How Much Would the New School Bond Really Cost Taxpayers?

Wednesday, March 29, 2017, 4:00 pm
By: 
Eliot Singer

Above: A still from the ELPS video on the bond proposal, with a question marked added by ELi.

Voters in the East Lansing Public School District are asking ELi in advance of the May 2 vote on a bond proposal what the bond’s passage would really cost property owners. Crunching the numbers, we come up with a figure higher than the District’s informational materials’ estimate of 1.795 mills, which is the anticipated increase over the 2016 tax bill. We find that, over the next decade, with a “yes” vote the increase would likely be between 3.25 and 5.0 mills compared to what we would see with a “no” vote.

East Lansing Public Schools has now provided ELi with its projections for what the ELPS debt millage will be without or with a “yes” vote on the bond proposal. Keep in mind that these projections are approximate, because they depend on what happens to taxable values on properties in the school district. When property values are growing, the projections are on the low side. When something happens like the Great Recession, projections are too high.

What we will be paying year by year in terms of our property taxes for school funding depends not just on the proposed bond if it passes, but also on when previous bonds are paid off. Here is some history of ELPS debt that we think will help provide context for the new bond.

In 1991, voters approved a $23,600,000 bond for “furnishing and equipping an addition or additions to, partially remodeling and partially re-equipping existing School District facilities; purchasing a school bus; improving existing playgrounds and athletic fields; and developing and improving the sites.” This bond was paid off (“retired”) after 2014.

In 2000, voters approved a $66,080,000 bond primarily for renovations at the High School and MacDonald Middle School. This bond is scheduled to be retired in 2030.

Both the 1991 and 2000 bonds were done in conjunction with the State of Michigan School Bond Loan Fund (SMSBLF). What this fund does is help stabilize the millage rate, given the unpredictability and fluctuation of property values, by paying for shortfalls when property values are less than projections, with the fund reimbursed by school districts when property values are ahead of projections.

As a reminder, a “mill” of tax means you pay a dollar for every $1,000 of the taxable value of your property. Taxable value is about half market value. So a simple formula to use is this: Take your property’s estimated market value, divide it by 2,000, then multiple that number by the millage rate we’re talking about. That tells you about how many dollars per year a millage rate would cost you in taxes. (So, on a house worth 250,000, a millage rate increase of 1.5 would cost about $187.50 exta per year.)

SMSBLF allows school districts to set a fixed millage rate for a number of years. Following approval of the 2000 bond, the millage for ELPS debt was set at 7 mills for 14 years, covering both the 1991 and 2000 bonds. So, on summer tax bills, from 2001-2012, property owners in the District paid 7 mills.

Then in 2013, voters approved a $5,005,000 Technology Bond. This bond was for five years, to be retired in 2018 (last paid on summer 2017 tax bills). This bond was done separately from SMSBLF. This meant an addition to the 7 mills.

With the Technology Bond, for summer 2013 taxes, ELPS debt went up to 8.2 mills, but because this millage depends on taxable values on properties, as these have grown over last few years, the impact has gone from 1.2 mills in 2013 to about 0.9 mills.

The Technology Bond complicated what happened when the 1991 bond was retired after 2014. For 2014 summer taxes, ELPS debt was 8.095 mills. In 2015, it dropped to 5.456 mills and in 2016 to 5.205 mills. If a majority of voters say “no” to the new bond, it will drop to 4.89 mills on 2017 summer tax bill.

Here’s how the history of the ELPS debt millages looks with all these bonds:

Year (Summer tax bill)

ELPS Debt Millage

Tax on $100,000 Taxable Value (approx. $200,000 market value)

2001-2012

7 mills

$700

2013 (Technology Bond)

8.2 mills

$820

2014

8.095 mills

$810

2015 (1991 Bond Retired)

5.456 mills

$546

2016

5.205

$520

On summer 2018 tax bills, after the Technology Bond is retired, if voters reject the new school bond, the rate will decline to 3.741 mills. After that, the rate would continue gradually to decline until reaching 0 mills on 2030 summer tax bills, as shown in the table provided by ELPS.

If the bond passes, ELPS debt will once again be set at 7 mills, like after the 2000 bond, in conjunction with SMSBLF. (The remaining year on the Technology Bond is folded in.) The 7 mills rate will continue through 2037 summer tax bill, then gradually decline to zero after 2044.

All told, the average yearly difference between a No and Yes vote between 2017 summer tax bill and 2038 will be 4.45 mills.

So, effectively, homeowners are looking at increase in taxes of approximately 3.25 mills to 5 mills compared to a No vote over the next decade. (For a house worth $200,000, that means an increase of about $325 to $500 per year if the bond passes.) Voters should remember the debt millage was 7 mills or more between 2001 and 2014.

 

Note: Due to an editing mistake, the sample tax caclulation was incorrect in the original posting of this article. It has been corrected.