I thought the reason for delaying putting a bond measure on last November’s ballot was to give us time to discuss and formulate how we, as a community, wanted to accomplish the much needed capital improvements in the School District. Even in delaying the vote for seven months, the Board may have left itself short on talk time. In just two weeks, the Board will vote on a resolution to put something on the June ballot.
Only lately did it release some vital figures pertaining to the proposed bond measure: The actual amount of the bond, $106M, its 30-year length, the estimated total cost to the community in principle and interest of $217.5M. The Board also released an example of how the estimated $111.5M in interest payments could be spread out over the 30-year period by clever interest-only payments. Knowing the overall average is a 2.05 payment ratio, one can figure out the approximate interest rate. The interest rate our community will have to offer bondholders is an average of 5.35 percent to gain interest in the municipal bond market.
As Time Goes By
Comparing the repayment schedule of our more standard-looking, still viable Measure T with that of the School Board’s latest bond example, it seems to be a hybrid, a variation of a Certificate of Appreciation Bond. Where the bond’s cost in debt service payments is pushed further down the road, the bond payments can look less expensive at the start. By using interest- only payments early, the annual payments will continue to cost much more as the years go by.
KeyGent’s estimated repayment schedule shows this bond's debt service starts at $3.5M in 2015 and increases each year an average of about $330K until our penultimate annual payment reaches over $12M, in 2043.
Still Feeling Rushed
By releasing this information so late in the process, the Board has left little time for the local property owners, the ones who are actually going to foot this $217.5M, to be able to comprehend its financial consequences and/or discuss other ways to finance the capital improvements.
Better Late Than Never?
The fact that the Board has scheduled only this one legally mandated, regularly scheduled meeting for a public discussion suggests that some Board members may be personally fixated on getting any type of bond measure on the ballot, no matter the cost to our small community.
What We Know
We already know we want to fix our schools and where the needs are. We have as yet to settle on how we want to pay for them. A month ago the Board established the bond’s $106M figure. Two weeks ago, plans were announced to spend the bond’s proceeds over an extended 12-year period.
Bond Bound
Some Board members seem to think that the community’s concern over the severity of the need for District-wide facility improvements will be enough incentive to drive voter approval over the 55 percent approval threshold.
What Are We Really Getting Into?
The additional service debt would increase our debt burden to over a quarter-billion dollars, $275M. For something as monumental as this, one would think the Board would have let community members have more time. Some members act as if putting our community in $275M debt is really no big deal.
You Better, You Bet
The question is not whether the work is needed. The most important question has yet to be thoroughly discussed. What is the best way for our community to pay for these projects? Is a more traditional bond financing better? Or is this hybrid example with its estimated $110M in interest payments, best? Is there another way to fund these projects in a manner that is interest-free that would save our community having to pay more than $110M in interest?
Uneasy Feeling
I remain very concerned that this proposed bond may put us on a fiscal path we might not want to travel.
Mr.Laase may be contacted at GMLaase@aol.com
