Dear friends and neighbors,
Several of you have asked about the repayment schedule for the PLSD's $77.5 million bond issue to finance our new junior/senior high schools (the ''$77.5 Million Bond Issue''). I apologize for the delay in my response.
Under this repayment schedule -- which was based, as you know, on the concept of ''minimal new millage'' -- annual payments of principal and interest (''debt service'') on the bonds will increase, more than doubling from approximately $3 million to approximately $6.7 million, between now and 2014, rather than remaining level, as in the case of a more conventional repayment structure.
The theory behind this structure is that, by the time debt service peaks in 2014, the PLSD's tax base will have grown, and the PLSD's other debt service requirements will have declined, so that we can handle the higher debt service with only a minimal increase in millage rates.
However, the minimal new millage concept has some serious drawbacks, which is one reason why I opposed, and voted against, this bond levy. It is possible that this theory will not work out in this case. Also, due to this structure, which delays repayment of principal and thus increases accrual of interest, the $77.5 Million Bond Issue will cost PLSD taxpayers an additional $12 million of interest expense over the life of the issue. That's enough to pay for an additional school. According to Fifth Third Bank, structuring the proposed $27 million elementary school bond issue in this fashion would cost PLSD taxpayers an additional $4 million of interest.
With a level debt service schedule, the millage required to repay the $77.5 Million Bond Issue would have continuously, and significantly, declined. This would have made it easier for PLSD taxpayers to finance the additional schools that doubtless will be needed in coming years. Finally, I believe that the school board was misled, by this repayment structure, to spend more on the new junior/senior high schools than we can afford.
However, I think it unlikely that the doubling in debt service payments for the $77.5 Million Bond Issue over the next dozen years will result in a doubling of the millage rate required to pay debt service on all of the PLSD's outstanding indebtedness. The tax base is likely to increase significantly during this period, and other PLSD debt service requirements are scheduled to decline.
Nonetheless, I hope the PLSD will not repeat its ill-starred experiment with minimal new millage. The risks, and costs, are simply too great.
By Bruce Rigelman
Several of you have asked about the repayment schedule for the PLSD's $77.5 million bond issue to finance our new junior/senior high schools (the ''$77.5 Million Bond Issue''). I apologize for the delay in my response.
Under this repayment schedule -- which was based, as you know, on the concept of ''minimal new millage'' -- annual payments of principal and interest (''debt service'') on the bonds will increase, more than doubling from approximately $3 million to approximately $6.7 million, between now and 2014, rather than remaining level, as in the case of a more conventional repayment structure.
The theory behind this structure is that, by the time debt service peaks in 2014, the PLSD's tax base will have grown, and the PLSD's other debt service requirements will have declined, so that we can handle the higher debt service with only a minimal increase in millage rates.
However, the minimal new millage concept has some serious drawbacks, which is one reason why I opposed, and voted against, this bond levy. It is possible that this theory will not work out in this case. Also, due to this structure, which delays repayment of principal and thus increases accrual of interest, the $77.5 Million Bond Issue will cost PLSD taxpayers an additional $12 million of interest expense over the life of the issue. That's enough to pay for an additional school. According to Fifth Third Bank, structuring the proposed $27 million elementary school bond issue in this fashion would cost PLSD taxpayers an additional $4 million of interest.
With a level debt service schedule, the millage required to repay the $77.5 Million Bond Issue would have continuously, and significantly, declined. This would have made it easier for PLSD taxpayers to finance the additional schools that doubtless will be needed in coming years. Finally, I believe that the school board was misled, by this repayment structure, to spend more on the new junior/senior high schools than we can afford.
However, I think it unlikely that the doubling in debt service payments for the $77.5 Million Bond Issue over the next dozen years will result in a doubling of the millage rate required to pay debt service on all of the PLSD's outstanding indebtedness. The tax base is likely to increase significantly during this period, and other PLSD debt service requirements are scheduled to decline.
Nonetheless, I hope the PLSD will not repeat its ill-starred experiment with minimal new millage. The risks, and costs, are simply too great.
By Bruce Rigelman
