Bremen School Board considers options for reissuing bonds this year
BREMEN—THE Bremen Public Schools (BPS) board heard a report from Baker Tilly as presented by Lindsay Simonetto at their March meeting. Baker Tilly is a company that helps schools and municipalities across the nation prepare for and finance capital needs.
As of right now, BPS has two outstanding debt service bonds: a First Mortgage Bond, Series 2019 and a First Mortgage Refunding & Improvement Bond, Series 2015. The school also has a Pensions Bond, which is paid for separately and is scheduled to be paid off soon. Because of that, Simonetto mentioned the Pensions Bond, but concentrated mostly on the school’s debt service bonds. The Series 2015 Bond is scheduled to be paid off next year, whereas the Series 2019 Bond is scheduled to be paid off in 2032.
As it now stands, the total bond payments will be gradually decreasing over the next few years. This year, the total bonds payment will total approximately $1.39 million next year, however, the payment stair-steps down to $760,000 and by 2024, the payment will only be $520,000, which is the average payment until 2032.
Even if the school does not reissue any debt, local taxes will not be affected on the whole. “Just because we would let our debt fall off and not reissue it, doesn’t mean that your taxes are going to go down. It just give opportunity for other tax entities to come in and take our money for themselves,” President Brian Teall explained.
Since BPS utilizes facilities that are constantly in need for improvement, the board believes it is wise to not allow the tax rate to drop off. “As a school, you want to protect that so that we have that opportunity, that capital, to reinvest in the school, keep things new, looking good, and structurally appropriate,” Superintendent Dr. Jim White explained.
Simonetto agreed that most schools try not to allow their tax rate to fluctuate based on the latest big school improvement project. “When you let it go down, you probably won’t have anyone thanking you. But if you bring it back up all of a sudden, you will have people visiting you,” Simonetto said. This is especially true with the recent rise of interest rates. She recommended that the board issue a General Obligation (GO) Bond of 2022 followed by a First Mortgage Bond, Series 2025.
A GO Bond is an option available to all taxing entities in Indiana. One of the benefits to a GO Bond is that fewer meetings are required and are therefore less expensive up front. Unlike the first mortgage bonds, however, there is a bond limit based on the school’s net assessed value. With a GO Bond, BPS could only borrow $3.5 million at most and would have to pay it off within a few years. If BPS decides to move ahead with this, they will have to issue the bond by December of this year, with the money becoming available eight or fewer weeks after the bond has been closed.
Simonetto recommended the school pick up a 19-year
First Mortgage Bond, Series 2025 after the GO Bond is paid off. “If you come to 2025 and you’re thinking, ‘Well, we have this large project that we want to pursue, but we’re not quite ready to pull the plug on the full borrowing for that.’ Maybe you’re still going through drawings and all those sorts of things. You would have the ability to, if you wanted to, do a one-year GO to just keep that tax rate up to buy you some time until you’re ready,” Simonetto said. “There’s a lot of flexibility.”
The First Mortgage Bond would be worth $15 million at most. Between both bonds, the school’s tax rate would be able to be maintained through 2044. “Be thinking about what needs do you have in the immediate future and what else are you thinking about coming down the line in three, five, ten years or beyond. That all goes into the picture of what we might address now and prioritizing that, and how we might structure our borrowing now with an eye on the future,” she emphasized.
Combining GO and First Mortgage Bonds is a common strategy among school corporations to keep the tax rate from rising or lowering. “They’re able to use that to really get an influx of dollars on a more regular basis,” Simonetto explained.
In order to get the GO Bond issued, BPS Corporation would need to have a rough sketch of the project that the school would hope to accomplish with the funds. “It doesn’t need to be set in stone in perfect numbers by any means, but you would need that [sketch] and you would want to be able to say with a straight year that you intended to spend that money in three years or less.” There would also be a public hearing to explain the project and the bond.
Simonetto presented three options to the board. The first, which combines an estimated $2.16 million GO Bond with a $14.3 million First Mortgage Bond, would maintain the current tax rate at a little under 75 cents per $100 assessed home valuation. The second, which would combine an estimated $2.94 million GO with a $15 million First Mortgage Bond, would raise the tax rate by five cents. The third option, which combines an estimated $3.44 million GO with a $15 million First Mortgage, would raise it by eight cents. Even with the highest rise, the tax rate in BPS’ taxing area would remain under the state average of $1.10 per $100.
The board will be discussing their options at later meetings. Any public hearings will be advertised in the legals section of the paper.