The Fayette Board of Education is expected to ask voters for a no-tax bond issue in April to make future capital improvements. 

The board heard two funding scenarios from Matt Deleo of Century Financial Systems, the company that oversees the district’s bonds, at its regular monthly meeting on Wednesday, October 19. One proposal was to sell general obligation bonds in the amount of $2.6 million. The other would sell $3.4 million worth of bonds, both with estimated coupon rates of four percent for the first year and five percent for the remaining term. 

The two amounts were hypothetical examples. The district could conservatively borrow up to $3.5 million.

The issuance of a new bond now would allow the district to keep its debt service levy at its current level. The district’s property tax rate is currently $4.9962 per $100 of assessed valuation. Of that, $0.7762 goes to pay the district’s debt. Should the district do nothing, the debt service fund could be capped, and the debt service portion of the property tax rate could drop.

“If you lower your tax rate and you go to your people and borrow money again, you may have to ask them to increase the levy,” Deleo explained. “You may have to ask them for a tax increase.”

The district currently has two outstanding bonds, one from 2018 and the other a 2021 refinancement of a 2012 bond. The 2018 bond issue easily passed with better than 77% of voter approval. The no-tax bond issue raised $1 million to pay off leases and make capital improvements at the middle school and ag buildings, among others. The district is scheduled to pay off the 2018 bond in 2032. The bond that was refinanced last year will be paid off in 2033.

Payments to those bonds total around $350,000 a year, while the district’s annual income from property taxes is around $518,000. That income is expected to increase as property values go up year over year. If approved, a $3.4 million bond issue would increase yearly payments by nearly $140,000 for the first year, and around $167,000 through 2031. Starting in 2032, payments would increase sharply, capping out at $525,000 in 2041.

If the district sells bonds of the proposed amount of $3.4 million, the district would expect to pay a total of $4,492,500 over the life of the loan.

Superintendent Brent Doolin said that the district will be able to keep the tax rate the same while still borrowing money on top of the debt of the two other bond issues. However, taxpayers could reject the new bond issue in the hopes of slightly lowering future property taxes.

“This is an opportunity at this point in time to fund some potential future capital projects,” said board member Shauna Young.

The board has not yet decided what projects for which the bond would pay and plans a work session to explore the needs of the school district and decide how much to borrow. To appear during the municipal and school board elections in April, the board would have to vote to pursue the bond issue and develop the ballot language, which must include specific projects for which the money would pay, no later than January 24.

It is expected that the work session would take place in November, so the board could vote in December to put the bond issues on the ballot.

“We’re getting to a point where we’ve got a lot of needs, and we may not get some of the wants,” said board president Skip Vandelicht. He highlighted the 20-year-old high school roof and walls at the middle school.

The Board of Education meets regularly in the administration building at 6:30 p.m. on the third Wednesday of every month except for July. Meetings are open, and the public is invited.