to pay for this.”

The controversial structure, which was constructed in 2010, allowed the school system to consolidate 250 school administrators from four Frederick County locations into a new building at 191 E. South St. in downtown Frederick.

When the board approved the project in 2007, officials argued that the consolidation would save them money on renovations. School officials also said they would pay for the new building from their operating budget rather than capital budget, so that it would not compete with school construction and renovations.

But critics — who often refer to the building project derisively as the “Taj Mahal” — have pointed out that while the central office was constructed quickly, aging schools were still waiting in line for capital funding.

School officials had hoped in 2007 to use $8.6 million from the sale of four county school buildings to reduce the cost of the project. That is the only pre-payment allowed under the terms of the original agreement.

But due to the poor economy, their value has decreased dramatically, and school officials now are estimating they can only recover about 50 percent of that money. All of the buildings are currently in some stage of the school system’ multistage sale process, according to Ray Barnes, director of school system facilities.

The two sales closest to completion are buildings at 7630 Hayward Road, which is being sold to the Ausherman Development Corp. for about $1.37 million, and 115 Church St., which is being sold to Better World Builders LLC for about $1.5 million, Barnes said.

The school system also is moving forward with a $430,000 offer from the city of Frederick for a property on Hayward Road and a $440,000 offer from St. Thomas More Academy for the sale of the 103 Prospect St. building in Middletown, Barnes said.

In an effort to make up for the loss in property values, school officials this year started considering refinancing of the project. To complete that deal, the school system hired a consultant, Davenport and Company LLC, which will be paid $15,000 to $20,000 upon completion of the refinancing.

Reeder, who is a branch manager and vice president at Columbia Bank, had hoped that SunTrust would agree to waive the penalty fee for the refinancing.

“I wish I would have been here,” Reeder said referring to the school board’s work in 2007. “Those are things that you negotiate.”

However, board members pointed out that the school system is still able to save money by refinancing.

“I like the $2.2 million that we are going to save,” said Smith, who also sat on the board that approved the central office project.

Although not happy about the existing agreement, Miller said she backed the decision to refinance.

“I will do what’s in the best interest of students with the hand that I am dealt with right now,” she said.

mraycheva@gazette.net