A voter information pamphlet that explains why the local school district is asking voters to approve a $19.5 million bond will reach registered voters’ mail boxes in Tooele County this week.
“We are not asking for an increase in the property tax rate,” said Scott Rogers, Tooele County School District superintendent in a meeting with the Tooele Transcript-Bulletin editorial board on Monday “We want to replace existing debt with a lower interest rate debt.”
Rogers has made the rounds to civic organizations, school community councils, and other community groups to explain the district’s bond proposal.
“I’m concerned that some voters are getting the school district confused with the county,” he said. “I keep getting questions about our new position for a financial director and why we are proposing a tax increase.”
The school district has done neither of those things, according to Rogers.
The Tooele County School District and Tooele County are separate entities, each with their own budget. The school district is governed by an elected seven-member board of directors.
If it is approved, school district officials will not use the bond to build any new buildings or incur new debt, said Rogers.
Instead, the bond will be used to refinance previous debt with a lower interest rate bond that will reduce bond payments over the next 15 years by approximately $500,000.
The bonds the district will refinance are bonds issued by the school district’s municipal building authority to build the Community Learning Center in 2009.
Municipal building authorities are a funding mechanism for school districts and local governments authorized by the state legislature.
The school district’s municipal building authority (MBA) is a separate legal entity from the school district, but it is governed by the school board. The MBA can bond for public improvements and pay for bonds by leasing the improvement to the school district.
The MBA does not need voter approval to issue bonds; however, they must follow state laws that require public notices and hearings prior to approving MBA bonds.
MBA bonds have a higher interest rate than general obligation bonds because, without the vote of the public, MBA bonds are not considered backed by the full faith and credit of county residents and the state of Utah.
General obligation (GO) bonds can only be issued after a vote of the public. They have a lower interest rate because they are backed by the state of Utah and receive the benefit of the state’s AAA credit rating.
At the time the district bonded for the CLC, the district was receiving over $5 million a year from the state’s Capital Outlay Foundation to help cover the district’s capital expenses, including the MBA bond payment.
However, since 2009 the state has reduced capital outlay payments to the school district, In 2014 the school district received $430,094 from the Capital Outlay Foundation.
The school district currently owes $19.5 million on the MBA bonds used for the CLC.
The current average interest rate on the CLC bonds is 5 percent. Rogers expects to lower the interest rate to near 2.5 percent as a result of converting the debt from MBA to GO bonds.
If the GO bond is approved, the owner of the average $170,000 in Tooele County will pay an additional $53.55 for general obligation debt, but the taxpayer will also see an equal reduction in other school property tax payments.
The school district’s current property tax rate of .009593 is a composite of five different property tax rates.
The state basic levy rate for schools in 2014 is .00149. It is set annually by the state. The voter approved local levy rate is .000600. The board-approved local levy rate is .002537.
The tax generated from these three levies is used for the district’s general fund to pay for operation and maintenance expenses.
The state has authorized two levies that local school boards can use to pay capital expenses, the capital local levy and the debt service levy.
The capital local levy rate is .001297. The revenue generated by this levy is used to pay for the district’s capital expenses, including building and property improvements and repairs. The capital local levy is also used to raise revenue to make payments on MBA debt used for new buildings.
The debt service levy rate is .003740. Debt service levy revenue covers the principal and interest on the district’s general obligation debt.
If the bond issue passes, the school district’s intention is to lower the capital local levy and increase the debt service levy rate so the combined total tax rate stays the same, according to Rogers.
“The property tax rate for the school district will remain flat,” he said. “Taxes paid for schools might go up if your assessed value goes up, but not as a result of this bond issue passing.”
If the bond issue fails, the district will continue to pay the higher interest rate on the MBA debt, according to Rogers.
The bond conversion is part of the district’s long-term master facilities and capital management and improvement plan, according to Rogers.
That plan identifies four needs: improved utilization of facilities; developing a capital reserve fund; converting municipal building authority debt to general obligation debt; and future construction.
The district has a boundary review committee working on improving building utilization.
In August the school board voted to keep its property tax rate flat to restore the balance in the capital fund.
The district is preparing for future construction with property it owns in the Benson Gristmill area for an elementary school. District officials have also started looking for property in Stansbury for a junior high school, and at Overlake for a new high school, according to Rogers.