Purdy eyes no-tax-increase bond issue
Strong financial position opens options for long-range planning
Following adjustments made during the annual property tax levy, the Purdy school district will be in a position to float a no-tax-increase bond issue for further improvements in the 2019-2020 school year.
The school board adopted a tax levy of $3.5286 on $100 of assessed property for the 2017 tax cycle. The general fund remains at the state minimum of $2.75. An increase in assessed valuation of close to 9 percent and a 4-cent boost in the debt service levy is expected to add approximately $130,000 to the district’s income.
Superintendent Steven Chancellor noted that the district has authorization to raise the debt service as high as 89 cents per $100, but only chose to bump it up to $.7786.
According to Todd Goffoy, managing director with the investment banking firm of PiperJaffry, additional money in the debt service fund could only be used for paying down principle and interest on the school district’s debt. Previously, the district paid down on its debt faster than scheduled, thus opening an option for an earlier bond issue, allowing the district to take on additional debt sooner. A reserve in the debt service fund can only be held for a year, leaving action necessary.
“There’s a serious possibility of a no-tax-increase bond issue in 2019-2020,” Chancellor said. “We can be strategic and think over several years. We’ve talked about other projects. I think we’ve anticipated growth issues. By then, I think we’ll be ready for new classrooms. We’ll need it.”
Chancellor previously explored the idea of adding more classrooms onto the middle school, the south end of the elementary school or on the southeast corner of the school campus by the vocational agriculture building. Those plans were placed on hold when federal funding was approved for a FEMA storm shelter. Architectural plans for that building, targeted for the northwest corner of the school campus, will incorporate the preschool, allow the music program to relocate and provide the district’s first performing arts center. The potential for additional classroom onto the building was discussed but ruled out for this construction cycle.
Goffoy said the district has $2 million in its general fund. The annual transfer of funds allowed by the state of 7 percent from the general fund to the capital improvements fund moved $312,000 in the 2016-2017 school year. He advised against spending down all the fund balances due to the unpredictability of state funding and unexpected rises in operational expenses. Nonetheless, the district had enough money to finish the FEMA project.
Goffoy suggested board members consider leaving the 2014 lease purchase in place, which concludes in 2029. He asked them to consider an 11-year financial deal in 2019 that would pay off at the same time. The district could borrow from $1.5 million to $2 million by making annual payments of $185,000 to $200,000. Continuing the annual 7 percent transfer would leave the capital improvements fund intact. He recommended borrowing for big projects and spending cash on smaller improvements, such as technology acquisition.
Even technology offers new options. Chancellor reported that in the past two months, the cost of iPads through the Apple Company has dropped in half. If the district traded its present iPads in, a $70,000 gain was possible, as opposed to using them another nine months.
“There’s only so much catastrophic stuff that can happen,” Board President Randy Henderson said. “I just don’t think we need 36 percent [reserves]. We want to see what you want to spend it on.”
Chancellor said in one day’s brainstorming session he identified potential capital improvement needs, including a new baseball field, additional iPads, some school buses with wheelchair lifts, putting buses on a replacement cycle “earlier than death,” a bus barn, scheduling replacement of the vintage cooler/freezer in the kitchen, building a daycare facility, and replacing equipment impacted by weather and use. Energy conservation options, such as light or window replacements, could also qualify.
Electricity generating solar equipment had been placed on hold. Henderson said solar did not represent a savings at the present time. The strategy would lock in present electricity rates, which would be a savings if prices rise in time.
Goffoy noted once construction bids for the FEMA project come in, that number would become much clearer. Chancellor expected the board would be able to award a contract in another 60 days.
“My objective [tonight] is for Todd to show we have options,” Chancellor said. “We can do more and it doesn’t change our financial standing. Todd has helped us tremendously, to think in the long-term.”