Posted: 4/10/07
District to re-fund capital loan
By Jane Palen
Managing Editor
The school board of ISD #299 has agreed to restructure its debt and in doing so extend the length of time it will take to pay off the loan for the school construction and remodeling. The decision will also result in a more stable tax rate for the remainder of the loan.
The district financed part of the new middle/high school and remodeling of the elementary school with a maximum effort capital loan. The "maximum effort" refers to a percentage, set by the legislature, of the districtís net tax capacity which the district must levy. The most recent maximum effort was set at 28 percent.
For 2007, the maximum effort was $1,409,896. Of that amount, $859,000 went to service the bond and the remainder ($611,000) was applied to the capital loan.
Because the district is required to levy a portion of its net tax capacity, an increase in land values results in greater tax capacity and a corresponding increase in the tax rate. In this way, the loan is paid off more quickly. Under existing conditions, the loan would have been paid off in 14 years at an average tax rate of 34.14 percent (on debt service only). The amount paid would be $30,411,306.
What the district has now agreed to do is sell bonds to refinance the debt, effectively retiring the maximum effort capital loan. The bonds will be paid off over a longer term, and it will cost the school district more in interest, but the impact on individual taxpayers will be reduced. The loan will now be paid off in 20 years at an estimated tax rate of 31.67 percent. The district will pay $37,280,231.
On a home valued at $150,000, the tax savings are estimated at about $37.
Ehlers and Associates was selected as the bond agent.
Superintendent Mike Moriarty said that the refinancing has been looked at in the past, but it has not been advantageous until now.
In other news, the board approved the recall of Sally Mensink to a position being vacated by Eileen Beach. Beach plans to return in the fall, at which time Mensink will be placed on unrequested leave of absence, explained Moriarty.
Caledonia Argus
314 West Lincoln St.
P.O. Box 227
Caledonia, MN 55921-0227
507/724-3475
E-Mail: editor.argus@ecm-inc.com