Canyons District may turn to lease revenue bonds to stretch school building options amid escalating construction costs

Construction on the new Hillcrest High School in Midvale, above right, continues on Wednesday, Nov. 27, 2019. The new school is being built next to the current school. | Kristin Murphy, Deseret News

SANDY — As the cost of school construction escalates in Utah, Canyons School District is considering other options to finance new schools.

On Tuesday, the Canyons School District Board of Education board was briefed on the option of lease revenue bonds, a type of financing commonly used cities and counties for fire stations and city halls. Lease revenue bonds do not require voter approval and are similar to a mortgage.

The board would have to establish a municipal bonding authority to issue lease revenue bonds, which in the district’s case, could be repaid from its capital levy now assessed on property owners.

According to the district’s public financial advisors, the process to create an authority is outlined in Utah state law. Bond counsel Randall Larsen said the municipal building authority would be the school board’s “alter ego.” The authority would be the issuer of bonds. Mortgage on the project secures the bond.

“It’s quite simple to be honest. It’s just the alter ego of the governing body,” Larsen said.

Other school districts such Alpine and Ogden have recently used or are considering using this option, according to board documents.

This approach, if adopted by the school board, would be used in addition to taxpayer-approved general obligation bonds.

Canyons School District business administrator Leon Wilcox said the lease revenue bonds would be most appropriate for smaller, short-term construction projects such as elementary schools.

The board’s discussion comes as the cost of school construction has escalated amid a building boom in Utah, labor pinch and significantly higher cost of building materials. High schools built along the Wasatch Front for $76 million to $82 million in recent years could double by 2020.

In Canyons District, the new Brighton High School project was expected to cost $87 million. Current anticipated costs are more than $113 million, up 30%, according to school district spokesman Jeff Haney.

In 2017, the rebuild of Hillcrest High School was expected to cost $85 million. The budget for the Hillcrest project is now over $119 million, a 40% increase.

The board is studying the option and lease revenue bonding would likely not occur for a few years should it decide to create an authority.

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