Revised Tax Forecast Buoys School Bond Supporters

Supporters of plans to rebuild all of the school district's K-8 schools received welcome news at a public meeting held by the Mercer Island School Board Feb. 23.

Executive Director Dean Mack said a new financial forecast on $196 million of bonds the district is asking voters to approve in April will have a substantially smaller annual tax rate than previously thought. Mack said that it was possible to limit the property tax school levy rate for construction bonds to a maximum of just 1.28 per $1,000 in assessed value — just 70 cents more per $1,000 than what taxpayers are currently paying. That would raise the combined school tax levy (including operating, capital and transportation levies) to a total of $3.62 per $1,000.

MISD Superintendent Gary Plano said an earlier property tax estimate of how much more the new bonds would cost a hypothetical $1 million property  — up to $950 — was now revised downward to no more than $700.

Plano said that the district planned to sell the voter-approved bonds over 5-7 years (ending 2017 or 2019). Timing the bonds are a concern because several bond issues will disappear from tax rolls by 2015.

"We want to keep tax rates as flat and as stable as possible," he said.

The King County Assessor upwards to 2.68 per $1,000 for 2012, due mainly to falling real estate values. 

Mack presented several different scenarios that started construction of the schools in 2014, but varied in the number of years spent on construction and the timing of rebuilding Islander Middle School. Each of the elementary schools would take a year to build and the middle school would take two years.

The most aggressive construction schedule would be the most costly to tax payers annually — at 3.62 per $1,000 — because more of the bond money would be borrowed sooner, and both IMS and an elementary school would be closed at the same time. Longer construction timelines could lower the levy rate to 3.51 per $1,000. 

The documents also stated Island Park would be the first elementary school rebuilt, but Mack later stated that the names of the schools were only used to serve as placeholders, and the first elementary school to be rebuilt had not been determined. 

Mack said several assumptions were made to achieve the revised school levy rate, including 100 basis points on federal interest rates, the sale of 25-year bonds, and appreciation of Mercer Island's total assessed value at an average of 2.5 percent per year.

Board President Janet Frohnmayer praised the district's fiscal prudence and .

"In today's economy (following the Great Recession), the incremental advantage of having that rating has become even more impressive," she said. "The other thing they do, Moody's looks at us, at our programs, at how we're spending the money and then they deliver their ratings. They actually look favorably at programs. When the district says here's what we're going to do, that shows strategic foresight … That makes us more likely to retain AAA with that kind of program."

Earlier in the meeting, the school board voted 3-2 in the King County Elections Voters' Pamphlet.