Colfax school board learns referendum mill rate could be slightly less than projected

By LeAnn R. Ralph

COLFAX —  Although interest rates have increased almost half a percent since the $7.2 million Colfax school referendum was approved November 8, new projections show the the mill rate still could end up slightly lower.

If the school district can lock in an interest rate of 2.97 percent, instead of the projected $77 per $1,000 of property value, the mill rate could actually be $76 per $1,000 of property value, said Brian Brewer, the school district’s financial consultant with Robert W. Baird & Co., at the Colfax Board of Education’s November 21 meeting.

The referendum projections for school improvement projects was based on an interest rate of  3.75 percent.

Out of 67 referendum questions statewide November 8, 55 of those questions received approval, Brewer noted.

At the end of June and early July this past summer, around the time of the Brexit vote, interest rates were at all time low, he said.

Since the November 8 election, interest rates have been increasing surprisingly quickly, Brewer said.

While markets generally do not like surprises, following the election of Donald Trump, investors have started taking money out of bonds and putting it into more risky investments, which means a faster growth of the Gross Domestic Product (GDP) and more inflationary growth, he said.

Brewer cautioned school board members to remember that even though interest rates are increasing, the rates are still historically low.

“Interest rates previously were abnormally low for an abnormally long time,” he said.

According to information Brewer provided to the school board, the decrease in interest over what was projected would result in the district saving $725,000 in interest over the next 20 years — or $36,250 per year.

The total interest on the bonds used to fund the referendum projects is projected at $2.76 million. The referendum illustration for interest cost was $3.49 million.

The school district’s debt service payments will be “wrapped around” the debt service payments for the energy efficiency project from three years ago, Brewer said.

The school district’s debt levy will increase to $500,000 in 2019, and from 2020 until 2038, when the referendum debt is paid off, the debt levy will be around $540,000 per year, according to the information Brewer provided to the school board.

The total debt levy of $11.34 million will be offset, however, by state aid that will amount to $2.35 million, for total combined cost of $8.99 million.

The combined cost with state aid factored in of about $120,000 per year will result in debt payments of approximately $420,000 annually.

The Colfax Board of Education will be holding a special meeting December 7 for an expulsion hearing but also is expected to take action on bonding for the referendum projects during open session.

The referendum projects will include building new classrooms to replace the temporary classrooms; making improvements to the Science, Technology, Engineering and Math program; moving the high school office to the perimeter of the building on the east side; infrastructure improvements for heating and ventilation; constructing a new bus maintenance building; buying six Liquid Propane buses; and paying off the district’s unfunded pension liability.