School board eyes smaller bond issuance, hopes to keep tax impact ‘zero’ for county residents
Millard School District officials continue to make progress toward a bond election and building program to improve Millard High and Fillmore Elementary schools starting next year.
The district’s board of education listened to two presentations during a work session at its May 11 meeting—one about what the school renovations will look like and another on how best to pay for them.
The largest project entails rebuilding the academic center of Millard High, replacing it with a two-story section full of various classrooms, constructing a new front entrance, new administrative offices, a counseling center, commons area, large outdoor courtyard and a lecture hall that can double as a community meeting space. This new central facility is envisioned just off the existing theatre and gym building.
Renderings created by Naylor Wentworth Lund Architects in Salt Lake City show designs being considered for a massive renovation project at Millard High School. The central academic building is slated to be replaced with a two-story classroom facility, new administrative offices, a counseling space, outdoor courtyard, commons area and more. Millard School District is planning to ask voters to approve general obligation bonds to pay for the projects as well as another to add classrooms to Fillmore Elementary School.
The campus’ existing technical education facility will be kept but also renovated. The existing kitchen and dining facilities would also likely be turned into a space for other functions as a new kitchen and dining space is built along with the new classroom building.
“The big question right now on our minds is do we keep the lunchroom part of that (CTE) addition. Because it could be a pretty good space to turn into something else,” said Philip Wentworth, vice president at Naylor Wentworth Lund Architects, which is designing the new facilities. “We’ve already since these drawings started to make some changes.”
One change contemplated includes the addition of a teen center next to a proposed space for counselors—the state this year authorized funds to provide facilities specifically for teens struggling with clothing needs or laundry facilities at home.
Wentworth and district officials joined MHS stakeholders in a recent walk-through of the current facility, identifying specific programmatic needs and mulling the dimensions of the changes contemplated.
Superintendent David Styler said that a building committee was formed and shown some of the half-dozen or more design options Wentworth and his team put together.
One struck them as the best starting point, he said.
“Let’s go from that one and move forward,” Styler said, describing the committee’s reaction. “And that was awesome.”
While Millard High will eventually seem like a whole new campus, work on Fillmore elementary will be much more subdued—the addition of between eight to 10, 1,000-square-foot classrooms and possibly a service area attached to the back of the current building.
“We don’t think there is a lot of site work that has to happen,” making the project more cost-effective for the district, Wentworth told school board members.
Costs are upper most in district officials’ minds, since current plans call for seeking permission from voters in November to sell general obligation bonds to fund the projects.
Japheth McGee, vice president at Zions Public Finance, provided an updated presentation on some of the district’s financing options.
He said if a general obligation bond election is necessary, a bond resolution would need to be approved by the school board no later than Aug. 10.
The bond resolution would then need to be delivered to the lieutenant governor’s office by Aug. 24, McGee said. A series of other steps would follow, including submitting for and against arguments, noticing and holding public meetings regarding the issue and producing an election pamphlet, among others.
Voters must approve any issuance of general obligation bonds.
One issue McGee said was likely to energize voters is the potential impact to property taxes from the district issuing such debt. State law requires any ballot item to spell out a specific impact, regardless of the district’s financial position and existing levies. However, the district can somewhat mollify voter concerns by also including a more realistic description of the likely tax impact from issuing the debt.
McGee said by way of example that if the district sought to sell $60 million in bonds it would have to tell voters the possible impact would be about $155 in annual property tax increases on an average home—$300,000 was utilized as an average home value, so owners whose homes are worth less would pay less and vice versa. However, given the district’s financial position and existing capital levy, the actual tax impact of a $60 million bond issuance on an average homeowner would be about $29 a year, McGee said.
The district would need to explain both tax impact numbers to voters.
“That has to be on the ballot statutorily, which is unfortunate, because it’s not necessarily a realistic picture of where your tax rate is or will be. But in order to be transparent, the state wants you to say that,” McGee told the board.
District officials, however, are seeking to create “zero impact” to area taxpayers, so they tasked McGee with showing them how that looked.
McGee said that issuing $47.5 million in bonds payable over a 35-year term would give the district the ability to assure average taxpayers of almost no tax impact from the debt—though the tax impact required by the state to be put on a bond ballot would still show $123 in annual property tax increases—given the district’s borrowing ability, conservative interest rate expectations and growth estimates.
“You still have to put that $123 in tax impact on the ballot…but then the explanation is it’s net neutral because we are going to keep our capital levy where it is and use IPA’s valuation growth… net neutral for residents, not IPA,” McGee said, referring to IPP Renewed, the new gas and hydrogen electric power generator under construction near Delta. IPP is the district’s largest taxpayer. Once completed, the new gas plant will increase the district’s taxable value by 50 percent, McGee told board members. Currently, the decades old IPP coal plant is so depreciated in value that typical homeowners have seen their property taxes sky rocket as a result in recent years.
McGee said in formulating how the district’s construction spree can spare homeowners any new taxes, he used conservative figures for future interest rates and conservative growth estimates. He said the district will benefit even more if growth projections come in much larger than his conservative estimates, which a few board members predict will occur.
The longer bond terms—35 years instead of 30—will help.
McGee said state law allows districts to issue bonds with terms as long as 40 years.
Asked about when the district could get a fixed interest rate on such debt, McGee said most districts after passing a general obligation bond set the financing in place at the beginning of the new year— the election is in November, a contest period occurs in December and then the bonds can go to market in January or February, which is when interest rates are set on the new debt.
Gilmore Bell, a public finance law firm established in 1979 with offices in Salt Lake City, will likely act as bond counsel for the district, McGee said.
The finance professional outlined multiple options for reducing interest payments long term by refinancing portions of any debt when interest rates fall.
But one problem the district may encounter, besides higher interest rates, is the sheer cost of building and uncertainty related to inflation.
District officials initially wanted to do a broader series of projects and initially mulled issuing as much as $75 million in bonds. McGee said one option available to the district was to issue lease revenue bonds on top of any general obligation bonds to fund spending required above $47.5 million.
Lease revenue bonds don’t require an election to issue.
They also can be issued for long terms, such as 30 years. But McGee said fewer buyers of longer term revenue bonds means shorter 15- to 20-year terms are more typical in that market. He said the district’s growth could cover lease revenue payments in the future as well should local industry continue to expand beyond his conservative projections.
School Board member Adam Britt said he’s already heard from citizens about the district’s bond plans. He says he does his best to explain the need for more and better designed space in local schools. Millard High in particular is considered by most to be in bad shape—it was supposed to get a new campus several years ago but voters denied the district’s request for bonds for it back then.
“Building schools is the cost of doing business,” he says he tells voters. “We just have to do it. It’s not pleasant, but you have to do it.”
