Bedford to refinance bond debt
4/13/2005TEMPERANCE - The Bedford Board of Education wants to invite you to dinner in 2009, and they're buying.
The board last week approved a plan by Ted Magrum, Bedford's assistant superintendent for finance, to refinance a portion of the bonded debt the school holds from its expansion project seven years ago when it added onto the high school and built a new elementary school.
The result will be a savings of almost $250,000 in interest that will be spread across the tax rolls in the form of a lower tax rate.
"It won't amount to a whole lot, probably enough for dinner out one night, or something like that, but every little bit helps," Mr. Magrum said.
The discounted interest rate - which won't be known until the bonds are sold - will apply to the bonds that will come due between 2009 and 2014, Mr. Magrum said.
After three previous attempts failed, voters approved a 15-year, $19.9 million bond issue in September, 1998, and school officials shortly thereafter sold the notes to pay for a 90,000-square-foot addition on the high school and construction of Monroe Road Elementary School, both of which were completed in 2001.
The school collects taxes to make an annual payment - ironically due later this month - of $1.17 million, and approximately $13.4 million of the original $19.9 million bond sale remains unpaid.
In the nearly seven years since the bonds were sold, the property tax needed to repay them has steadily declined, due primarily to the Headlee Amendment and Bedford Township's impressive rate of growth.
The initial tax rate for the bonds in 1998 was 2.67 mills; by last year, it had dropped to 2.04 mills, a decrease of almost 24 percent. Mr. Magrum estimates that the tax rate on the bonds will continue to drop about one-tenth of a mill each year, if the township continues to build more than 200 homes and a number of commercial structures each year.
Though the drop in tax rate occurred with no help from anyone other than those that build new taxable property, it's enough to translate into real dollars for property owners. As an example, if someone had purchased a $200,000 home in the district in 1998, they would have paid $267 for the bond issue that first year. If they still owned the same home in 2004, they would have paid about $234 due to a combination of the drop in tax rate and the township-wide increase in state equalized value over the six-year period, township tax officials said.
The tax discount comes as the district struggles - along with every other district in Michigan - with its finances.
The board will hold a special meeting Tuesday to decide on a list of about $1.3 million in proposed cutbacks for next year to help balance its budget. But because the tax and interest savings are from dedicated funds earmarked specifically by voters, they can't be used to help ease the district's budget woes.