Source: Sherman Publications

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Brandon school bond loan OKd by board

by Susan Bromley

July 17, 2013

Brandon Twp.- It is "profoundly unpalatable" to LeAnne Schmidt to borrow money to pay on debt.

However, that is exactly what the school board is forced to do, and during their July 16 meeting, Schmidt and the other six board members voted to approve borrowing up to $4 million from the state School Bond Loan Fund in order to make this year's bond payments.

Executive Director of Business Operations Jan Meek noted that the board is borrowing to pay on the principal portion of the payment, not the interest.

"We can not default on our bond," said Meek. "Based on 2006 property tax assumptions, the district is not collecting enough to pay."

Meek expects to borrow very close to the $4 million approved, which is about the same that the board borrowed last year from the SBLF.

With the new borrowing, the district now owes about $42 million to the School Bond Loan Fund. The district has been borrowing from the SBLF every year since 2006, when voters here passed a $73 million bond for school district improvements.

The 8.24 bond millage rate the district levies collected only $4,093,742 this past year, far short of the $7,637,363 paid in principal, interest and fees for the bond. A new state law, Senate Bill 770, will take effect July 1, 2014 and will mandate that districts adjust their millages to pay off school loans within six years of their last bond payment.

Meek said that by 2032, the district will likely have more than $100 million to repay to the state for money that has been borrowed to make the bond payments.

While many districts have had to borrow to make bond payments following massive decreases in property values in the past several years, Meek said the new law impacts Brandon more than most districts in the state.

"We are in the top ten in what we owe," she said.

"We are underwater as shown by this," said Schmidt. "At some point it has to come to a screeching halt. I'm starting to hear screeching."

A meeting with a financial planner is scheduled for August, Meek said. By October, the district must have a millage rate assessment completed to determine what millage rate would allow the district to pay off the loan by the mandatory date of 2032. The district could raise the current millage of 8.24 mills for both bonds to a maximum of 13 mills.