$419 Million Bond Measure Approved for November Ballot
Although Santa Clara Unified School District may be in the heart of one of the biggest wealth-generating centers of the world, here are some of the conditions in its schools:
- Only half the heaters work in the Peterson Middle School gym, and, because they’re 50 years old, they’re un-repairable because the units aren’t made anymore.
- The boys’ showers at Buchser and Cabrillo middle schools are unusable because the plumbing doesn’t work. Like the Petersen heaters, the plumbing is half a century old and similarly beyond repair.
- 14 of the district’s 17 elementary schools lack air conditioning
- Portable classrooms that were intended for temporary use decades ago are still in use. Roofs leak and as soon as one leak is patched, another springs open.
- Some sewer lines are over 50 years old. The grade has shifted, and roots frequently grow into them, causing regular backups in school restrooms.
- Kindergarten classrooms are overcrowded to the point that additional students registering may have to be bused outside their attendance areas.
These are some of the reasons SCUSD will be asking voters in November to approve issuing $419 general obligation bonds. The board unanimously approved the ballot measure at the July 24th meeting
Almost half the bond revenue ($200 million) will be used to build new K-8 and high schools on the recently-purchased Agnews site in San Jose, starting in 2015 and continuing through 2019. Almost as much ($180 million) will be used for critical infrastructure repairs and rebuilding necessitated by years – even decades – of deferred upgrades and maintenance.
The remaining funds are needed for school expansion ($40 million) – to relieve existing overcrowding, accommodate growing enrollment and enable class size reduction – and modernizing facilities across the district ($30 million). The money can’t be used for anything other than the stated purpose, and can’t be diverted to pay administrator salaries.
To see a complete list of projects, visit santaclarausd.org/documents.cfm?id=1232.22566 and select “Spec Bd Mtg Pckt 7-17-14.” Page through the PDF image document to page 13, because SCUSD documents aren’t searchable (offering a hands-on illustration of the need for modernizing the district’s 1990s back office systems).
Because of the area’s “incredible commercial and business growth” – a significant part of which is driven by the new Levi’s Stadium – the district can borrow up to $1.1 billion.
Bond Financing Tax Levy Forecast at $48 per $100,000, But SCUSD History Points to Lower Actual Rates
The bonds will be sold in four issues, with varying terms, and at multiple interest rates that are calculated based on a multiplicity of factors. The bottom line is: unless you’re a financier, don’t even try to figure it out. A better way to evaluate the financing, says the district’s bond specialist Lori Raineri, President of Government Financial Strategies, is in terms of the overall ratio of interest to principal.
Unlike a parcel tax, which is a flat tax on each property, tax levies are based on the assessed value (not sales price) of each property. If property tax assessments grow, the levy can go down. If assessments drop, the levy can go up.
The financing for the upcoming bond is structured to keep the tax levy at no more than $48 per $100,000 of assessed value, and to keep the debt to principal ratio at 1.95 percent – in other words the district will pay interest of $398 million on the $419 million. As a point of comparison, for a 30-year mortgage at 5.5 percent, the borrower’s debt to principal ratio is 2.04 percent.
Historically, SCUSD levies have gone down, for several reasons including: conservative forecasting, competitive sales, smart refinancing, independent financial advice, and a strong financial rating according to Raineri. These “best practices” have saved the district $213 million in interest, and delivered an additional $4.6 million in proceeds.
Currently, the tax levies for Measure B, J, and H bonds together add $71 to the average property tax bill – about half what was initially forecast. At $48, the new levy would add about $180 to the average property tax bill.