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Proposed Long-Term Bond
South Burlington School District
Why issue a long term bond?• Entities issue long-term bonds to finance long-term
infrastructure assets with extended lives. The large dollar cost of these projects can be difficult to pay for in one year. The benefits from the improvements will accrue to residents over many years.
• If current residents shoulder the full cost for improvements, they will be charged for improvements that may accrue over 20, 30, 40 or more years and not necessarily benefit current residents.
Public Hearing on Long-Term BondFebruary 21, 2018 2
Why issue a long-term bond?
• Economists term this concept “intergenerational equity”: having the taxpayers who benefit from a particular improvement shoulder their cost of the particular improvement for the time period they utilize it.
• Current residents may be reluctant, or unwilling, to pay the full cost of a needed school addition, major renovation, or series of capital improvements. Breaking that cost into a series of years makes the improvement easier to afford on an annual basis.
How large is the proposed bond? $950,500
Over how many years will the bond be paid? Twenty yearsPublic Hearing on Long-Term BondFebruary 21, 2018 3
Public Hearing on Long-Term Bond
Does the State of Vermont contribute to the debt service payments?• The State of Vermont for many years contributed 30% to the
cost of capital improvement projects. It discontinued that program several years ago. Debt service payments are included in the total district budget and are part of the state’s education financing system.
What will the annual payments be on the proposed bond?
Why issue a long-term bond?
February 21, 2018 4
School Year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Principal $0 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525
Interest $20,010 $36,119 $34,218 $32,317 $30,416 $28,515 $26,614 $24,713 $22,812 $20,911
Total $20,010 $83,644 $81,743 $79,842 $77,941 $76,040 $74,139 $72,238 $70,337 $68,436
Proposed BondEstimate of Debt Service Expense
Public Hearing on Long-Term Bond
2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Principal $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $47,525 $0
Interest $19,010 $17,109 $15,208 $13,307 $11,406 $9,505 $7,604 $5,703 $3,802 $1,901 $0 $0
Total $66,535 $64,634 $62,733 $60,832 $58,931 $57,030 $55,129 $53,228 $51,327 $49,426 $47,525 $0
February 21, 2018 5
Public Hearing on Long-Term Bond
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
February 21, 2018 6
What improvements are you proposing for the bond?
Public Hearing on Long-Term BondFebruary 21, 2018 7
Items proposed for the $950,500 Bond
Public Hearing on Long-Term Bond
Chamberlin Elementary Schoolo Light fixtures replacements $3,000o Carpet & asbestos floor tile replace $7,000o Parking Lot Upgrades $7,500o Fire Alarm Upgrade $5,000
Orchard Elementary Schoolo Carpet & asbestos floor tile replace $5,000o Light fixture replacements $3,000o Roof $67,000o Fire Alarm Upgrade $5,000o Key Scan Access $5,000
Rick Marcotte Central Schoolo Light fixture replacements $3,000o Carpet & asbestos floor tile replace $5,000o Roof Replacement $30,000o Fire Alarm Upgrade $7,000o Main door replacement $10,000
Munson Field / Iverson Tracko Restrooms & Training Room $325,000o Storage Building $50,000
South Burlington High Schoolo Library Reconfiguration $150,000o Fire Alarm Upgrade $43,000o Re-Key and door hardware upgrade and
security $15,000o Exterior door upgrades $13,000
Frederick H. Tuttle Middle Schoolo Burner Replace $65,000o Carpet & asbestos floor tile replace $110,000o Light fixture replacements $12,000o Fire Alarm Upgrade $10,000o Key and Lock Security Upgrades $5,000
February 21, 2018 8
How do the payments on the proposed bond compare with debt service the district has paid in prior years?
Public Hearing on Long-Term BondFebruary 21, 2018 9
Public Hearing on Long-Term Bond
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Annual Debt Service Expense, Past and Proposed
Past Debt Service Proposed
February 21, 2018 10
Tax Impact of Proposed Bond
How much would the proposed bond add to the school district’s tax rate?
• First year debt service is equal to one-half the interest expense for a year. Our estimates show this would add 0.09 cents (9 hundredths of a cent) to the tax rate, 0.86 cents in additional tax per $100,000 in property value.
• In the second year and following years, the bond would add 1.64 cents annually to the tax rate, $3.58 per $100,000 in property value.
Public Hearing on Long-Term BondFebruary 21, 2018 11
Public Hearing on Long-Term Bond
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
cen
ts o
n t
he
tax
rate
"Debt Tax Rate," Past and Proposed
February 21, 2018 12
Is there an “appropriate” level of debt for a School District? Part I
Public Hearing on Long-Term Bond
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
Burlington SD Champlain ValleyUSD #15
Colchester TownSD
EssexCommunity Ed
Center USD #46
Essex JunctionISD
Essex Town SD HuntingtonTown SD
Milton Town SD Mt. MansfieldModified USD
South BurlingtonCity SD
Williston TownSD
Winooski SD
Outstanding Debt, Nearby Districts
February 21, 2018 13
Public Hearing on Long-Term Bond
Is there an “appropriate” level of debt for a School District? Part IIThe Vermont Statutes Online
Title 24 : Municipal And County Government
Chapter 053 : Indebtedness
Subchapter 001 : Indebtedness Generally
(Cite as: 24 V.S.A. § 1762)
•§ 1762. Limits
•(a) A municipal corporation shall not incur an
indebtedness for public improvements which, with its
previously contracted indebtedness, shall, in the
aggregate, exceed ten times the amount of the last grand
list of such municipal corporation. Bonds or obligations
given or created in excess of the limit authorized by this
subchapter and contrary to its provisions shall be void.
(b) However, the provisions of this subchapter as to the
debt limit shall not apply to bonds issued under section
1752 or 1754 of this title, relating to the ordinary
expenses of a municipality. (Amended 2011, No. 155
(Adj. Sess.), § 10.)
$0
$5,000,000,000
$10,000,000,000
$15,000,000,000
$20,000,000,000
$25,000,000,000
$30,000,000,000
$35,000,000,000
Debt Limit South Burlington
Statutory Debt Limit vs Ditsrict Debt, with Proposed Bond
February 21, 2018 14
Who would perform the work that the district is proposing to fund with the bond?
• As with any major expense the district engages in, the district is required by law to put major purchases out for bid. This project would be broken into different components that would be publicly advertised and contracts would be awarded to the lowest responsible bidder for each project.
Public Hearing on Long-Term BondFebruary 21, 2018 15
Questions?
Public Hearing on Long-Term BondFebruary 21, 2018 16