Mandan News

Mike Bitz: Long-term debt and property taxes

 

As a property owner in Mandan I recently received my 2012 property tax statement in the mail. As I reviewed my statement, I could see that the Mandan School District receives the largest portion (40 percent) of the property taxes that I pay. This is typical for most school districts. Across the river, for example, in the city of Bismarck, almost 44 percent of all property tax dollars goes to the school district.

During the 2012-13 school year, over a quarter (25.89 percent) of the local property tax collected by the Mandan School District will be used to pay long-term debt and city special assessments. We, the school board and administration, are looking at options to reduce our long-term debt obligations. In January the school board will consider pre-paying three outstanding bond issues with general fund dollars. By making a one-time payment of $873,343 this spring the district can retire all three issues and save over $243,000 per year in future debt payments. Not having to pay the $243,000 in future years translates to roughly 3.5 mills of property tax that the school district will not have to levy on property owners in the Mandan School District.

One long-term debt obstacle that we are dealing with is the financing package that was used to fund the Mandan Middle School. In 2005 Mandan, like most schools in North Dakota, was experiencing declining enrollment. It was reasonable for the administration and school board at the time to believe that there would not be a need to build new schools in Mandan in the foreseeable future. They also knew that the final payment on the Fort Lincoln Elementary School would be made in 2011. Using these two pieces of information, they structured the payments on the new middle school so the district only paid interest (no principle) until 2012. The 2012-13 payment on the Mandan Middle School bonds will increase by $695,000 to cover this first principle payment.

This principle payment alone will eat up over a quarter of the property tax dollars collected by the school for debt repayment. We are considering our options to refinance the debt on the Mandan Middle School so that we can save money in interest and retire the debt as quickly as possible.

Please understand that I am not second guessing the administration and school board who set up and approved the financing package for the new Mandan Middle School in 2005. I believe they made the best decision they could with the information available to them at the time. Fortunately for Mandan, the situation has changed. Instead of losing enrollment, Mandan is now gaining students. Businesses like Walmart, Comfort Inn and St. Alexius are making commitments to come into Mandan because of the business environment that currently exists. This is a good thing.

We have decided to wait to put together the financing plan for the new northwest elementary school until after the 2013 North Dakota Legislative Session. In his preliminary budget, Governor Dalrymple is proposing an interest buy down program that will allow schools to borrow money at 1 percent for up to 90 percent of the cost of the project. If this is approved it would result in a significant savings to the taxpayers in the Mandan School District.

The purpose of this article was to give you a better understanding of the how the Mandan School District is planning to deal with its long-term debt. It is our goal to retire the debt as quickly as possible and to minimize the impact of this debt to the taxpayers within the school district.

Hopefully, this article has been informative to you. If you have any topics or items that you would like me to discuss in future columns, or you would like to comment on this article, please feel free to call me at the school (751-6500) or email me at Mike.Bitz@msd1.org with your thoughts and ideas.