Schools borrow $4.9 million to make loan payment
August 11, 2010 - Collecting seven mills on $1.8 billion in property value, Clarkston Community Schools has $12.8 million for this year's long-term debt payment.
It's not enough.
The district owes $17.7 million this year, out of about $157 million total in long-term bond debt.
The $4.9 million difference will be borrowed from the state.
"Tax revenue is too low to make the bond payment," said Bruce Beamer, business director for the district. "Property taxes aren't generating enough."
The district has been borrowing from the state School Bond Qualification and Loan Program for several years, accumulating a total of $27.9 million. The total includes $1.2 million in estimated accrued interest.
"The fund was established to help school districts having trouble making their bond payments," said Interim Superintendent Dave Reschke. "Clarkston was in that situation in the late 1980s and early 1990s."
"As long as that loan mechanism is available to us, we shouldn't have any issues," said said board Treasurer Rosalie Lieblang. "We will need to continue to collect the taxes to pay off the bond debt and then the revolving loan. It has no impact on the general fund dollars which is what we use for raises, new prorams etc.
Property values grew in the late 1990s into the new millennium, flattened out, then went into decline, Reschke said.
"In 2003, property values were going up 8-10 percent every year," Beamer said. "Property values over the past three years have been going down."
Property values fell 15 percent this past year, about $185 million in taxable value, said Curt Carson, Independence Township treasurer.
"I expect it to continue to drop," Carson said. "I anticipate the property-value drop to slow and hit rock bottom in 2012, 2013."
Clarkston Board of Education voted unanimously, Aug. 9, to continue borrowing from the state program.
"This is an annual action we must take to allow our district to participate in the state School Bond Loan Fund program, which helps us to pay back our prior bond debt," said board President Steve Hyer. "Ultimately the debt millage ends up paying back the bonds and the state program. This is something we will continue to do annually until the debt millage covers our interest and principal payments."
"Long term debt is only considered when a school district is interested in issuing new bonds for capital improvements," said board Vice President Sue Boatman. "Other spending, like programs and raises, comes from the general fund which gets its revenue mainly from the state in the form of per pupil foundation grants."
The district is paying off six bonds, issued Aug. 8, 2003; Aug. 12, 2004; April 12, 2005; March 22, 2006; and Feb. 14, 2008.
Clarkston's payment schedule, principal plus interest, each year is:
$18.6 million in 2011;
$18.1 million, 2012;
$18.1 million, 2013;
$17.7 million, 2014;
$69.1 million, 2015-2019;
$47.8 million, 2020-2024; and
$27.2 million, 2025-2029.
With $157 million principal and $77.5 million in interest, the total is $234.8 million. The debt is separate from the district's general fund and per-pupil state funding.
Seven mills is the maximum allowed for long-term debt payment. When the amount collected is not enough to pay the scheduled amount, the district borrows from the state loan program. When it collects more than scheduled, the extra goes to repay the state.
Beamer estimates another 15 years before this happens.
"We've been doing this for a long period of time Ė it looks like we do it for 15 more years instead of 10," he said.
Phil is editor for The Clarkston News. He is a veteran of the first Iraq war, having served in the U.S. Army.