Tooele County School District officials hope voters will read the entire ballot for the district’s special bond election before they cast their vote.
Despite what may seem as confusing language, voter approval of the bond issue does not mean the property tax rate for schools will increase, according to district officials.
The second paragraph of the special election ballot states, “If the bonds are issued as planned, an annual property tax to pay debt service on the bonds will be required over a period of 15 years in the estimated amount of $53.55 on a $170,000 residence, and in the estimated amount of $97.36 on a business property having the same value.”
When read alone, the paragraph sounds like the bond issue, if passed, will add $53.55 to the average homeowners property tax.
However, the next paragraph explains the action the school board will take to reduce other school property taxes, by the same amount as what will be added by the new bond, leaving no net increase.
The subsequent paragraph on the ballot states, “If the bond authorization is approved, the Board intends to reduce the existing capital outlay tax rate associated with the Lease Revenue Bonds of the Building Authority in such a manner that no increase in the current overall tax rate levied by the Board is expected to occur as a result of the issuance of the bonds.”
“There will be no increase in the district’s overall tax rate if the bond passes,” said Scott Rogers, Tooele County School District superintendent. “We are just replacing old high interest debt with a lower interest bond to save money. This is like refinancing high interest credit card debt with a low interest loan.”
Rogers said he could be accused of falling asleep at the wheel if he did not try to take advantage of every opportunity to save money, including refinancing debt.
The bonds the district will refinance were issued by the school district’s building authority to build the Community Learning Center in 2009.
They are known as lease revenue bonds because district’s building authority can bond for public improvements and pay for bonds by leasing the improvement to the school district.
A building authority is a funding mechanism for school districts and local governments authorized by the state legislature.
They are a separate legal entity from the school district, but their governing body is the school board.
The building authority does not need voter approval to issue bonds; however, they must follow state laws that require public notices and hearings prior to approving bonds.
General obligation (GO) bonds, the kind of bonds the district is asking voters to support, can only be issued after a vote of the public. They have a lower interest rate than building authority bonds because they are backed by the state of Utah and receive the benefit of the state’s AAA credit rating.
The school district currently owes $19.5 million on the building authority 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 building authority lease revenue bonds to GO bonds.
The result will be $500,000 worth of savings over the 15 years remaining on the life of the bonds.
If voters approve the GO bond, the GO levy tax rate will go up, but the capital tax levy, the tax levy that produces the revenue to pay the building authority bonds, will go down.
The net result will be no change in the net effective tax rate, 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 building authority debt, said 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.
No funds have been committed to future construction, but the district is preparing for growth with property it owns in the Benson Gristmill area for an elementary school. District officials have also started looking for property in Stansbury Park for a junior high school, and at Overlake for a new high school, according to Rogers.
“The plan is working,” he said. “It is sound fiscally and prudent for the taxpayers.”
