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A bond issue is a way to borrow money to fund "bricks and mortar"
projects, as well as technology for certain capital improvement projects.
This requires voter approval. Capital projects can include additions of
new classrooms, safety, maintenance, and renovations of existing
schools and certain technology costs.
Where does the money come from to pay for them?
When the voters pass/approve the bond issue, the school district then
obtains bids and sells bonds to the purchaser that offers the lowest interest cost.
The district pays back the debt over a period of years, typically around 12 years.
We use current tax dollars to pay off bond debts. In Rockwood,
that debt service comes from a dedicated 68 cent property tax levy.
This process is similar to a home loan. When you purchase a home,
you borrow money at a specific interest rate. You make payments on that loan,
which include principal and interest, over a period of years. In order to
make those payments, you dedicate a certain amount of your income
to retiring that debt.
Will the bond issue raise my taxes, if approved by voters?
No. The current 68 cent debt service levy will be in effect until 2022,
even if the voters do not approve the April 6 bond issue.
If voters approve Prop 5, it will extend the district's current level of
bond indebtedness two years - meaning you will then continue to pay
the same 68 cent debt service levy until 2024.
How can we do this without increasing the tax rate?
Each year, the district retires or pays off old debt from previous bond issues and
our assessed value can increase. As that happens, we are able to fund new debt
from the existing 68 cent levy without increasing our debt service tax rate.
This is similar to what happens when you take out a home equity loan. You
continue to make those monthly payments, which have not increased,
but you have “added” new debt, which extends the period of time
it will take to pay off the entire loan.
Why does Rockwood continue to issue bonds?
This method of funding allows us to pay for capital projects that have a length
of “life” that is similar to the “life” of the loan.
The district has over 3 million square feet of facilities valued at over $350 million.
These facilities require regular maintenance, upgrading and renovation.
What can the bond money be used for?
The money from bond issues can ONLY be used for capital expenditures
such as: building new school additions school safety renovations and
major technology costs.
Bond funds MAY NOT be used for operating expenses such as: salaries and
benefits, transportation costs, utilities, textbooks or other supplies.
Why aren't these expenses included in our operating budget?
Ten or more years ago, all ongoing major maintenance projects and technology
were funded by the district’s operating budget.
We made a conscious decision to supplement the funding of major maintenance
projects and some technology costs with bond issues because:
1 - District enrollment growth slowed (fewer facilities were required).
2 - Operating revenue growth slowed (creating a pinch on our operating budget).
If all the money for these certain expenses had to come from the operating
budget, we would have to make adjustments to that budget. Most of our
operating budget - 81 percent total - is allocated for employee salaries and
benefits. Only 3.7 percent is allocated for capital outlay.
Will any of the bond issue funds go toward areas other
than building needs? Although building needs are important, many people I know are more interested in finding the funds to hire experienced teachers of exceptional quality to educate their children.
Bond issues allow Rockwood to free money from our annual operating budget
to provide for needed building maintenance and capital improvements,
so we can keep a higher percentage of our operating budget to pay for
salaries and benefits.
The State of Missouri makes it very clear that the money from bond issues
can ONLY be used for capital expenditures such as: building new schools and
classrooms, school renovations, and technology costs. By law, bond funds
MAY NOT be used for operating expenses such as: salaries and benefits,
transportation costs, utilities, textbooks or other supplies.
Rockwood has different kinds of budgets - just like your own family. In Rockwood,
we have two separate funding sources:
1 - the annual operating budget paid partially from the operating levy
2 - bond issues that are paid out of our debt service levy.
Annual Operating Budget is funded in the past from our operating tax levy fund.
Most of the money in the operating budget (73.0%) is dedicated to instruction.
Money for daily maintenance and cleaning of our buildings is a smaller
percentage (11.8%) of the annual budget. Other expenditures include items,
such as transportation costs, books, supplies, and school support, also come
out of the operating budget.
Major maintenance projects and capital improvements are funded by bond issues.
Bond issues are financed over a period of time, typically around 12 years.
This means that the cost of capital improvements, such as additional classrooms or
a new roof for a school, can be extended over several years. These bonds are
paid from the debt service fund, which is set at .68 and does not change year
to year. However, the district rolled back 7 cents of our former 75 cent debt
service levy to the current 68 cents.
Ongoing maintenance and improvements are needed for our facilities. The first
Rockwood school was built in 1934. Our newest school was built in 2004.
If you looked at all Rockwood schools by square feet, you would discover:
the majority, 54 %, of Rockwood schools are between 30-70 years old,
about 45 % of Rockwood schools are between 10-30 years old, and
1 %, only three schools, are less than 10 years old.
Aging schools mean that roofs, heating and cooling systems, electrical services,
safety items, floors and carpet have to be replaced. Renovations and additions
are required to meet changing needs and demands of education as well as
changing safety and security requirements. Bond issue funds allow us to
take care of these needs without using money in our annual operating funds
that would take money away from students.
What is the difference between a bond issue and a tax levy?
A bond issue is used when a school district wants to borrow money to build
schools, make capital improvements or purchase large amounts of equipment. The operating tax levy provides funds for operating the schools, paying staff and
educating students. The debt service levy provides funds to repay the money
borrowed through bond issues.
A bond is essentially a long-term loan and is similar to a home mortgage.
In effect, Rockwood is given an advance by investors who purchase District bonds.
In return, Rockwood promises to pay the investors a specific rate of interest
on their funds until the principal part of their original loan has been completely
repaid, generally during a period of 12 years or less. Bond issue funds for
technology are repaid during a period of 5 years or less because their useful life is
about 5 years.
On the other hand, normal operating funds are received from the operating tax
levy, a separate voter-approved levy. This fund pays for salaries, utilities,
supplies, etc. |