Orland organic ag mogul Charlie Johnson served on the Madison High School renovation committee this summer. That committee discussed the financing and campaign strategy for the new gym and renovation plan on which voters will issue judgment tomorrow. In this guest column, Johnson discusses the benefits and risks of the financial plan offered by the school district.
When I agreed to be part of a study committee to review possibilities for the renovation of the Madison High School, I made a personal pledge that I would not advocate a pro or con position on a final proposal coming forth from the committee. I saw my involvement being one who could offer advice and perspective. That is my intention here with this open letter to Madville Time readers.
The request of Madison voters to approve 6.3 million in general obligation bonds is part of an overall financing package for a 14.6 million renovation project at the high school. The other portion will be financed with 8.3 million in certificates of capital outlay. For the present time until or unless major amounts of private money are secured, the total project will be 100% debt financed secured by the taxable valuation of real estate property located within the school district. The total debt burden by property owners will be approximately 14.6 million. The annual debt service for the project will run about 1.45 million for four years (1 million capital outlay plus around 440,000 for the bond redemption payment). After 2016, when the elementary school is mostly paid off, the annual debt service will be about 1.14 million(700,000 for capital outlay plus the 440,000 bond payment) for the next 16 years. The proposal last February called for 16.9 million in bonding with 1.12 million in annual debt service for 25 years. As you can see our annual debt service will be about the same with each proposal for years 5 through 20. The earlier proposal would have called for payments years 21 thru 25.
What does all of this mean? The patrons of the school district are being offered a 14.5 million project with annual payments for 20 years versus the earlier proposal of 16.9 million payable over 25 years. In each case, the total cost is financed by property tax dollars upfront until or unless fund raising dollars occur.
What the school board is offering is a type of "bridge financing" so that we can finish payments on one project and begin construction soon on another. This is in contrast to the earlier proposal which called for bond financing for the entire amount. There is some inherit risks with this approach. Again I remind you that I was part of the discussion and input to this financial package. The risks are two fold in part. A bond issue is like a one punch meal ticket. Use it and you can be assured there is little or no chance for a second issuance until the first one is paid off. The second risk is committing a major amount of capital outlay revenue to annual debt service. For 20 years the board will sacrifice some flexibility to address future major projects or provide tax relief in the form of lowering the 3 mill max on capital outlay levy. But keep in mind we have financed the middle school and elementary school with capital outlay revenue for 20 some years already. With this proposal we will be doing the same for another 20 years.
I think the study committee came up with a better plan for voters this time around. Whether it is a good enough plan? That is for voters to decide. The need for school and classroom upgrades is very apparent. The choice for some major changes and extra foot print to the school requires patrons to approve additional debt financing. That is why we have an election. We seek to secure the wisdom of the voter. For one special day, you have more decision making power than the school board or the administration. Please exercise your right and, yes, carry out your responsibility.
—Charlie Johnson, Orland, SD, 2011.11.07
Charlie's right: it's your money, your responsibility. Discuss the issue with your neighbors; check the blueprints, your budget, and your priorities; and get out and vote tomorrow!
Nice info, Charlie. We both voted "yes" as absentee voters. Sincerely hope there is a good turnout...Not the usual 20% or less.
"The patrons of the school district are being offered a 14.5 million project with annual payments for 20 years versus the earlier proposal of 16.9 million payable over 25 years. In each case, the total cost is financed by property tax dollars upfront until or unless fund raising dollars occur."
There is one other difference here. With the earlier proposal, property taxpayers would be taxed extra for the entire $16 million (over and above the taxes already assessed for the capital outlay). With this current proposal, the property taxpayers will only be taxed extra for the $6.9 million. The other cost is coming out of the capital outlay assessment already collected yearly. Thus, this proposal is considerably less costly to taxpayers.
The curious thing is why it wasn't known before just how much was obligated yearly in the capital outlay fund for bond redemption, how long the redemption period was, etc. We were told with the previous proposal that the entire funding would have to come from a new bond issue because the capital outlay fund was obligated for many years to pay off existing debt for the elementary school; however, come to fund out the majority of that debt would be paid in four years, thus freeing up the capital outlay fund for the present proposal.
Linda,
I think you would agree that this plan is a work of compromise. It was realized under the accounting leadership of our new Business Manager, Mitchell Brooks. He was able to find more solutions for financing and reduce costs through lower interest rates. These positive changes all occurred after the last vote and help benefit the plan and lowered the overall tax burden.
I think many believe this to be a fair compromise. It reduces the tax obligations and the length of the commitment by 5 years. It meets the needs of all students and it will help the community attract young families with school aged children.
Now for a comparison. I think the proposed tax "Mill Levy" is reasonable. Compare our proposal to the one that was just passed in Harrisburg last week. They will now pay $12.00 per $1,000.00 of property valuation. That is 3.5 TIMES what Madison will be paying if this vote passes today! Madison is currently at 3 Mills, Harrisburg is at 12 mills per $1,000. If we pass this vote, Madison will be at about 3.65 Mills. How do we compete with other communities if we do not fund education at the same levels? Harrisburg is spending 38 Million on a new Elementary and Middle School. The vote last week passed with overwhelming support. Madison will spend just 14.5 Million on a new High School if the vote passes tonight. I hope our numbers are also 75% yes or higher!
I think when you compare us to other places in the state, this plan looks very reasonable. I hope we earn your YES vote today. There are 3 hours left to vote. For more information, go to http://www.VoteYesForMadison.com or feel free to look me up in the phone book and call me before you vote. I would be happy to talk to anyone that has concerns or questions.
Thanks,
Ashley Kenneth Allen
I believe the metric in this election will be much like the larger monetary vote in Sioux Falls. That being if the younger person will take the time to vote then the issues of both elections will pass. No sense arguing with anyone about it, it is what it is. I don't consider myself young but I did vote Yes. I am a friend of education and education has been my friend in return. Not all, including our Governor, can say that.
Linda, I offer this pure speculation: we were offered the one big bond plan last winter with no use of existing capital outlay funds as a roll of the dice on the administration's part, to see if they really could win such a vote. Then, in the likely outcome of a loss, they could turn around, trot out this plan ("Surprise! We really do have $8.2 million in wiggle room!"), and thus be able to claim they are offering a grand compromise... when really the gym backers are still getting everything they wanted back in 2007.
I'm feeling like something got compromised, all right....
Thank you to the 65 percent who voted Yes! We win!
I will question the definition of "We" in that sentence.
What will be required now is sacrifice, discipline, and humility. All dollars and resources to carry on any future major projects will be on hold for the next 20 years. That was the tradeoff in order to make the bridge financing work. Keep in mind we will soon take on 14.5 million in debt for 20 years with little or no flexibility to address any future problems. Whether that is right or wrong, only the future will tell. FYI----I thank all 100% who took the opportunity to vote. Neither the 65 or the 35 have any claim to be victors or losers. How we as the school district treat the future will be the factor whether we are all winners. One good step for the district to show/demonstrate good will is drop the busing issue with Rutland.