FSCC to finance fine arts center with bond issue

Fort Scott Community College officials have found a way to save the college money and also finance the proposed $7 million Danny and Willa Ellis Family Fine Arts Center.

FSCC officials have chosen to use industrial revenue bonds to finance the proposed fine arts center that is scheduled to begin construction next month.

FSCC is moving closer to starting construction on the proposed 33,000-square-foot facility, the first academic building on the FSCC campus in 20 years, having already collected about $6.3 million of the $7.2 million needed to build the facility through pledges and donations the past two years, officials said.

FSCC President Clayton Tatro said the industrial revenue bonds will allow college officials to begin construction on the building next month, without having to raise the remainder of the money immediately, and pay off the loan within the next 15 years, since FSCC currently has limited funds available.

"We have about $6.3 million in pledges so far, some of which will not pay out for the next five or 10 years," Tatro said. "And the college only has about $2 million in cash on hand right now."

Industrial revenue bonds are the most cost efficient financing method available for this particular type of construction, an FSCC statement said. Other than helping FSCC officials get the facility built, the bonds could also provide other benefits to the college as well, Tatro said.

"This will address the cash flow issue between now and when the bonds are paid," Tatro said. "IRBs are state-approved financing. It's a more systematically sound method (of financing). It could also save us $1 million in terms of finance costs."

At a public hearing that took place Sept. 4 during the Fort Scott City Commission meeting, commissioners approved the issuing of about $7.6 million in industrial revenue bonds to FSCC for the purpose of building the new fine arts center. The bonds will be issued by the city to provide FSCC with funding needed to begin construction on the center this fall on the main FSCC campus, and to acquire, equip and install furnishings and fixtures inside the building, according to city documents.

The City of Fort Scott will own the building and lease the facility to the FSCC Endowment Association, a non-profit corporation that is the fund-raising arm of the college.

"FSCC is continuing their commitment to being fiscally responsible by seeking an avenue that, in the long run, will be financially sound for both the college and the community," the statement said.

The FSCC Endowment Association had recently researched the best possible way to fund the building's construction, which is slated to be complete in April 2009. Some pledges the college has received are set up on a multi-year plan that limits a steady cash flow. Because of this, FSCC is borrowing the funds needed now for construction purposes and will then pay off the loan within the next 15 years as the donors' pledges come in, the FSCC statement said.

Industrial revenue bonds are among the most popular and cost-efficient methods of financing up to 100 percent of a growing business' land, buildings, and equipment. They are securities issued by cities, counties, and the Kansas Development Finance Authority.

Proceeds from the sale of bonds to private investors are made available to enable creditworthy companies with the ability to purchase land and pay the costs of building and equipping new facilities or the costs of acquiring, remodeling, and expanding existing facilities for projects that benefit a community, according to the Kansas Chamber of Commerce Web site.

If industrial revenue bonds are used to finance certain types of facilities, interest payable to the owners of the bonds is exempt from federal income tax. This type of bond is generally called a 'tax-exempt' bond. FSCC also views the lease agreement with the city as a viable option because the low interest rate they will be able to secure as part of the agreement will be far lower than any interest rate they would be able to get from another financial institution, the FSCC statement said.

The burden of the payment of the bonds will fall solely on the FSCC Endowment Association. Although FSCC had to go through the City of Fort Scott to obtain the bonds, the city will not actually incur any responsibility for the repayment of the loan. Kansas state law explains that the Endowment Association would be under sole obligation for this debt and the city would not. The law also states that under no circumstances can the bonds be paid for with taxation.

The groundbreaking for the new fine arts center is scheduled to take place at noon Oct. 5 on the FSCC main campus, 2108 S. Horton St.

The Endowment Association is also continuing its capital campaign to raise money through pledges and donations to help build the center, even through its construction phase, Tatro said.

The center, named after local philanthropists Danny and Willa Ellis, will contain a 600-seat auditorium, several fine arts and performing arts classrooms, art studios and gallery space, and the 3,000-square-foot Gordon Parks Center for Culture and Diversity. The floor plan for the building includes the nearly 12,000-square-foot Kathy Ellis Academic Hall, named after the Ellis' late daughter who died in 1997. The center will also contain a 19,000-square-foot performing arts hall.

In January, FSCC documents showed that the center will require nearly $6 million in construction costs. Money the college collected since fund raising efforts began include about $4.2 million through a fine arts campaign, $1.5 million through a bank loan to help pay for construction costs, and almost $2 in money acquired through fund raising events, according to FSCC documents.

FSCC has about $4.5 million in assets that will be used to pay bills for the project until early 2008, officials said.