A proposal to take out an additional $6 million loan to fix Waukegan School District 60’s “broken buildings” would mean taxpayers would see the district debt portion of their property tax bills extend out an extra two years, district officials said.
The school board took its first step toward issuing the bonds in a 5-1 vote with one abstention on Tuesday.
School board member June Maguire said she would pass on voting on the measure because she would be leaving the board in May after her term is up and before the final vote is taken. Board member Miguel Rivera was the sole “no” vote, pointing to the tentative interest rate the district would be looking at.
The school district is required to publish a public notice about the proposed bonds and hold a public hearing, tentatively scheduled for April 25, according to a preliminary timeline provided to the board. The final vote would follow in late May.
Voters could force the issue to go to referendum, likely in March 2018, if they submit a petition signed by 10 percent of registered voters in the school district, or 3,777 signatures, to the board within 30 days of the notice being published, according to the documents. If a petition is not submitted, the school board can go ahead and vote on whether to take on the debt.
Echoing a question from board member Anita Hanna, board Vice President Rick Riddle questioned how much the new proposal would cost taxpayers, especially considering the new bonds would come about a year after the 16,800-student district took $7 million in federally subsidized construction bonds.
“It’s not free anymore,” said Riddle, who voted for Tuesday’s measure after clarifying that board members could get more information before taking final action. “This loan has to be paid off, the principal and the interest. How is this a better deal? Why are we doing it now?”
The subsidized bonds were available through a competitive grant process, said Gwendolyn Polk, the district’s associate superintendent of business and financial services. The district went for the amount it did because it had to put up some of its own money, and the results of a state-mandated building survey weren’t known at the time.
“We would have probably applied for more (had we known), but we were not guaranteed that we would have gotten those,” Polk said.
Some of those subsidized-bond dollars ultimately ended up going toward survey-identified projects instead of the projects identified by the district itself as priorities, Polk said.
That survey identified $82.5 million worth of improvements, $4.8 million of them being the highest priority, according to William Newby, the district’s associate superintendent of campus relations, operations, staff and student safety.
“There’s a lot of projects,” Newby said Tuesday. “I mean, we have a ton.”
He said the district is currently holding off on a roof replacement and paving project at Waukegan High School’s Brookside campus; a boiler repair at the Glen Flora Armory where permanent records and other storage is housed; and a steam pipe replacement at Glen Flora Elementary School.
Under the proposed debt plan, the district would pay an estimated $276,000 each of the first 10 years and then pay off the loan’s principal in the final two years, according to district documents.
That means, assuming an interest rate of about 4 percent, the loan would ultimately end up costing $2.9 million in interest because the district would be paying mostly interest until the final two years.
The district is also looking to pay off some existing debt using another loan, figured for the time being at $2 million, which would open enough space under the debt ceiling to allow some interest to be paid each year, according to board documents. That $2 million loan would cost an estimated $600,000 in interest.
The loan payments are structured this way because the school district is limited in how much debt it can have without going to voters, said the district’s bond counsel, Kyle Harding of Chapman and Cutler. The district is set to pay off its existing loans in tax year 2026, which opens up room under that debt ceiling to pay off the proposed loans.
The maneuver is a complex one but looks like a “defensible, reasonable strategy” to obtain the funding within the constraints of the debt ceiling and other state laws, said Mike Peddle, a professor in Northern Illinois University’s public administration program.
The interest rate is a reasonable one, and any extra cost the district would incur because of the plan’s structure could be justified, Peddle said, pointing to potential factors such as the proposed property tax freeze, the property tax cap and the need for some projects to happen sooner rather than later.
“There is some cost, but is it out of whack? No,” Peddle said. “It’s like taking out a home equity payment where people don’t pay down the premium until the end.”
Taxpayers won’t see their bills go up under the plan, the district’s Polk said.
Instead, assuming a flat home value, taxpayers would see the portion of their tax bill that goes toward the district’s debt payments fall in three years as referendum-approved bonds are paid off, then again the next year and then stay near those levels for eight years instead of six years, according to district documents.
The plan is designed as a way to address the district’s “broken buildings,” district attorney Thomas Morris said.
“I think this a really good option for us to handle some of the facility needs that we currently have,” Polk said.
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