The Danger of Debt

Written by Beth Hull, Co-Chair, Citizens For the Children’s Future Committee

To this point, there have been no large loans by District 7 since the $58 million bond approved by voters in 1998 and issued on October 1, 2001.

Various long-term obligations (bonds and purchase agreements) are from $1 million to $21 million, and all loans currently on the books are due to be paid off by the end of 2022.


 

CAFR 1

CAFR 2


 

That leaves the district the opportunity to either take out small bonds in a similar fashion and repay them at the current rates with roughly the same tax burden as we have now, or if they require less money than these bonds, to lower property taxes.

Debt Service Requirements


 

Financial advice publications and rating reports from Moody’s and Standard & Poor’s praise District 7 for good money-management practices to this point for maintaining a reasonable debt level.

Moodys 1

Moodys 3

S&P 2

Moodys 4

Moodys 2

S&P 1

S&P 3


 

However, both publications consider the BMW manufacturing facility (304 John Martin Road outside of Fairforest, also Highway 101, and Blackstock Road) and the Amazon fulfillment center (402 John Dodd Road, Wellford) as part of the equation in boosting the property tax base. However, neither are in District 7.

District 7 does benefit from federal, state, and county funds, however, this particular referendum will not tax Amazon and BMW.

S&P 4


 

Both publications specifically warn against increasing debt.

Moodys 5


This $185M referendum is NOT meeting those parameters, it is NOT within the 8% constitutional debt limit. That is why the School Board needs a special referendum to fund this huge spending project.


This referendum is exactly what the reports warn against … not following “moderate future borrowing plans”, “manageable debt burden”, and not staying within “its limited authority to raise its operating millage rate.”


When ratings go down, money is more expensive, and investors are discouraged from investing in that area. Lowered ratings warn that the financial future is increasingly uncertain. Increased debt, especially a huge increase such as this which has never been on our books, is something that competent financial managers avoid.

If you are wondering how this increased debt will affect your taxes, consider the District’s own Debt Service Requirement chart.

The lighter blue and green bars show the debt we are already committed to pay. That debt is already on our books and our current taxes are paying it back. The darker lines plus the yellow and orange lines show what the School Board is proposing.

If we oppose the referendum, and take out smaller bonds to handle the District’s realistic “needs” instead of their very expensive “wants”, we can keep the debt service requirements around five million dollars. Maybe even less than that with a budget overhaul and administrators who actually pay attention to these things.

Debt Service Requirements 2