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How will we pay for this bond that won't raise taxes?

5/8/2015

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I can confidently state that the messaging from the NoPAC saying that this bond will increase taxes is absolutely untrue. In my opinion, their expensive misleading messaging is doing such a disservice to our kids and our voters and our community.  I'm no financial expert, but this is my understanding of the facts when it comes to the question "how will we pay for this bond that won't raise taxes?"  

The $52.5M in bonds, if approved, will be paid back using money that the district collects from our taxes.  When you get taxed, the money goes into two pots.  $1.04 of the tax rate is collected and put in our district’s general fund and used to pay personnel (85%) and maintenance and operations costs (15%.)  Another $0.1725 of the tax rate is collected and put into what is called the Debt Service fund (also called the I&S Fund…”Interest & Sinking.)  This money is used to pay off past and current bonds and can not ever be used for anything else.  Let’s say that the bond passes…the district then uses some of this Debt Service money to buy the buses that it needs, and it uses some of this money to keep paying off roof repairs that it made through bond purchases 15 years ago.  If the bond doesn’t pass, then we can use this debt service money to keep paying off past projects (on bonds that were approved years ago) but we can not pay for a new bus.  So if we then need a new bus, we have to take money from the general fund to pay for it.  That means that we have less money to pay for teachers.  

It is important to note that when the district gets the money from the $1.04 tax and puts it into the General Fund, they then have to take 55% of it and give it back to the State for what is called the “recapture program” or the “robin hood program”.  So while the bus paid for with bonds costs only $120,000,  when paid for from the general fund, that bus costs us over twice that much.  This is why it is so helpful to pass bonds to cover these kinds of expenses.  Bonds allow us to keep control of our local dollars.  They also give us a safety net so that when unpredicted maintenance issues come up that must be addressed, we have a way to pay for them without jeopardizing our M&O pot that pays teachers.  When we have bond dollars available to cover these kinds of critical needs expenses, the impact of these expenses on the community and schools and kids is much lower.

It is also important to note that, while the district could opt to extend the life of the bonds to as much as 50 years, they follow a protocol of matching the lifetime of the bond with the lifetime of the purchase  (we are not paying 20 years of interest on an object (think technology purchases) that might only last five years).  And the district does not exceed a 20 year bond lifespan.  This practice, in combination with keeping the I&S rate steady (predictable for both voter and district), is why we have a “superior rating” when it comes to how we handle our debt.  This rating favors us in many ways, particularly in keeping our financing rates low and keeping us competitive in the bond market.  It also means that we are minimizing the amount of interest payments on our borrowed money.  

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    I am an architect.  A Mother.  A Volunteer.  My goal is to inform the dialogue about district issues with my insights from these perspectives. I welcome you to share your perspective....

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