South Burlington School District Proposed Long-Term Bond Why issue - PowerPoint PPT Presentation

South Burlington School District Proposed Long-Term Bond

Why issue a long term bond? • Entities issue long-term bonds to finance long-term infrastructure assets with extended lives. The large dollar cost of these projects can be difficult to pay for in one year. The benefits from the improvements will accrue to residents over many years. • If current residents shoulder the full cost for improvements, they will be charged for improvements that may accrue over 20, 30, 40 or more years and not necessarily benefit current residents. February 21, 2018 Public Hearing on Long-Term Bond 2

Why issue a long-term bond? • Economists term this concept “intergenerational equity”: having the taxpayers who benefit from a particular improvement shoulder their cost of the particular improvement for the time period they utilize it. • Current residents may be reluctant, or unwilling, to pay the full cost of a needed school addition, major renovation, or series of capital improvements. Breaking that cost into a series of years makes the improvement easier to afford on an annual basis. How large is the proposed bond? $950,500 Over how many years will the bond be paid? Twenty years February 21, 2018 Public Hearing on Long-Term Bond 3

Why issue a long-term bond? Does the State of Vermont contribute to the debt service payments? • The State of Vermont for many years contributed 30% to the cost of capital improvement projects. It discontinued that program several years ago. Debt service payments are included in the total district budget and are part of the state’s education financing system. What will the annual payments be on the proposed bond? February 21, 2018 Public Hearing on Long-Term Bond 4

Proposed Bond Estimate of f Debt Service Expense School Year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Principal $0 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 Interest $20,010 $36,119 $34,218 $32,317 $30,416 $28,515 $26,614 $24,713 $22,812 $20,911 Total $20,010 $83,644 $81,743 $79,842 $77,941 $76,040 $74,139 $72,238 $70,337 $68,436 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Principal $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $0 Interest $19,010 $17,109 $15,208 $13,307 $11,406 $9,505 $7,604 $5,703 $3,802 $1,901 $0 $0 Total $66,535 $64,634 $62,733 $60,832 $58,931 $57,030 $55,129 $53,228 $51,327 $49,426 $47,525 $0 February 21, 2018 Public Hearing on Long-Term Bond 5

$90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 February 21, 2018 Public Hearing on Long-Term Bond 6

What improvements are you proposing for the bond? February 21, 2018 Public Hearing on Long-Term Bond 7

It Items proposed for the $950,500 Bond Munson Field / Iverson Track Chamberlin Elementary School o Restrooms & Training Room $325,000 o Light fixtures replacements $3,000 o Storage Building $50,000 o Carpet & asbestos floor tile replace $7,000 o Parking Lot Upgrades $7,500 South Burlington High School o Fire Alarm Upgrade $5,000 o Library Reconfiguration $150,000 o Fire Alarm Upgrade $43,000 Orchard Elementary School o Re-Key and door hardware upgrade and o Carpet & asbestos floor tile replace $5,000 security $15,000 o Light fixture replacements $3,000 o Exterior door upgrades $13,000 o Roof $67,000 o Fire Alarm Upgrade $5,000 Frederick H. Tuttle Middle School o Key Scan Access $5,000 o Burner Replace $65,000 o Carpet & asbestos floor tile replace $110,000 Rick Marcotte Central School o Light fixture replacements $12,000 o Light fixture replacements $3,000 o Fire Alarm Upgrade $10,000 o Carpet & asbestos floor tile replace $5,000 o Key and Lock Security Upgrades $5,000 o Roof Replacement $30,000 o Fire Alarm Upgrade $7,000 o Main door replacement $10,000 February 21, 2018 Public Hearing on Long-Term Bond 8

How do the payments on the proposed bond compare with debt service the district has paid in prior years? February 21, 2018 Public Hearing on Long-Term Bond 9

Annual Debt Service Expense, Past and Proposed $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Past Debt Service Proposed February 21, 2018 Public Hearing on Long-Term Bond 10

Tax Impact of Proposed Bond How much would the proposed bond add to the school district’s tax rate? • First year debt service is equal to one-half the interest expense for a year. Our estimates show this would add 0.09 cents (9 hundredths of a cent) to the tax rate, 0.86 cents in additional tax per $100,000 in property value. • In the second year and following years, the bond would add 1.64 cents annually to the tax rate, $3.58 per $100,000 in property value. February 21, 2018 Public Hearing on Long-Term Bond 11

"Debt Tax Rate," Past and Proposed 5.00 4.50 4.00 3.50 cents on the tax rate 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 February 21, 2018 Public Hearing on Long-Term Bond 12

Is there an “appropriate” level of debt for a School District? Part I Outstanding Debt, Nearby Districts $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Burlington SD Champlain Valley Colchester Town Essex Essex Junction Essex Town SD Huntington Milton Town SD Mt. Mansfield South Burlington Williston Town Winooski SD USD #15 SD Community Ed ISD Town SD Modified USD City SD SD Center USD #46 February 21, 2018 Public Hearing on Long-Term Bond 13

Is there an “appropriate” level of debt for a School District? Part II The Vermont Statutes Online Statutory Debt Limit vs Ditsrict Debt, with Proposed Bond Title 24 : Municipal And County Government $35,000,000,000 Chapter 053 : Indebtedness Subchapter 001 : Indebtedness Generally $30,000,000,000 (Cite as: 24 V.S.A. § 1762) • § 1762. Limits • (a) A municipal corporation shall not incur an $25,000,000,000 indebtedness for public improvements which, with its previously contracted indebtedness, shall, in the $20,000,000,000 aggregate, exceed ten times the amount of the last grand list of such municipal corporation. Bonds or obligations $15,000,000,000 given or created in excess of the limit authorized by this subchapter and contrary to its provisions shall be void. $10,000,000,000 (b) However, the provisions of this subchapter as to the debt limit shall not apply to bonds issued under section $5,000,000,000 1752 or 1754 of this title, relating to the ordinary expenses of a municipality. (Amended 2011, No. 155 $0 Debt Limit South Burlington (Adj. Sess.), § 10.) February 21, 2018 Public Hearing on Long-Term Bond 14

Who would perform the work that the district is proposing to fund with the bond? • As with any major expense the district engages in, the district is required by law to put major purchases out for bid. This project would be broken into different components that would be publicly advertised and contracts would be awarded to the lowest responsible bidder for each project. February 21, 2018 Public Hearing on Long-Term Bond 15

Questions? February 21, 2018 Public Hearing on Long-Term Bond 16