IRON RIVER—It has been a long time coming, and it won’t actually happen for a few more years.
But the payback on the 25-year bonds that financed construction of the West Iron County High School building is now in its final years. School administrators are starting to think about what they should do after the bonds are paid off.
The topic came up during the School Board’s May 20 regular meeting.
“In 2017, the bond for our high school is paid off,” said Superintendent Chris Thomson. Property owners are currently paying 1.99 mills to pay off the bonds—Finance Committee Chairman Rob Possanza said the district made its $340,000 annual payment on the principal and interest just recently.
Also in 2017, the district’s sinking fund levy (currently 0.44 mills) will also end—it was approved by local voters for 15 years in 2002.
“I think it’s a perfect opportunity,” said Thomson, “for us to save the residents some tax dollars—but also look at increasing the amount we charge for sinking fund.”
The sinking fund, said Thomson, has to be approved by voters and the money it raises can only be used for certain purposes, as set in state law. Sinking fund money can’t be used for payroll or day-to-day operations.
“Basically, it’s for the construction or repair of school buildings,” the superintendent said. For instance, sinking fund money was used in 2010 to replace the boilers at Stambaugh Elementary. “It didn’t have to come out of the general fund, and we didn’t have to pass a bond.”
When the high school was remodeled a few years ago to add the middle school grades, it was done with sinking fund money. The repair and replacement of parking lots also came from the sinking fund, and so did classroom recarpeting and security upgrades at the school buildings. “It can be used for major projects or routine projects,” Thomson said.
If West Iron voters approve a larger sinking fund levy that would start after 2017, they will get a big tax cut anyway because the high school bonds will be paid. West Iron has no other bonds to pay.
“My goal, as we start looking at 2016, 2017,” Thomson said, “is that we inform the public that their millage rate is going back and we want to increase the sinking fund.
Thomson called the sinking fund “the most efficient use of taxpayer money.” When a school district sells bonds, it’s just like any other loan: Only part of payment is used for the principal (the amount borrowed). The rest goes to pay interest on the loan.
That’s not the case with the sinking fund: The district is able to use every penny that the levy raises. “And usually as locally as possible,” Thomson said.
Schools are asking the Legislature to allow sinking fund money to be used for some major education expenses: technology and transportation. Under present law, when a school buys new school buses or computers or when it upgrades software, the money has to come from the district’s general fund.
Thomson talked about a letter he sent to Gretchen Whitmer, Senate Democrat leader. “She is really pushing for the expansion of sinking fund moneys to move into technology and transportation.” Thomson also wrote the two leading Republicans in the State Senate, “reminding them of the efficiency of sinking fund.”
If the change is made, he said, “That would help districts immensely,” Thomson said, “especially in this ever-changing world of technology.
“That’s something we are looking forward to, and we hope Sen. Whitmer continues to push for this.” Both Iron County’s local legislators, Rep. Scott Dianda and Sen. Ed McBroom, have said they support the change.
Loan payments for the high school bonds started in 1992, when a levy of 4.2 mills was collected. Since then, the levy has been reduced to the present 1.99 mills, and the bonds were refinanced at least once to get a lower interest rate.
The sinking fund was approved for 15 years and started in 2002. That levy started at 0.5 mills and currently is 0.44 mills.
The topic of district finances after 2017 will be coming up often in the next few years. “It’s something we need to start doing if we’re going to do our five-year planning,” said Possanza. “It’s within that realm.”
• Thomson also told the board that the state has added $85 million to the school aid fund. That would equal about $80 per pupil statewide. The state house and senate are in a conference committee, he said, trying to work out a bill both bodies will pass.
Thomson said Gov. Rick Snyder has promised that all budgets will be done by June 1. In past years, local districts didn’t know what the Legislature would do about school aid until August or September.
Once the district learns how much state aid to expect, a special board meeting will be called to discuss the district’s 2013-14 budget, which would be approved at the June regular meeting.