By Jeff Clemetson | Editor
Property tax increase could save millions in long run
Grossmont Unified High School District is hoping voters will be willing to support a November ballot measure to “refinance” Proposition U, the district-wide bond measure for building and repairing GUHSD facilities that was passed by voters in 2008.
The projects that still need to be completed under Prop U include work on 30 buildings, a new high school in Alpine and other facilities improvements. Beyond Prop U, the district needs additional work on 44 buildings, storm water construction, hardscape projects, water conservation projects and deferred maintenance. And according to GUHSD board members, refinancing is the best way to get the work done for less money.
“Our ability to sell bonds authorized under Proposition U has been severely stressed due to the lingering effects of the economic downturn,” said Deputy Superintendent of Business Services Scott Patterson at a special GUHSD board meeting held Jan. 26.
When voters passed Prop U, the plan was to sell all the bonds by 2019. Current projections estimate the bonds can’t be sold until after 2032 unless more money can be raised, which is impossible to do under Prop U because it caps the amount of money it can tax homeowners to pay for the bond at $27.90 per $100,000 of the assessed value (AV) of a home. When home prices fell, so did the value of the bonds and investors stopped buying.
Of the total $417 million worth of bonds that voters authorized to sell under Prop U, only $289 million in bonds have been sold — leaving over $128 million left to sell, Patterson said.
The district’s solution is to pass a “refinancing” measure in November that will fund the remaining $128 million of Prop U projects; with an obligation that the district stops issuing Prop U bonds — in effect, replacing Prop U. If the new measure doesn’t pass, Prop U projects will take more time and money to complete.
“Basically, it is going to take us another 14, 15 years from where we sit today to use [the remaining] $128 million and the repayment ratio for those dollars would be $497 million — or roughly four times, if we do nothing,” said Mark Young, a financial advisor who studied the issue for the district.
Under the terms of the proposed bond replacement, the repayment on Prop U’s remaining $128 million is estimated at $238 million — less than half the $497 million projected under the current setup, Young said.
The GUHSD board hired Young to find out what the added tax rate would be like with a new authorization on the same Prop U projects and found it would be nearly $11 per $100,000 AV of homes on top of the $27.90 per $100,000 AV.
The median price of a home in the district’s area is close to $300,000, so the average homeowner already pays around $90 a year for Prop U and would see an increase of roughly $33 if the new bond measure passes.
“However, the $27.90 would end much sooner under the replacement bond scenario, resulting in significant savings,” Patterson said. Currently, Prop U bonds won’t be paid off until 2054 but the replacement bond pushes that date up to 2044 because the district won’t have to wait until 2032 to start selling bonds again.
But the cost savings for the district won’t exactly translate to a savings for taxpayers — at least not in the short-term.
“For somebody who is in a house today, they’re not really saving money because now there’s going to be an additional tax in order to get those facilities in place over the next three years,” Young said. “But over the life of the program, various constituencies in the district will save over a quarter of a billion dollars. Someone who is in a house today who is maybe retired and won’t be in that house in 10 years won’t see the benefit … their grandkids will.”
If the proposed measure passes, the district will see the timeline for completing Prop U projects speed up significantly.
“If we had this refinancing, or whatever the correct name for it is, in late 2016, early 2017, I would be doing design and then in 2017, 2018 I’d be able to start construction again,” said Katy Wright, director of facilities management for GUHSD. “And that’s [much] different than stretching onesie, twosie projects out for the next 16 years — and that’s what in fact I’d be forced to do [without the bond fix].”
Wright thinks speeding up the timeline by refinancing Prop U projects would also save additional money.
“We also put escalation into the program because we know things cost more tomorrow than they do today,” she said. “So that would be an additional $60 to $80 million worth of projects we can do by avoiding the long delay.”
—Write to Jeff Clemetson at [email protected].
