Gazette opinion: Let’s talk about school bond costs, projects

2010-06-18T00:00:00Z Gazette opinion: Let’s talk about school bond costs, projects The Billings Gazette
June 18, 2010 12:00 am

The Billings School Board must decide at its 5:30 p.m. Monday meeting at Lincoln Center whether to call a bond election in early September to take advantage of zero-interest bonds through time-limited federal programs.

If the board decides Monday to move forward, as two of its committees recommended on June 7, trustees will then have to decide by July 6 which of many possible school facility maintenance and repair projects they would fund if voters approved the bond issue.

A bond election would have to take place the first week of September to avoid conflicts with the November general elections process and to meet a federal deadline of Sept. 21 for participating in these bond programs.

Zero interest expense

Over decades of investing less in building maintenance than needed, the school district has accumulated an estimated $120 million in deferred maintenance among 30 buildings used by Billings’ 15,500 K-12 students.

Two federal programs would make a total of $12 million in interest-free funding available to Billings Public Schools.

Although the federal government would pay the interest expense over the 16-year term of the bonds, the district would be responsible for repaying the principal. However, the federal programs allow the district to put bond issue proceeds in an interest-earning sinking fund. The district would be able to use the sinking fund earnings, estimated at $400,000, to help repay the principal.

In calculating the cost to local taxpayers, the district’s bond consultant, Bridget Ekstrom, vice president of D.A. Davidson & Co., included state funding from a program that helps defray costs of school bond repayment. She reported that the district taxpayers would ultimately be responsible for repaying 41 percent of the $12 million principal because the sinking-fund interest and the state reimbursement would cover the rest.

It is important for trustees and other community members to understand that the state reimbursement level isn’t guaranteed. The state school facility reimbursement program funding depends on the Legislature’s biennial appropriation. In some years, the Legislature hasn’t appropriated enough money for all eligible school districts to receive the full reimbursement the law allows, according to Madalyn Quinlan, chief of staff for Denise Juneau, Montana’s superintendent of public instruction.

State reimbursement

The Office of Public Instruction has advised eligible school districts that their state bond reimbursement for the fiscal year beginning July 1 will be only 80 percent of the amount they had expected, Quinlan said. That reduction is due to cuts in spending for fiscal 2011 that most state departments had to take as Gov. Brian Schweitzer gave orders to shore up the state’s fast-dwindling checking account.

The state school facilities funding is available only to districts where the taxable value per student is below the statewide guaranteed minimum tax base. Billings elementary district’s mill value per student is 52.6 percent of the statewide value, according to OPI. So, with full funding, the state program would reimburse the Billings elementary district 90 cents for every dollar local taxpayers contribute to paying off school bonds.

In the high school district, the taxable value per student is 61.2 percent of the statewide value, so with full funding, the state would pay 63 cents for every dollar local taxpayers contribute, Quinlan said.

While it’s important to be clear that the state program doesn’t have a guaranteed funding level, it’s still a great deal for Billings taxpayers — at 80 percent of full funding or even less.

The federal programs also are an excellent opportunity for saving the district millions of dollars in interest expense on $12 million in school building upgrades.

According to draft minutes of a June 7 meeting, the board’s Budgeting for Results Committee unanimously recommended that trustees apply these criteria to determine which projects would be funded:

• Potential energy savings.

• Catastrophic avoidance.

• Educational adequacy for students.

That’s good advice.

Before the community could get behind a bond issue, citizens will have to know what the plan is. Trustees and the new superintendent, Keith Beeman, will have a big communication job ahead for the rest of the summer. If a bond issue is to have any hope of passing in this tough economic climate — after voters approved an elementary operating levy and high school technology levy in May — proposed bond projects will have to be obvious needs in buildings that must continue serving students for many years. The projects must be noncontroversial because the prospect of taxpayers funding any bonds is controversial.

We encourage trustees to proceed with a fulsome discussion and to listen to community input as they make their bond decisions.

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