“We’re not trying to hide anything here."
The Warren County R-III Board of Education is considering whether to keep the debt service tax levy at just over 65 cents or increase it by nearly four cents as they look toward the April 2024 bond issue for a new elementary school.
The R-III Board of Education in June approved using a no-tax increase bond issue to build an elementary school the district owns north of Interstate 70, pending funding availability.
At the July 13 regular board meeting, they received potential options for the upcoming bond, including how the debt service tax rate could affect the project.
Warren County R-III Superintendent Dr. Gregg Klinginsmith said the original base estimate for the project came in at about $33 million. The base bid plus two alternates for 25 classrooms in the new elementary school is projected to cost $38.5 million. The cost to construct the building with room for 900 students is projected to cost the district $42 million. The building with 25 classrooms is what the district needs, Klinginsmith said.
With an $875,000 defeasance and maintaining the tax rate for debt service at 65.03 cents, bonds would be issued for a $38.5 million project for $10 million in 2024, $16 million in 2025 and $12.5 million in 2030. For a $42 million project, the bonds would be issued for $10 million in 2024, and $16 million in both 2025 and 2032. If the district levies 69 cents for debt service, bonds would be issued for $10 million in 2024 and $17 million in 2025. Under both options, the district could utilize lease financing. A $38.5 million project with the 69 cent levy would include $11.5 million in lease financing with about $1.5 million in interest. They would pay off the $11.5 million over three years and issue the remaining bonds in 2028. If the project is $42 million, the district would utilize lease financing for $15 million, which would lead to about $3.4 million in interest, which would be paid off in 2030, at which time the district would issue the rest of the bonds. Lease financing is not available for the district at the 65.03 cent levy because they would not have the cash flow to support lease financing, LJ Hart President/Chief Financial Officer Thomas Pisarkiewicz said.
“We would seek voter approval for everything right now,” Pisarkiewicz said. “Once you get the authority, you can break it up however you want. You don’t have to issue it at once.”
Pisarkiewicz said if growth in assessed valuation occurs at more than 2.5 percent, they could potentially pay off the lease sooner. They were conservative in using the 2.5 percent estimate, he said.
If the district elects to keep the levy at 65.03 cents for debt service, the bond issue would be labeled as a no tax increase bond issue on the ballot. The district has two options to raise the levy to 69 cents. They can either put it on the ballot as an increase to the debt service levy or they can raise the levy to 69 cents at the annual tax rate hearing in August and the ballot would include the no tax increase language.
“We’re not trying to hide anything here,” Pisarkiewicz said. “If you make any adjustment or want to make an adjustment next month, I would recommend that you actually put some communication out there that you’re considering it.”
The annual cost of the increase for a $100,000 residential home would be $7.54. The cost in personal property for a $30,000 vehicle would be $3.97. The yearly cost in commercial for a $250,000 business would be $31.76 and the cost for 160 acres of agricultural farmland would be $4.92 annually.
The R-III Board of Education is mulling the benefits of keeping the tax rate at 65.03 cents versus raising the rate to 69 cents, a 3.97 cent increase to the debt service levy.
If the district maintains the levy rate at 65.03 cents, the district would have to wait until 2030 for the $38.5 million project and until 2032 for the $42 million project to issue the remaining bonds. This would require the district to split up the project and work with the architect to split the project into segments, Pisarkiewicz said. With the 69 cent levy and lease financing, the district could complete the project all within two years.
“I do want to build the building all at once,” Board President Franci Schwartz said. “I think that’s really important because otherwise, we’re moving early childhood and then we’re moving them back and switching. It just puts us out further and I’m afraid we would wind up having to rent mobile units in Warrior Ridge or somewhere because we would run out of space in the meantime. And we’ve all said we want to avoid that if at all possible.”
Klinginsmith said staying at the current levy rate would delay opening the building. If the district can construct the building within two years, the building would be operational starting in the 2027-2028 school year.
Board Vice President Sarah Janes questioned how far $12.5 million would go in 2030, when the third round of bonds would be issued if the tax rate stays at 65.03 cents and the district proceeds with the $38.5 million project.
“I think Sarah brought up a great point, too,” board member Rich Barton said. “If we did the no tax increase at $12.5 million, by the time we got that money in 2030, it might only be $5 million. To me, I’ve said this millions of times. It’s not how much money you have, it’s how much buying power you have. Well, $12.5 (million) sounds like a lot of buying power. But in 2030, I don’t think it’s going to be very much buying power.”
Board Secretary Deanna Zwyers said she had “heartburn” with increasing the tax levy but putting it on the ballot as a no tax increase.
“They’re going to think we’re not being forthright,” Zwyers said. “And look at how many times the fire has been turned down, right? And then just getting an increase in their assessments, I don’t see this going over very well at all.”
Board member Ginger Schenck understands Zwyers’ concerns but noted the board would be operating legally within what they can do.
“What they’d be voting on for the bond issue is really a no tax increase,” Schenck said. “We’re not asking for more. But I do see what you say. It could be a little off putting to people.”
Klinginsmith said the option to increase the debt service tax levy just under four cents stems from the bond issue. If the district was not considering the project, they probably would have left the debt service levy the same and started paying off debt sooner. With the current tax levy rate, the district will have about $26 million available for the project.
Klinginsmith stressed the board is still considering the best solution for the debt service levy.
“Should we increase it just slightly? That way we pay less in interest,” Klinginsmith said. “So we save the district potentially $1 million in interest payments. But then the taxpayers have to foot the bill a little bit more than what we had. Because what we want to do is set the tax rate now and then have a no tax rate increase moving forward to pay for this. So we set it now and then this is what it’s going to be.”
Klinginsmith stressed the Board of Education has not made a decision on whether to keep the debt service levy rate the same or opt for the just under four cent increase. Klinginsmith said he and the board members are collecting feedback on the issue.
“I sent an email out to all our families with all the information and asking for feedback,” Klinginsmith said. “And so we’re just waiting for those to come in and see what people say. Right now, we’re just kind of gathering feedback before we make a decision.”
The board will set the tax rate by the end of August. The annual tax rate hearing is Aug. 24.
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