For the past several weeks, the Board of Education has answered questions about the extensive ground-up examination and long-term planning that was undertaken when determining how to address our facilities deficiencies. How to finance the cost of any recommendations was an important factor in the Board’s due-diligence process. We have heard the community’s concerns about taxes and sought financing strategies that could minimize the tax impact.
So how do we undertake a $52.9M capital project ($72.6M total project cost, including bond interest) while minimizing the net increases in taxes? Right now, three factors are available to assist in this mission:
1. There is substantial retiring debt that exists over the next ten years. Utilizing retiring debt is vital in trying to maintain a consistent budget. This includes retiring debt from the 2003 High School project ($7.7M), the energy performance contract ($4.1M), and refinanced
debt from 2003 ($5.9M). Add to this approximately $8.8M in state aid that is owed to our district on our current debt, and the retiring debt available to offset a portion of the capital project totals $26.5M.
2. New York State Education Department (SED) provides building aid to school. A net state building aid reimbursement rate of 50% was utilized for this project (including that on bond interest), which equates to just over $34.5M. This is a conservative estimate from
our technical experts, KG&D Architects and is based on what the project embodies - a combination of renovation and new construction. KG&D has well over 20 years experience in developing and designing public school projects and working with the SED in determining building aid reimbursements in New York State. This experience came to bear on our project development.
3. We currently have $700K in our capital reserve fund that would be utilized as an additional offset to the cost of the capital project.
The remaining cost for the capital project would be the net increase in the tax levy.
The capital project would be financed with a number of bonds that would be acquired as needed through the project. Although current municipal bond interest rates are significantly lower at this time, we are using a 3.5% interest rate to be conservative, due to potential interest rate risk.
There are many different ways to structure the 22-year financing of this project. We wanted to provide the community with an approach that was both simple and hopefully affordable. It was important to create a solution that we hoped everyone in our community could budget for, with no volatility in tax rates due to this project. The planned financing structure outlined here does just that.
The net increase in taxes due to this project, utilizing all off-sets, is $20 per $100K assessed value of the taxpayer's property. This equates to a one-time, additional one-percent increase in the tax levy (over the regular operating budget in 2015-2016) that would remain stagnant for the 22-year repayment of the bonds. So for example, if your property assessment is $300K, your one-time net increase in taxes for the capital project would be $60. You would then make this $60 annual payment for the next 22 years.
If the community approved our current referendum, design work would begin immediately in order to acquire SED approvals as soon as possible. The project will be phased so that no students would be relocated during construction. Based on our expert's estimated timelines, major construction would begin in 2016-2017 school year; minus some smaller priority projects that would start earlier in the summer of 2015. Construction completion is scheduled for the 2018-2019 school year. It should be noted that delaying the project any further could increase costs significantly, due to construction costs escalations and losses of some of the off-sets previously described. This, along with our commitment to the long-term health, safety, and educational needs of our students and staff, were the major reasons for putting this referendum back to the community as soon as legally allowed.
We hope that the information provided here helps clarify how the district is envisioning financing the capital project with such a relatively low net increase in taxes moving forward. Your input is very important to us. Please feel free to email your questions, comments, and concerns to email@example.com
Brian Cournoyer, President
Ruth Quinn, Vice President