Revised Tax Forecast Buoys School Bond Supporters

Planning for the approval of $196 million in construction bonds this April, the Mercer Island School District revised expected school levy rates downwards and discussed construction timing scenarios.

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.

Jake Wood February 29, 2012 at 04:27 PM
We need to pass the bond to know what's in the bond..... where have I heard that before? The cost of publishing the in the King County Pamphlet is less than 1 day's interest. What is the school board hiding?
Kendall Watson February 29, 2012 at 07:19 PM
Here's a thought: What do you think about measuring tax burdens by absolute dollars, rather than by levy rate? Is this a relevant metric — apples to apples — or not? I didn't report on it this way because I wasn't sure about that.
Robert Spalding February 29, 2012 at 07:55 PM
Hi Jake - there actually is a lot of information out there. Just because the school board voted to follow their regular procedure of not printing a voters pamphlet doesn't mean they're hiding anything. Please check out their website at http://www.misd.k12.wa.us/departments/facilities/facilitiesQ&A.html. There are also planned meetings being sponsored by the Committee for Mercer Island Public Schools which is a citizen's group formed to support the district. Check out that website at www.mischoolsyes.org for dates of the presentations. Thanks!
Kendall Watson February 29, 2012 at 08:06 PM
Thanks for this Robert! I'll run a short item about this on Patch.
Jake Wood March 01, 2012 at 12:06 AM
Robert, thanks for the links. However both sites are pro bond. I would like to be able to read the language of the bond directly, without bias. Would you know where I could do this? Thank again.
Robert P. Browne March 01, 2012 at 05:03 AM
The mischoolsyes.org is biased, and as I mentioned earlier, twists numbers so that they are quite deceptive. Even the school website it inaccurate; it still says land acquisition will be in the plan. Despite several parents and students concerns, portables are not a detriment to learning (Tak Cheung Chan, (2009) "Do portable classrooms impact teaching and learning?", Journal of Educational Administration, Vol. 47 Iss: 3, pp.290 - 304) The King County Department of Assessments found two elementary schools and one middle school on Mercer Island to have a "GOOD" building quality, and West Mercer had an "AVERAGE" building quality when compared to similar buildings. There is definitely room to add another wing at IMS, by demolishing the portables and creating it two classrooms wide with a hallway in the middle while still maintaining the proper setback requirements (which I would like to see). Additionally, and very importantly, the bond drafts show an upgrade to the stadium, when in fact this past summer it was renovated including new paint job; the IMS track updated this past September. The "loss of the IMS track for or multiple years as the school is rebuilt" is an effect of using it as a swing school, and on the 6-year plan it is shown to be replaced in 2016. On a last note, I am glad that you clarified the sequencing, although it seems like the administration keeps coming up with excuses.... I, too, may have to start directly questioning their methodology and accuracy.
Geoffrey Spelman March 01, 2012 at 07:38 PM
We all have a right to know how much this will cost. There are too many comments floating around about how much this increases your tax bill over what you are now paying. To finance $196 million over 20 years at 2.8% requires payments of $12.8 million per year. Based on the island's current total valuation, that would require a tax rate of $1.58 per thousand, which means that a home assessed at $950,000 would have to pay just one cup of coffee shy of $1,500 per year for 20 years. Issuing bonds over a period of as long as 7 years also exposes us (not the district) to rising rates, so the cost could well be greater. Not THIS bond.
Kendall Watson March 01, 2012 at 09:36 PM
I believe these are 25-year bonds, issued in 2013 through 2018 or 2019 if the measure passes.
Geoffrey Spelman March 01, 2012 at 11:25 PM
My attendance at recent board meetings tells me that they have shifted from 25 year bonds to 20 years and while you are correct that they would be sold over several years, they all presumably would have 20 year lives. The fact that the bonds would be sold in future years only adds uncertainty over the actual cost as higher interest rates would be yet more expensive.
Kendall Watson March 02, 2012 at 12:24 AM
True, assuming that interest rates are likely to rise. The current estimate has 100 basis points built in, as I reported earlier. If the fed moves to check a hypothetical inflationary bubble at some point during that period, that would likely boost interest rates past that. I'll ask again about 20 year-bonds vs 25 years. I'm pretty certain it's 25.
Kendall Watson March 02, 2012 at 05:02 AM
Jolly well spotted, Geoff. Upon asking Superintendent Plano, it's "20-year bonds over 25 years." Right you are.


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