The $29.7 million question
Tax impact of school bond issue estimated for residents
Steamboat Springs — Steamboat Springs residents may need a calculator and their checkbooks when deciding how to vote in November.
The Steamboat Springs School Board decided this week to approve two ballot initiatives, one to improve local elementary schools and the other to increase funding for district teachers and staff. The decision means that one year after local voters approved an $11.4 million expansion of Bud Werner Memorial Library, Steamboat voters will again decide whether to fund a large-scale building project in the city.
The elementary school initiative has a cost of nearly $30 million, spread over 20 years and funded by local property taxes. The teacher and staff funding initiative asks for a permanent property tax increase, in the form of a mill-levy override, which would generate $600,000 in 2007, increase by $25,000 annually until 2015, then cap at $800,000 per year.
In exchange for the tax increases, Steamboat residents would get a brand-new elementary school, contracted by the Steamboat Springs School District for construction at the current site of Soda Creek Elementary School in Old Town.
The proposed 70,000-square-foot, two-story building would include 28 classrooms, an outdoor play area for kindergartners, an athletic field, and a 45-space parking lot with circular traffic flow.
Also, an $8 million renovation of Strawberry Park Elementary School would add 10 classrooms and significant multi-purpose space to the re-designed, 64,500-square-foot building, while removing six temporary, modular classrooms that currently house about 200 students.
Finally, the mill-levy override would allow the school district to help teachers and staff in several ways, including salary and benefit increases, housing assistance, and training programs.
Donna Howell, superintendent of the Steamboat Springs School District, and Rudy Andras, economist and vice-president of the Denver financial firm RBC Capital Markets, presented figures this week detailing the potential financial impact on local property owners. The figures relate primarily to the elementary school initiative, which asks voters to allow a long-term bond issue and represents the bulk of funding requested by the school district.
If voters approve both initiatives Nov. 7, school-related property taxes for the owner of a $450,000 home in Steamboat would increase by about $100 in 2007, to a total of $926, and would then – barring drastic future changes – remain close to $926 for the next 20 years.
Andras said $450,000 is the median value for a single-family Steamboat home in 2006-07.
The median 2006-07 value of a commercial property in Steamboat is $320,000, Andras said. For owners of a median commercial property, approving both ballot initiatives would increase school-related property taxes by about $250 in 2007, to a total of $2,399. That tax amount likely would remain close to $2,399 for the next 20 years, Andras said.
He acknowledged that financial forecasts are far from an exact science.
“The only thing we can do with any real precision, at this point, is look at next year,” Andras said. He and RBC economist Dan O’Connell have worked with school district administrators for nearly a year and have met with the School Board numerous times to assess and plan November’s ballot initiatives.
Andras said his projection of a steady tax rate during the next two decades is based on local history.
In 1994, the median value of a single-family home in Steamboat was about $150,000, he said. That year, owners of a median home in Steamboat paid $849 in school-related property taxes. In 2006, those same homeowners paid $830 in school-related property taxes, despite skyrocketing home values and continuing repayments on a $24.7 million bond issue approved by voters in 1997, to fund renovations at Steamboat Springs High School.
Between 1994 and 2006, school-related property taxes for the owner of a median-value home ranged from a low of $744 in 1996 to a high of $875 in 1998 and 2000.
That is an unusually consistent tax rate, Andras said.
“Your home value has tripled, but your tax bill has stayed the same,” he said.
Owners of commercial property also can expect an initial tax hike followed by relative consistency if voters approve the ballot initiatives, Andras said.
Between 1994 and 2006, school-related property taxes for median commercial property owners grew from $1,429 to $2,151, with the largest single-year increase occurring from $1,572 in 1997 to $1,930 in 1998 – the first year of the bond for the high school.
In that same 13-year period, median commercial property values grew from $112,000 in 1994 to $320,000 in 2006, with a total school-related tax increase of less than $1,000.
“If this history repeats itself, people can expect a similar range,” Andras said. “You can safely say, if conditions stay constant, the future would look something like this.”
A cloudy crystal ball
But in economics, conditions do not always stay constant.
“Interest rates can move half a percentage point within a few months,” Andras said.
To compensate for that fluctuation, Andras and O’Connell prepared the ballot language using costs based on interest rates higher than what they expect and higher than the current market.
The elementary school ballot initiative cites a maximum repayment cost of $57 million. Andras said that number is based on a 6 percent interest rate for the 20-year, $29.7 million bond. The current interest rate on such a bond is 4.15 percent, he said Thursday.
An interest rate of 4.65 percent would result in a total repayment of $50.3 million, but those calculations are not included in the ballot language.
“We use higher interest rates to protect the school district,” Andras said. “These are legally binding numbers.”
Most of the repayment for the elementary schools’ bond would occur after 2017, O’Connell told the School Board on Monday night. Because the school district is currently repaying the bond for the high school, which is scheduled to be paid off in 2017, O’Connell said RBC would “wrap” the elementary school bond around the high school bond, to lessen the impact on taxpayers.
In other words, repayments on the elementary schools’ bond would be low at first, then much higher after the existing high school debt is paid off, resulting in a steady payment of about $3.5 million for the next 20 years to complete both debts.
“We’re trying to make it as smooth of an increase as possible, rather than have a huge jump (in taxes) right now,” O’Connell said.
In deciding Monday night to place a new elementary school on the ballot, School Board members culminated a highly public, hotly debated process that raised questions about where to locate a new school, what the facility should include and how it should be built.
Some of those questions remain.
School Board members and the residents asked Rick Denney, director of facilities for the district, to examine opportunities to implement energy efficiency and environmental conservation in the school’s design, while addressing concerns about student security and a lack of parking spaces at the Soda Creek site, which is less than 5 acres in size.
“I think the parking issue is extremely serious, and could inhibit the whole plan,” said Michael Loomis, a member of the city’s Education Fund Board and former School Board member.
Denney said he and the school’s design team have those needs firmly in mind. The architect for the new elementary school is Leland Reece of Christiansen, Reece & Partners, P.C. The electrical engineering firm is CEI Consulting Engineers of Colorado Springs, directed by lead engineer Roger McFarland. The mechanical engineering firm is M.E. Mechanical Engineers, also of Colorado Springs, led by engineers Charlie Lengal and Mike Edward.
Denney said Thursday that design plans are “on hold” and that the School Board has not yet decided whether to front $500,000 to allow design planning to continue before the November vote. Such a gamble paid off in 1997, Denney said, by allowing designers to get a head start with planning the high school renovations.
Howell said that pending a successful vote in November, the new school at Soda Creek could be ready for students in fall 2008.
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