What is the difference between the MLO and Bond? Why do we need both?
A Mill Levy Override (MLO) is a ballot measure that asks voters to approve the collection of additional “mills” on property taxes. The money generated from this tax stays in the community and goes directly to the school district for specific purposes as stated on the election ballot and as detailed in the spending resolutions. See http://www.lewispalmer.org/4a4b for more information. This is the ONLY way a school district can collect additional day-to-day operational dollars, funding things like teacher salaries (new hires or increased pay), new books, a new arts program, etc.
A bond request on a ballot is usually asking two things: can the district take on more debt, and can the district increase your property taxes to pay off that debt? This debt can only be used for construction, maintenance, or infrastructure needs. A bond can not pay for operational expenses.
For this initiative, both a Bond and MLO are being requested. Construction of the new school, conversion of Bear Creek to a middle school and enhancing physical security at district school sites can only be obtained through a bond. Funding for the additional security personnel and counselors can only be obtained through a MLO. Since D-38 needs both of these things, two separate ballot measures are required, both a bond and MLO.
Is the Mill Levy Override forever, or will it sunset? The Mill Levy Override will end, or sunset, in seven years. That means if D38 wanted to continue using these funds it would again have to ask voters to continue the Mill Levy Override, or it would end in 2024. Each year until it sunsets, the board can decide whether or not to levy the mills. So, if federal funding is made available and is obtained by the district for security personnel and counselors, the board would not levy the mills that year.
How much will this cost me?
TOTAL COST to Homeowners: $13.66/month (for a $400,000 value home) Bond: $36.5 M total
$29.5 M for construction of 650-seat elementary school
$1 M conversion of Bear Creek Elementary back to a middle school
$2.5 M physical security improvements to ALL district schools
$3.5M for construction of a district-owned gym and/or auditorium adjacent to Monument Academy’s planned extension
Cost to Homeowners
$8.84 per month (for a $400,000 value home) | $106.07 per year (based on a $400,000 home)
Cost to Business Owners
$35.60 per month (for a $400,000 value business) | $427.22 per year (based on a $400,000 value business)
MLO: $1 M total
Sunsets in 7 years
Funds security personnel and wellness counselors
Cost to Homeowners
$4.82 per month (for a $400,000 value home) | $57.81 per year (for a $400,000 value home)
Cost to Business Owners
$19.41 per month (for a $400,000 value business) | $232.69 per year (based on a $400,000 value business)
How will we pay back the bonds? What will it cost after 10 years of interest only payments?
The Board of Education has several options but has not yet decided on which they will pursue. They could do straight amortization, 10 years of interest only (wrap model) or a hybrid with maximums set in the bond language. The expected impact for an average $400K home is $9 per month for this bond.
In early August, before bond language had been finalized, the District consulted Hilltop Securities for estimates on various bond structures. The reports were based on a $35.5M bond (which is lower than the final ballot measure of $36.5).
The district got estimates for three different bond structures: a Wrap Debt Service, a Level Debt Service and a Step Down Debt Service. The district currently has debt service which funded the construction of Palmer Ridge High School, Prairie Winds and Creekside, which will conclude in 2029. Below, you can see the total amount of district debt with our current levels and what the various structure options for 4B will add (scroll to bottom for supporting data).
The Wrap Structure (noted in blue on the chart above), which is a common way of paying back school bonds, would pay interest only in the first years and make the immediate impact to taxes lower than the other structures. We are in the last 10 years of paying off existing bonds (including 1999 bond for Prairie Winds and Creekside, 2006 bond for Palmer Ridge). The current debt service is $6.6M/year and will lower in the last 5 years of payoff. In the 11th year, the debt service for the 2018 bond goes up to about $5.2M year (if a Wrap Structure is selected) but the debt service for other bonds goes down to $0 so the net impact is to have a lower property tax. The tax impact per $400K also lessens each year as the number of homes and the assessed valuation of all homes in the area goes up and as the assessment rate drops (projected to be 6.1% of market value for 2019 and beyond). Other things that could impact your property tax are: future bonds or MLOs that the community votes for, additional changes to assessment rates, and changes in the real estate market which impact home values. You can see the impact on property taxes with the various bond structure options, relative to the current payment level, here:
A Wrap Debt Service Structure has the lowest impact on property tax levels in the near term, but at the end of service is the overall highest amount paid. Because ballot language requires the maximum total payback amount be stated, once the Board had finalized the bond amount as $36.5M, an analysis on that amount with a Wrap Debt Structure (which would result in the maximum payback amount) was conducted by Hilltop Securities. Hilltop Securities also included the impact of the MLO in this assessment. The $9/month payment for the bond and $5/month payment for the MLO is based on this analysis, which then declines each year after the first.
In fact, the total amount paid goes down every year and even adding 4A and 4B, by 2025, you'll be paying LESS than you currently are in property taxes today. This is due to three primary things: the assessment rate is slated to drop from 7.2% to 6.1%, home values are anticipated to keep rising, and the debt gets spread across more more homes as our growth continues.
The final decision on what type of bond structure to pursue can not be made until after voters approve the ballot measure. It will be made in consultation with the district's Financial Audit Committee and the Board of Education, which counts a CPA as a member (Chris Taylor). To hear the discussion of the Bond and possible payback schedules see this part of the School Board meeting from Sept. 17:
Supporting slides for initial bond structure options:
How can the new elementary school and reverted middle school be ready by fall 2019?
There has been a lot of thought, preplanning and pre-work done so that if the bond passes, once the vote is certified and the bonds are issued, construction can begin in December of 2018. The architectural firm is already well underway with the designs and the general contractor has been doing preplanning and qualifying of subcontractors who have the manpower and skill to do this amount of work in a short amount of time. The construction plan includes working six days a week, 10 hours a day rather than the standard 40-hour work week. This will require two crews and careful planning and scheduling for material deliveries, which the general contract has experience managing on other projects in the area. The site will also be controlled to minimize disruption and maximize efficiencies. The architectural designs will serve not only as a basis for the new elementary school at the Bear Creek site but will be a template that can be used in the future for this and/or any additional elementary schools we may need in coming years. Both the architectural firm (CRP Architects) and the contractor (GH Phipps Construction Companies) have extensive experience building schools and have worked on other schools in our district including Creekside Middle School (now Bear Creek Elementary) and Monument Academy’s current and proposed school buildings. See Mike Hester of GH Phipps Construction Companies answer this at one of the DAAC forums: https://youtu.be/Vq6er_Il2Fw?t=23m58s Learn more about Mike Hester at: https://www.linkedin.com/in/mike-hester-14019149/ Learn more about GH Phipps Construct Companies at: http://www.ghphipps.com Lear more about CRP Architects at: http://www.crparchitects.com
Is the charter school included in Bond and MLO initiative? What about Monument Academy?
Monument Academy Charter School (the only charter in D38) is included in this initiative in several ways:
Mill Levy Override funds (4A) According to Colorado state law, all Mill Levy Override monies must be shared with district charter schools in proportion to the number of district students at the school. For D38, approximately 15% of the $1M MLO will go to Monument Academy. And just like the district is obligated to use the MLO funds in the manner stated on the ballot (for security and wellness personnel), the charter school has an obligation to use the funds in the same way.
Physical Security upgrades (4B) Every school building in the district, including Monument Academy, will receive a portion of the $2.5M bond allocated for physical security upgrades. The distribution by school is based on specific needs at each site. Monument Academy has identified $125,000 of specific security enhancements they require at their current K-8 facility and will receive that amount to complete those projects.
Construction of a gym (4B) $3.5M of the bond has been allocated for the construction of a gymnasium built in collaborative agreement with Monument Academy to be located adjacent to their planned middle/high school expansion (projected to open in 2020). The structure will be entirely constructed and owned by D38, with full accountability to the D38 taxpayer and review under the Bond Oversight Committee. The primary intent is to support Monument Academy’s students and athletic teams, but the gym will be a resource and asset for the entire district, similar to the Don Breese Stadium (adjacent to Lewis Palmer High School). A detailed use agreement, mutually agreeable to all parties, will be developed after the bond passes. This is a unique opportunity to partner and collaborate with our charter school by building a resource that not only supports the charter students but also benefits the entire community. The D38 Board of Education took extraordinary effort over several months to develop this plan and it truly is an innovative partnership within our district that is agreeable and beneficial for all. It is a win for the entire community.
The Board of Education has decided that the most fiscally prudent course of action is to build for the reality of today, addressing the immediate capacity issues we have at the middle school level.
Although significant growth is projected for our area, for the short term, adding 650 additional seats in the district for the fall of 2019 will give the district the space it needs now. For the long term, D38 is likely going to need several more schools. The main questions are when and where will those schools be needed?
If the demographer’s forecasts come to fruition, another elementary school could be needed as early as 2020. However, there are several pockets of new development throughout Monument and giving another year for the development to progress will help the District identify the best possible location and the greatest area of need for another elementary school. Additionally, Monument Academy charter school has plans to open a new high school by 2020, creating some additional seats at their primary and middle grade levels, which has the potential to impact neighborhood school needs and timing. Having one more year to assess the growth and new development in the area, we can confirm a need.
Planning for one new school building on the November 2018 ballot gives the district flexibility to make the best decisions for our students while considering the tax impact on the greater community.
Who is paying for this MLO campaign?
All the money for this campaign is coming from private donations given to the Strong D38 Community campaign. No D38 resources can be used for the campaign once the ballot language is approved, according to the Fair Campaign Practices Act. All donors who give more than $20 will be identified publicly through reports filed with the Colorado Secretary of State.
What about Senior Citizens on a fixed income?
We are fortunate to have a supportive senior citizen base in the Tri-Lakes Region. With increasing taxes, there is always a concern about seniors meeting their liability on fixed incomes. Colorado Congress voted to reinstate the funding for the SENIOR PROPERTY TAX EXEMPTION (Title 39, Article 3, Part 2, Colorado Revised Statutes) for the tax year 2018. For qualifying seniors, this exemption reduces the property tax on the primary residence by exempting 50% of the first $200,000 in market value. Please visit the El Paso County Assessor website for more information at:
How can I be sure the money will be used for what the school district has promised to fund?
Signed Resolutions of Intent from the Board of Education indicate how the funds from the MLO (4A) and the bond (4B) will be spent.
A Citizens' Oversight Committee will be created and comprised of a group of D38 stakeholders from diverse backgrounds with diverse experiences, with a separate committee for the bond and MLO. This oversight group will monitor the spending of the bond and MLO dollars and report out to the community with extensive information available to the public in a variety of ways, including reports and school board meetings and through a publicly accessible website.
There is an existing small Operations Advisory Committee that is already reviewing the plans, walking the site, and requesting more information. Members include someone with experience managing large Air Force projects (who is also the Robotics coach in the district), and someone with expertise in HVAC systems. This is similar to the group that oversaw phases of Palmer Ridge High School construction. The district will add to the group to fill in with financial and other expertise. There will be an application process so that anyone can submit their name and credentials for consideration. As with the long range planning committee and other groups the goal is to keep the number to a reasonable level so it doesn't get unwieldy yet to ensure there is good representation. Similarly, for the MLO they will start with the existing audit committee and add additional skills needed through an application process. Watch the district website and Facebook page as well as other pages that track what's going on in the district.
D38 is committed to and practices complete transparency when it comes to budgeting and finances. It has won national and state awards for its transparency and financial reporting.