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Letter: Where's the Financing Statement for School Bonds Issue?

Mercer Island resident Millford Walker raises questions about financing the school bonds in a letter to the editor about exactly how much it could cost local taxpayers.

Editor:

There are three things any reasonable person should want to know when making a major purchase. What exactly am I buying? How much does it cost? And if I’m financing, what is the cost over the life of the loan? Now as a government institution the Mercer Island School Board owes the citizens, at the very least, these things. A Truth in Lending document, if you will.

So far they’ve provided us only one of these things, the . They’ve given us an idea of what they intend to buy, but the bond (actually authorization to buy a series of bonds over several years) gives authority to the school board to do something completely different. As far as financing costs, they’ve made very little readily available to the general public about the assumptions they’ve used to predict tax payer costs. 
Would you make a major purchase like a home or a car with this kind of information? Of course you wouldn’t, but the citizens of Mercer Island are being asked to do just that! 

What the school board should publish is an anticipated schedule of payments a homeowner will have to pay if they stay in their home both with the bond and without for the duration of the bonds and the underlying assumptions used. They didn’t. That leaves busy regular citizens the task of trying to uncover these details in sleuth-like fashion, something we shouldn’t have to do. 
Some of the pertinent information you’ll find when digging is (you’ll have to track down a copy of the ):

  • The tax payments for this bond jump dramatically after the third year  — nearly double if you're living in the same house and escalate thereafter.
  • The financing assumes property valuations will increase 2.5%/yr meaning a homeowner will face a minimum 2.5% average annual increase in local school taxes. 
  • The school board can choose to do something totally different with these funds.
  • 2010 US Census data indicate MI populations of younger children
  • The district population peaked in 2000-2001 with nearly 150 more students than today   

So what does this mean in terms of just the local portion of your school taxes ? A family continuing to live in the same the first year increasing steadily to over $6,600 by the time the bonds are paid off. Of these amounts, the proposed measure accounts somewhere between $1300 and $1800 each year (excepting the first three years where the amount is set at about $700 - the teaser-tax) (excepting the first three years where the amount is set at about $700 - the teaser-tax) (Ed. Note: Please see the attached document to the right of the letter for the supporting document, created by Northwest Securities).

It is the duty of the school board to freely publish such information so we can make informed decisions. We deserve better than the campaign style piece mailed at taxpayer expense. Send all of us the schedule of payments we can expect if we continue to live in our homes.

Sincerely,

Milford Walker

Kendall Watson April 15, 2012 at 04:10 AM
As editor, I felt it necessary to respond to this letter with a few observations (and to do it as a "comment" rather than an editor's note as it is a "Letter to the Editor"): 1) There are several hyperlinked passages in this letter intended only to aid the reader with supplemental information. Some were supplied by the author, and some link back to Patch stories that discuss the issue highlighted. 2) It is very important to understand that this letter is talking a lot about absolute dollar figures and not tax rates. The figures used here won't match up with much of what the MISD has offered to explain the costs because most of the time the school district has discussed the bond in terms of rates. 3) An accurate enrollment headcount history for the district was surprisingly very difficult to find. There are two different sets presented as "Headcounts" by the MISD's Kendrick (2008) and Mack (2010) Demography reports. Specifically, the numbers from years 2006-2008 do not match up. 4) US Census data shows that, in contrasting 2000 to 2010, there's a smaller number of children aged 0-9 than children ages 10-19. 5) Yes, the MISD is expecting real estate values to rise on average 2.5 %/yr. According to MISD CFO Dean Mack, this is a "conservative" estimate.
Kevin Scheid April 15, 2012 at 05:26 PM
It seems reasonable to expect full and open disclosure on the financing of this bond from the School Board. Having the whole story would not only help in understanding of what we are being asked to commit to, but would make other statements from the school board more believable. I would like to see a comment on this issue from the School Board. Knowing that we will pay a constant 3.6% Mil rate is really less helpful than seeing the actual dollars required to make the bond payments.
Rick Campbell April 16, 2012 at 12:55 AM
I think Mr. Walker correctly points out that the demographic numbers do not support the school board's argument. The 2010 Census numbers are official and the city has not refuted them. One must wonder where the school board is coming up with its belief that the number of school-age children on the island is increasing.
Robert T. Brown April 16, 2012 at 01:20 AM
The last professionally done enrollment forecast was in 2008, despite the five-year accuracy rate typically accepted. Although updated periodically, enrollment is not "set in stone" for the next few years. Additionally, many supporters of this bond point out the extra O&M costs of a 4th elementary school. However, the study done for this amount is not yet made public, and such studies for additional O&M costs for larger schools has not been started. I predict this bond will fail, because historically, larger voter turnout decreases bond success rate, and we already have about 40% voter turnout. At the February special elections, all School construction bonds failed, while the O&M levies all passed, according to the Seattle Times.
Kendall Watson April 16, 2012 at 08:34 AM
Two other thoughts: 1) 2.5% appreciation is essentially the same as the average inflation rate (CPI) for the past decade. Will local home values keep pace with inflation? 2) Peak enrollment for the MISD was in 1974 and 1975 when total enrollment crested above 5,500. Enrollment then fell until the late 90s when it rose again and hit its most recent peak in 2000 (current enrollment, 4,205, is less than 100 students below that, and projected to rise for at least the next 3 years, if not more).

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