Budgets, Levies, & Debt

Presentation on Debt Options-Sept. 9, 2013

On September 9, 2013, William Blair & Company presented the Finance Committee of the Geneva School District options on repayment of district debt service. Debt service is defined as the principal and interest owed as a result of approved school district referendum. The complete presentation is listed below.

The vast majority of debt service is the result of the 2006 referendum requesting the building of two new elementary schools (Williamsburg & Fabyan) and renovations to a number of other schools. Due to the approval, the district was over the debt limit of 13.2% of Total Equalized Assessed Value and premium bonds were issued. The 2006 referendum was largely based on enrollment projections due to future growth within the Geneva School District boundaries.

In 2011, it was discovered that the projections of the district’s own expert were inflated. The referendum passed by 100 votes resulting in a total debt service for the district of more than $325 million. Currently, the debt service is $289 million with payoff scheduled for 2025.

Listed below are highlights of the Blair presentation:

• The projected budget numbers in the report do not include salary increases for certified staff.
• All figures assume that every year the maximum tax levy will be approved.
• It is assumed that assessed property values will increase starting in levy year 2014 and continue to increase at a rate of 4% year-to-year thereafter.
• Abatement is defined as any surplus in the Education Fund above $15 million that is paid on the debt service the following year.
• Abatement is currently in place so that yearly repayment is artificially held at $15 million per year. Scheduled increases above $15 million are paid with abatement dollars.
• In other terms, abatement is levying current taxpayers in order to create a surplus. Abatement actually increases property taxes in the short term.
• If abatement continues as is, in levy years 2015-19 the yearly repayment will increase to between $22-25 million per year. In levy years 2020–25 the yearly amount will drop to $19 million.
• If the District continues abatement for levy years 2011-13 and refunds the debt balance in 2025, yearly repayments will total $1 million. Levy years are two years behind calendar years.
• The District could also continue abatement through levy year 2018 and refunds in 2019 to hold repayments to $19 million per year. This would require having an Education Fund surplus of $34 million from levy year 2011 - 2018.
• The District could use $2.6 million in levy year 2014 to decrease long-term callable bonds. This would reduce the interest payments on callable bonds but result in large yearly repayments in the $19-22 million range.

It is clear that repayment of current debt service is the biggest challenge that the district faces over the next 15 years. No matter what option is chosen, the taxes will increase and the burden on all homeowners will continue to worsen.

Parent Category: ROOT