Bonding expert says school district is solid with bonding

Greene County school board members got a double dose of math class Wednesday as they started with an hour-long work session about bonding and heard a presentation on the 2018-19 budget during their regular meeting.

What they learned was that the district will have the ability to pay off a $21.48 general obligation bond issue should the voters approve it on April 3, and that the district’s tax levy, aside from the new asking for the bond issue, will be unchanged for the next school year.

Matt Gillaspie, managing director for public finance/investment banking for Piper Jaffray, walked the board through several charts and tables of information. He first showed the board the calculation for the district’s debt capacity, which by law is 5 percent of the total assessed valuation of property within the district. The district could carry $44.2 million in debt, according to Iowa law. The district currently has $2,144,000 in debt, which is 4.85 percent of capacity. The district could go into debt another $42 million without reaching the allowable limit.

He used the total taxable valuation as of 1/01/17 and calculated the revenue from the tax levies going toward the proposed project, including the $2.70 (per thousand of taxable valuation) on the ballot. Based on that valuation, there would be $1.44 million available to pay on the bond in the first year. The annual principle and interest payment would be $1.4 million.

Gillaspie’s calculations used 3.25 percent as interest on the general obligation bonds and 1.5 percent annual growth in the total taxable value for property tax revenues. He used 2.75 percent as interest on the bonds sold against the SAVE 1-cent sales tax and 1.5 percent growth in annual retail sales. Using those figures, he provided a chart showing revenues and bond payments over 20 years. He also provided a time line showing payments on the district’s current and proposed debt.

His bottom line – “The district is sitting very comfortably from a financial infrastructure point of view if the bond issue passes.”

His calculations did not include any increased value due to the MidAmerican Energy wind turbines. The total assessed value in the district will increase even with the county using the first 41 as the increment in tax increment financing.

Gillaspie said there are about 40 school districts in Iowa that are shortening the repayment of bonds courtesy of wind turbine development. Those districts continue to levy the full amount approved in their bond referendums, giving them more revenue for bond payment and saving the district money in interest payments.

The other option would be to decrease the debt levy from year to year so the revenue remains constant, and continue bond payments for the full 20 years.

Superintendent Tim Christensen spent considerably less time presenting the 2018-19 budget during the regular meeting.

The budget is based on a projected decrease of 9.5 students and a 1.0 percent increase in supplemental state aid. Christensen calculated $1.34 (per thousand dollars of taxable valuation) for the voted PPEL (physical plant and equipment levy) and a 4 percent voted PPEL income tax surtax.

The budget shows total revenue of $19,803,000, compared to $19,570,000 in the current year.

Expenses are pegged at $18,380,000, compared to $19,122,000 in the current year. The difference is the cost of the preschool addition at the elementary school that was completed last fall. The district plans to spend $10,492,000 on instruction, $4,967,000 on support services, and $3,518,000 on non-instructional line items.

The bottom line on the budget – excluding the $2.70 (per thousand) debt levy on the April 3 ballot, the levy rate won’t change for the next year. It will remain at $12.69.

A public hearing on the budget is scheduled for Wednesday, April 11, at 5:15 pm at the administrative building in Jefferson. If voters give the bond referendum the 60 percent “yes” vote needed for approval, the board will by resolution add $2.70 to the levy at the public hearing. The budget must be certified to the state by April 15.

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