City Schools of Decatur revises debt and tax projections, says more communication needed
Decatur School Board members received a slightly better economic forecast during their Feb. 23 meeting to discuss a tax increase to pay for school construction.
In the process, it became clear that they will need to make sure the public understands the school system’s predicament. That will be a challenge, in part because the shifting numbers were confusing for School Board members, too.
To recap: At a meeting on Feb. 10, School Board members voted to request an $82 million bond referendum. The debt would be paid off through increased taxes. At the time, those tax projections involved a 4.84 millage rate increase. For a $300,000 home, that would’ve been an additional $726.51 in additional taxes per year, starting in 2017. For a $700,000 home, that’s an additional $1,695 in taxes.
But that picture changed on Feb. 23.
Dianne McNabb, with CSD adviser Public Financial Management, said those projections were based on incorrect information.
“We got the new data on the value of a mill,” McNabb said. “That amount was higher than the one we were working with.”
She also revised the length of time it would take to pay back the debt. The original timetable was 20 years. She presented three projections for the School Board to consider: a 20 year timetable, a 25 year timetable and a 30 year timetable.
If the School System paid back the bond over 20 years, the tax picture would look like this each year:
2016 Millage = 1.50 2017 – 2036 millage = 3.46
Tax on $150,000 home: $112.18 $259.17
Tax on $300,000 home: $224.37 $518.35
Tax on $500,000 home: $373.95 $863.91
Tax on $700,000 home: $523.53 $1,209.47
Extend the timetable to 25 years and the picture brightens further …
2016 Millage = 1.60 2017 – 2036 millage = 2.98
Tax on $150,000 home: $120.21 $223.24
Tax on $300,000 home: $240.42 $446.48
Tax on $500,000 home: $400.70 $744.13
Tax on $700,000 home: $560.98 $1041.79
And now 30 years …
2016 Millage = 1.68 2017 – 2036 millage = 2.67
Tax on $150,000 home: $126.32 $200.02
Tax on $300,000 home: $252.64 $400.04
Tax on $500,000 home: $421.06 $666.73
Tax on $700,000 home: $589.49 $933.43
Source: City Schools of Decatur
McNabb cautioned that, “25 (years) is OK, 30 is taking it out a very long way.”
She also presented a different picture of the city’s debt.
In February of last year, Decaturish reported that the city has borrowed $154.2 million since 2005. Since that happened, City Schools of Decatur decided to borrow about $18 million more to begin the process of expanding its schools. So that’s $172.2 million issued by the city and its school system for capital projects, like the Beacon Municipal Center that now houses the City Schools of Decatur Central Office.
At the Feb. 10 meeting, McNabb said CSD’s bond request would approach the city’s constitutional debt limit, which is 10 percent of the assessed value of its current tax digest. On Feb. 23, she presented new information. McNabb said debt issued via Urban Redevelopment bonds does not count against the constitutional debt limit. According to figures provided by City Manager Peggy Merriss last year, Decatur has issued $72.6 million in Urban Redevelopment bonds since 2005, and CSD has issued $8.2 million.
With those caveats in mind, McNabb said the city’s limit is $141.5 million, based on property values from 2014. The outstanding debt as of Jan. 1, 2016, as it applies to the debt limit, will be $36.7 million. That will leave the city with a debt capacity of $104.8 million. If the voters approve issuing an $82.8 million bond, the city would only be able to borrow $22 million for projects, according to McNabb’s figures.
Another revision. At the Feb. 10 meeting, consultants told School Board members that the bond request that would only allow the school system to build out its facilities to accommodate about 90 percent of its enrollment projections. On Feb. 23, that changed to 100 percent. Jeff Prine, president of CSD consultant ASCENSION Program Management, said that assessment was due to an error on his part.
“I apologize for that mistake,” he told School Board members.
The new information caused board members to reassess everything they discussed in the Feb. 10 meeting.
School Board member Lewis Jones said the request for an $82 million referendum could be reconsidered.
“Given all of the information that’s been presented, I would be open to reconsidering the number we voted on the last time,” Jones said. “I don’t want to revisit that today. … I was motivated entirely the last time by, even at the high number we were looking at 90 percent at the low end projection. Now we’re looking at 100 percent. I would like us to take a look and say how much do we need, so that we’re open to changing what we’re requesting.”
Board members came up with a game plan for discussing the debt request with the City Commission – which would have to agree to put a bond referendum on the ballot – and the community. Board members said there will be two joint meetings between board members and city commissioners, one in March and one in April. There will also be two public presentations on the bond request. CSD also intends to poll residents before moving forward.
School Board members said the public needs to understand that one way or another, taxes would need to increase to pay for more school space. Without a bond, residents would likely see more portables instead of new school buildings. CSD’s growth shows no signs of slowing down. The current enrollment is 4,364 students. All of the general obligation bond estimates considered at Tuesday’s meeting envision a low-growth scenario, which predicts a total enrollment of 6,527 students without annexation.
School Board member Julie Rhame said without a bond issue, “We’d be bankrupt in a few years.”