The Oregon school board passed a resolution at its last meeting to authorize Treasurer Jane Fruth to refinance the balance of its school improvement bonds and save the district $3 million.
The district issued $44,999,993.05 school improvement bonds on May 12, 2005 to fund the construction of a new elementary school to replace Coy Elementary, and to renovate, add and remodel other buildings in the district, including an addition, partial demolition and renovation of Clay High School. It also funded equipment, furnishings, site improvements and landscaping.
“The interest rates have been dropping,” said Fruth at a Feb. 19 meeting. “The rate is roughly ranging from 3 to 5 percent on the current debt. Preliminary numbers as we run our estimates show we could reduce that from 1 to 4 percent. This would save our taxpayers over $3 million over the life of the debt, or roughly $158,000 per year. Any way we can find savings for the taxpayers, we will. This resolution allows us to proceed and look into the refinancing.”
The resolution provides for the issuance of up to $33,960,000 in school improvement refunding bonds.
“If the markets were to change in a manner that is no longer advantageous, obviously we won’t follow through,” said Fruth. “But this is the first step in the process.”
Board member Jeff Ziviski said the resolution gives Fruth authorization to proceed with refinancing the debt.
“This is the only motion the board has to make. If the numbers come in the way we want them to be, then we go forward with it,” said Ziviski. “This reduces the rate down to 1 percent for the first several years, then it goes up a percent every five years. But the highest rate it’s going to go is still lower than the highest rate we are going to pay under the current term. And the $158,000 savings per year is not out of the general fund, but the bond fund. I don’t want to get those two confused. Just because we’re authorizing this tonight doesn’t mean we’re doing it, but only gives Jane the opportunity to investigate it and make sure things go the way we want them to before we proceed.”
Also at the meeting, Fruth said in her treasurer’s report that the money the district will receive from Gov. John Kasich’s new school funding formula if the state’s two year budget is passed will not come close to making up the financial losses over the years.
“Oregon is one of the districts that actually has good news from the budget. We will have increases. For 2014, it’s $1.9 million of increases. For 2015, it’s $2.3 million. The reason this is helping us so much is because it’s been at least four or five years the district has been on a formula. And in that time, I’m sure you’ve heard us talk about the loss of personal property taxes and all kinds of valuation. The bottom line, since 2006, our district has lost 34 percent of our valuation. So this is the first time we’ve received any relief from the state on this,” said Fruth.
“Under our current five year forecast, we were talking about having negative cash balances in 2015 of $490,000 and looking at a negative cash balance in 2017 of $16.8 million. With this new budget, we’d be ending 2015 with over $5 million, and ending 2017 down $5.5 million compared to $16.8 million,” she said.
She cautioned that the governor’s budget has not yet been approved by the Legislature. And if it is approved, the increase in funding will not go very far. The district, she noted, will no longer receive hold harmless monies from the state.
“In the governor’s budget, we are not going to get any more money they’ve been sending us to replace the monies we lost in the tangible personal property taxes,” she said. “That’s huge. Obviously, again, this isn’t final. Who knows what other rug can be pulled out from under us. But we’re one of the districts that are happy. It’s about time we’re happy when we consider all the valuations we’ve lost. Yes, we’re having an increase. But in terms of our total budget, what does this really mean to us? You can see it’s only 5 percent of our general fund budget. Forty-eight percent of our general fund budget comes from our real estate taxes, and 23 percent comes from the state foundation. The 5 percent slice is the increase.”
Board President P.J. Kapfhammer said it was important to note that the increase in state funding would help the general fund, but not the capital or permanent improvement fund. The district is seeking a renewal of a 2-mill, five year permanent improvement levy on the May 7 ballot. The levy is expected to collect $1,018,277 from 2014 to 2018. The revenue would be used to fund improvements in the district, such as major building repairs, technology upgrades, and the purchase of buses. It would not go towards salaries or operations.
“This will help the general fund,” Kapfhammer said of the increase in state funds, “but it has nothing to do with the capital or permanent improvement fund. What we use that money for is busing, security, textbooks.”