• Article Image Alt Text
    Darin Augustine, with SJCF Architects of Wichita, talks to the USD 257 Board of Education about a school bond proposal in November 2018.
  • Article Image Alt Text
    Steve Shogren, senior vice president with George K. Baum & Company, talks to the USD 257 Board of Education in November 2018.

School bond financing 101

Get your No. 2 pencils ready, it’s time to do the math
The Iola Register

(Editor’s note: This is the third installment in a series of articles related to the April 2 USD 257 school bond referendum. Read the first article in the series here; the second can be found here.) 

 

When it comes to the USD 257 school bond issue, 35 is a special number.

The state will pay 35 percent of the costs. 

If voters agree to build a new elementary school, it will cost about 35 cents a day.

But 35 is only one of the many numbers voters will need to consider as they head to the ballot box April 2 to decide whether to build a new elementary school for $25.5 million, with options to build a new science and technology building at the high school for $7 million and provide new heating, ventilation and cooling systems for $2.8 million. 

Combined, the measures would cost about $35.3 million.

But even those figures don’t show the full picture. After the state pays 35 percent, local taxpayers would be left with $22.945 million for the three projects.

And though some voters may make their decisions based on numbers alone, school bond supporters hope the community is willing to invest in new facilities based on the information gleaned from a year of meetings by members of a steering committee. 

It’s been 26 years since USD 257 voters passed a school bond issue, when they agreed to improve the middle school.

“Cost always plays a factor, but the right plan makes a difference,” Darin Augustine, with SJCF Architects of Wichita, said. SJCF is working with USD 257 on the school bond issue. “I think everybody knew something needed to be done, so taking the time for research and community engagement was important.”

 

EXPERIENCE has taught Augustine that $10 also carries a lot of weight. 

That $10 represents the monthly amount the average taxpayer can expect to pay in increased property taxes. The closer you can get to that magic figure, the more likely voters will approve a bond issue, Augustine believes.

“Historically, it doesn’t seem to matter if you’re working with a large district or a small district, that’s where the sweet spot is,” Augustine said.

If voters agree to build a new elementary school, it’s likely to cost the owner of a $70,000 house about $10.48 more in property taxes each month. If all three issues are approved, the increase will be about $14.57 a month.

But estimating the expected cost to taxpayers is a tricky business. Steve Shogren and Bret Shogren, analysts with George K. Baum & Company of Wichita who are working with USD 257, said they considered the most conservative scenario for financing, based on a couple of variables. 

For example, they calculated the district’s assessed property valuation would grow by about half of a percent each year. They also assumed a 4.50 percent interest rate on a 30-year bond issue. 

A change in those variables could affect the amount taxpayers will pay.

It’s possible — and likely, based on the county’s 1 percent growth in annual assessed valuation over the past decade — that it could grow by more than a half percent. It’s also likely they can secure a better interest rate. If the bond were approved today, Steve Shogren said the district could obtain an interest rate at less than 4 percent. 

But with the more conservative estimates in play, taxpayers can expect to see an increased mill levy of about 15.62 mills for the elementary school, with another 4.34 mills for the science and tech building and 1.76 mills for the HVAC at the middle school.

Steve Shogren, senior vice president with George K. Baum & Company, talks to the USD 257 Board of Education in November 2018.

 

 

NOW CONSIDER the impact of state aid. Remember the number 35?

That’s essentially a guaranteed percent the state will pay if voters approve the school bond issue.

The money comes from taxpayers across the state of Kansas, including those in Allen County. The money essentially is put into one big pot, then given to districts that pass bond elections. How much a district gets depends on how wealthy it is, according to Craig Neuenswander, director of school finance for the Kansas Department of Education. He served as USD 257 superintendent between 1999 to 2011. 

“The poorer the district, the higher the state aid,” Neuenswander said. “That allows poorer districts to have a more equitable chance to replace facilities when local voters determine it is necessary.”

When USD 257 voters considered — and rejected — a $50 million school bond issue in 2014, the state’s commitment was 50 percent. The state changed the formula in 2015, when USD 257 would have qualified for 60 percent.

The calculation and ranking is done every year, but Neuenswander said he doesn’t expect USD 257’s rate to change more than a percent or two. 

Since the money comes from one big pot, the process to qualify for state aid can be competitive. But because USD 257 hasn’t passed a bond issue in more than 25 years, the district is considered “at the front of the line” and the money essentially is guaranteed if the current bond issue passes, Augustine said.

 

FOR VOTERS who wonder why the middle school’s HVAC improvement is part of the bond issue, the answer is with that 35 percent.

If voters approve Question 3, taxpayers will owe $1.82 million of the $2.8 million cost thanks to state aid. That’s a savings of nearly a million dollars.

If voters reject Question 3, it’s likely the district will have to reach into its capital outlay fund to continue to maintain the current system until it’s beyond repair, and/or pay for a new system at some point, steering committee members including Ray Maloney of LaHarpe said. 

“We’re getting a 35 percent discount. Why not take advantage of that?” Maloney said. “These three things are what we’ve identified need to be done. Now it’s up to the voters to determine if their priorities are the same.”

The Iola Register

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