Interest on referendum estimated at $3.7 million

BAS referendum financing

Voters heading to the polls on Tuesday, November 3 will answer a referendum request allowing the district to issue bonds for $6.9 million for repairs and upgrades to the district’s buildings.

The Dial has covered each section in installments. Part one covered the heating and cooling systems and was run in the Sept. 10 issue of the Boscobel Dial. Part two was run in the Oct. 1 issue and covered exterior repairs and upgrades and plumbing. Part three covered audiovisual equipment, safety and communications systems and lighting in the Oct. 22 issue. This article concludes the series.

Part 4

Financing

H&H Energy, the contractor awarded the project contract contingent upon the referendum passing, with help from Robert W. Baird & Co., has estimated the annual tax impact to be an increase of $1.18 per $1,000 in equalized value.

Because state law does not allow the school district to seek bids on the sale of bonds before a referendum authorizing the sale has passed, Baird used what they term a “conservative estimate” to determine the interest rate of 4.5% for the bonds. Amortized over 20 years, the bond repayments would include $3,717,000 in interest.

That interest rate could come in lower or higher based on a number of factors.

“The district does not currently have a credit rating since they are not carrying additional debt, so they will have to go to a rating agency if the referendum passes,” said Mike Clark, the managing director of public finance at Robert W. Baird & Co.

The credit rating agency will look at property values and employment in the district. They will also look at the district’s budget history, so the current deficit may have an impact, Clark acknowledged.

“The district will have an opportunity to meet with them and discuss all aspects under consideration, which the agency will take into consideration before issuing a rating,” Clark said.

If the referendum is successful, the school district will seek bids on the sale of the $6.9 million in debt. Whomever is awarded the sale – a choice based on offering the lowest interest rate, Clark said – will become the underwriter.

The district has three years to spend the funds with a 20-year repayment schedule.

“The funds from the sale of the debt are constrained by the referendum,” Clark said. “The scope of the project is outlined on the ballot and the school district cannot go beyond that.”

The only legal option the district has if funds are not used on the projects outlined in the referendum, is to use them to pay down debt from the sale of bonds, according to Clark.

The district would be eligible for debt relief due to the generally low property values in the district, Clark noted.

“State aid received by the district in the form of general aid due to debt service from the referendum is solely given as an offset to taxes,” explained Clark. “That money takes the place of taxes that would be otherwise collected.”

Baird used 38-percent of debt service expenses to estimate what the impact of state debt aid would be, according to Clark. That is based on the formula currently in place. That formula has been in place for many years, Clark noted, but could change if the legislature chose to alter it. It does not come with a guarantee.

The energy savings aspects of the projects proposed in the school referendum would save the school an estimated $900,000, according to H&H Energy. Money the district receives through energy savings is not constrained by law and could be used as the district sees fit.

Voting – when and where

Residents of the Boscobel Area School District may vote at their polling place between 7 a.m. and 8 p.m. on Tuesday, Nov. 3.

Where to vote:

• City of Boscobel – Blaine Gym, 104 Oak Street

• Town of Boscobel – American Legion, 106-1/2 Oak Street, Boscobel

• Town of Castle Rock – Hickory Grove Lutheran Church, 15934 County T, Boscobel

• Town of Clayton – Town of Scott Town Hall in Mt. Zion, 43590 County W., Gays Mills

• Town of Haney - Town of Scott Town Hall in Mt. Zion

• Town of Hickory Grove - Hickory Grove Lutheran Church

• Town of Marietta – Town Hall, 45946 Sunset Lane, Boscobel

• Town of Marion - American Legion in Boscobel

• Town of Mt. Hope – Town of Woodman New Hall, 15047 County K, Woodman