The Lindbergh Board of Education voted last week to seek up to $11.7 million in construction bonds available through the federal stimulus package that could save district taxpayers as much as $5 million if the application is approved.
The board voted 6-0 to submit the application for the Qualified School Construction Bonds. Board member Kathleen Kienstra was absent from the June 9 meeting.
The application was submitted last week to the state of Missouri, which allocated $141 million of federal-stimulus funds for Qualified School Construction Bonds.
If Lindbergh’s application is approved, the bonds would be issued as part of Proposition R 2008, a $31 million bond issue approved by voters last November.
Prop R 2008 received 20,378 “yes” votes — 72.4 percent — and 7,770 “no” votes — 27.6 percent. A four-sevenths majority was needed to approve the measure, which will not increase Lindbergh’s debt-service tax rate, but extend the current rate of 38 cents per $100 of assessed valuation an additional five years.
In March, the school board voted to approve the sale of $10 million in general-obligation bonds to fund Propo-sition R 2008 projects.
During the June 9 board meeting, Chief Financial Offi-cer Pat Lanane said, “… The state of Missouri has $141 million in interest-free/tax-credit construction bonds, and the requirement must be that you have passed a bond issue. We did, thankfully to the community last November, and we’ve issued one set of those bonds. This would be for our next issuance. It would allow us if we’re accepted by the state — and we’re applying for up to $11.7 million in issuance of bonds — to issue interest-free bonds. And they’re really interest-free in the sense that the interest they’re able to take off their taxes, federal taxes, and we do not — we meaning the taxpayers — do not have to pay interest on those bonds.
“So it’s a great deal in terms of bond and interest payments. It’s the best deal I’m pretty sure we’ll ever see. So we want at least to be in line for this. The application is simply just that. Once we would get a ruling on our application, we could come back to you and be sure that you were aware we were accepting these (and) what the terms were. There are a few restrictions on these. You don’t have quite as long a maturity schedule that you can offer.
“But there’s very little down side other than that because basically the debt-service rate does not have to go up as high to pay the interest on these bonds, and so we advertised that bond (issue) as a no-tax-rate-increase, it will make sure that that absolutely happens. We were very, very conservative anyway with that, but that really makes that a very strong concept and proposal, and could have the effect at some point of actually lowering the tax needed to pay those bonds because you have two parts to any bond payment — principal and interest. Well, when the interest goes away, it could have the effect — and it would be several years out before we would see this — it could have the effect of lowering that tax rate …”
If the district’s application is approved, Lanane said, “… It would result in maybe as much as $5 million less tax money needed to pay interest on bonds. So we’re asking permission to submit the application …”
Board President Ken Fey asked, “Pat, what are the chances?”
Lanane replied, “I think they’re pretty good. They’re not putting restrictions on this like you must have so many students that fall within these parameters. It’s pretty much wide open, and I actually think if there’s more applications than there would be money, that it would be prorated out on kind of a proportional basis …”
The Board of Education had placed Prop R 2008 on the ballot with the goal of providing a long-term solution to space concerns at Sperreng Middle School. More than 1,300 sixth-, seventh- and eighth-graders are jammed into the middle school that was designed to accommodate 800 pupils when it opened in 1970.
While Sperreng will remain a sixth- through eighth-grade middle school, funds from Prop R 2008 will be used to convert Truman Elementary School to a sixth- through eighth-grade middle school, add onto Crestwood and Long elementary schools, convert Concord School to an elementary school and construct a new Early Childhood Education building next to the Administration Building.
In a separate matter last week, the board voted 6-0 to approve a budget for the 2009-2010 school year that projects operating revenues of $57,806,515 with anticipated expenditures totaling — $60,806,515 — a deficit of $3 million. The district will not go into the red, but instead will dip into its reserves, which total nearly $25 million.
With reserves totaling $24,935,469 projected at the end of the current school year, a balance of $21,935,469 is projected at the end of the 2009-2010 school year. The projected 2009-2010 deficit adheres to the district’s long-range financial plan that calls for a planned spend down of those reserves with a deficit-spending cap of $3 million per year.
The “big story,” Lanane told the board, is the district’s declining revenue.
“… It shows declining revenues for three years in a row, which is simply unheard of. One thing about a recession and school districts, we don’t get hit on the early end of it. We’re kind of OK — sometimes for a year — and this recession’s been going on for awhile. We’re now starting to feel it,” he said. “The bad news is our tail end of a recession is much longer and particularly in terms of property values.
“As you all know, your property values declined this past year … That will be a decline in your tax bill, which you should be getting those estimates very soon. That also in turn, though, results in a loss of revenue for the school district because we are a hold-harmless school district and your state tax dollars do not come back to us. They go other places, and so it’s very detrimental to a school district (that) is property-tax reliant when we have such a terrible recession. And reassessment isn’t for another year, even after next year. So we’re going to be in a recession revenue-wise for this school district for the next couple of years, and we predicted our revenues actually will decline by over $800,000 for this next year,” Lanane said.
During a May 19 budget workshop, the board gave tentative approval to more than $2 million in reductions for the coming school year, he noted.
As a result of those “painful” cuts, Lanane said, “We have been able to maintain that $3 million deficit spending from our reserves …”
Board member Mark Rudoff said, “… We are planning to spend $3 million more than what we’re taking in this year …”
Lanane interjected, “Exactly.”
“And this was an extraordinarily painful exercise that we engaged in this past May with minimal impact on personnel …,” Rudoff said, noting the financial plan calls for spending an additional $3 million from reserves for the 2010-2011 school year. “If there are any increases in costs that occur during the course of the year, whether it be by giving raises or increases in insurance or increases in operating expenses, that’s going to add to our $3 million deficit, and for us to get down to $3 million again next year, it’s going to require even more painful cuts next May. So I will say that as a board member sitting here, be mindful that we will be asking — or at least I will be asking — you if there is a salary increase or an expenditure increase is being proposed, I’ll be asking you where you expect to make a commensurate cut at that time so we can stay within that $3 million deficit.”
Lanane said, “And I’ll be asking that question of a lot of other people … That’s absolutely as it should be because we must maintain the budget discipline that we were able to maintain this past year.”