The North Bend Eagle


 

Bonds

Bond supporters say time to strike is now

by Nathan Arneal
Published 3/6/13

The North Bend Central school district has been known for having one of the lowest tax levies in the state.

Supporters of a bond issue to be voted on March 12 say that will still be the case if district patrons vote in favor of the bond.

The total cost of the project that would make significant changes to both North Bend Elementary and the high school building, covered in the previous two issues of the Eagle, stands at $7.365 million.

bonds

That cost would be paid by raising the district’s tax levy by 2.1 cents per $100 of property value. That means a $100,000 house would be assessed an additional $21 per year. School board member and farmer Francis Emanuel said it works out to about 75 cents per acre for typical farm ground in the area.
Even with the additional 2.1 cent bond, NBC’s levy would still be the second lowest of the eight surrounding school districts.

NBC superintendent Dan Endorf said the school board has been preparing for several years to take on a project such as this bond issue with minimal effect on the taxpayers.

Board member Jeff Peters said groundwork by previous boards and administrations left NBC in very good financial shape.

“You can go back through the history of the North Bend school board and we’ve always had a very responsible board when it comes to taxation and our school levy,” Peters said. “It’s made it considerably easier for us to go to the public now.”

Several area school districts have passed bond issues of similar value in recent years (see table above). In each case, the district increased its levy by more than four times the amount NBC is seeking.

Several factors have allowed NBC to get by with such a low levy increase: historically low interest rates, a strong tax base in a geographically large district, and utilization of part of the school’s Building Fund toward the bond issue.

The total levy required to pay for the bond is 6.6 cents. The school board is going to cover part of that cost by moving over 4.5 cents of the district’s existing Building Fund levy. That leaves just the 2.1 cents of new levy to be added.

Dan Wesely, a 13-year member of the NBC school board, said the renovations and additions included in the bond issue would take care of many of the maintenance and facilities needs that the Building Fund was paying for. The Building Fund would be left with a 2.5 cent levy (down from its original 7.0) to deal with any future needs that arise.

Craig Jones is a managing director of public finance with First National Bank in Omaha. He specializes in school bond issues and has been advising the NBC school board. He said now might be the best time in history to be considering a building project thanks to low interest rates.

“These are roughly 40 or 50-year historic lows,” Jones said. “These are the lowest I’ve seen in my lifetime in terms of bond interest rates.”

Jones said the projected blended interest rate NBC is looking at is about 2.8 percent for a 20-year bond.

The economic downturn starting in 2008 made people wary of investing in the stock market, Jones said. As a result, more people started investing in safer municipal bonds. The higher demand lowered interest rates to their current historic lows. With people regaining confidence in the stock market and the economy, Jones said he expects municipal bond interest rates will have to increase to attract investors. He said that most national experts project interest rates to rise by about 0.5 percent by the end of the year.

“These are times that we’ve never seen before,” Jones said. “The fact that interest rates have hung this low have really surprised a lot of people to begin with.”

Jones said a 1 percent increase in the interest rate would cost taxpayers $1 million in additional interest payments over the life of the bond.

What if it doesn’t pass?

School board members told the Eagle that if the bond issue doesn’t pass, it will end up costing the taxpayers more money in the long run.

“Our needs don’t change,” Peters said. “We would still need to proceed, but in a much slower time frame, basically accomplishing one thing at a time. Anybody that’s familiar with construction costs knows it’s cheaper to get things done all at one time rather than to drag it out over a 10 to 15-year period.”
Wesely said the board has looked at a plan to proceed with the needed improvements without a bond. He said the board would prioritize the needs and tackle them one by one.

“In 15 years, we would probably get a third of the projects done,” Wesely said.
The school board members also said that defeating the bond issue wouldn’t necessarily protect district patrons from a levy increase.

Small levy adjustments such as 2.1 cents are common over the course of normal year-to-year business. To tackle issues of overcrowding and antiquated facilities, the board would have to increase the levy on the Building Fund, which it can do without voter approval, and wait until the Building Fund has enough money to undertake the necessary projects.

The only time school districts are required to seek voter approval is when it seeks to take out a loan, which is what a bond issue is. By getting the money up front and taking on the whole project at once, the district will save money.
“With interest rates likely rising and construction costs going up,” Peters said, “we’re getting more bang for our buck if we’re able to get this bond passed now.”

Helps with recruiting

North Bend Central is currently undergoing a lot of staff turnover as several long-time teachers retire. Many of those teachers were hired in the ‘70s when the high school building was in its first decade.

The ability to recruit high quality teachers to NBC played a factor in the board’s decision to go ahead with the bond issue now.

“Whether its science rooms or the gym, everybody wants to be in a new facility rather than coming to something that’s behind times,” Wesely said. “If you are modernized and have the latest equipment, you feel like you’re right in there and can do a good job teaching. It’s going to bring in kids, too. I think it will snowball in the right direction.”

Peters, a 1988 graduate of NBC, said continuing North Bend’s tradition of strong education will help the community as a whole.

“I brought my family back to this town because of the quality of education that it provided for many years,” Peters said. “I don’t want that to go away. Any town’s viability is based on the success of its school. We have a great town with an 18-hole golf course and a brand new library. We’re a progressive town. We just need to show people that we’re willing to make that investment in our kids’ education.”

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