Bond deal for private boys' school draws scrutiny
A $50 million bond deal to pay for upgrades at the private boys' school Montgomery Bell Academy (MBA) is receiving pushback.
State of play: MBA is seeking tax-exempt bonds through the Industrial Development Board (IDB). The deal would be privately financed through Pinnacle Bank.
- Such tax-exempt bond deals are commonplace and legal under Tennessee law for nonprofit groups, including private schools, and are utilized by universities, health care organizations and community groups to finance improvements.
Driving the news: IDB member Quin Evans Segall first sounded the alarm about the proposal. Segall tells Axios she's concerned the IDB and the public have not had enough time to scrutinize the proposal, since the board just received word about it last Friday.
Why it matters: Segall acknowledges that the law allows for the IDB to approve such deals, but says she's not sure it's good policy.
- "Just because we're authorized under the law to do something doesn't make it right," she says. "When we look at what we're going to spend our time on, it represents opportunity cost."
- "Are we going to spend it doing deals like this that benefit a small community? Affordable housing is a great example of where we should be focusing."
The other side: MBA attorney Chris Whitson says the school will use the money from the bond issuance for a reimbursement financing of new campus facilities, including the wellness center and "improvements to the football and lacrosse fields."
- Under the financing tool, the interest on the bonds is not subject to federal taxes. Whitson says MBA has been approved by the IDB for such deals at least twice before, most recently in 2010.
What they're saying: Whitson emphasized that taxpayers are not on the hook to pay back the debt. The IDB's sole responsibility is to decide if the proposal meets the legal requirement to qualify for tax-exempt bonds.
- MBA headmaster Brad Gioia tells Axios he thinks critics' "beef is more with the state legislature than it is with anyone else."
The latest: Gioia says he hasn't spoken to Mayor John Cooper about the proposal, although Cooper's son attends MBA.
- "This is not a proposition we would have to talk to a politician about, because, as I said, it's very customary."
What's next: The board is scheduled to vote on the proposal today.
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