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Iowa City School District Might Ask Voters to Borrow Money
By Gregg Hennigan and Mark Carlson, Reporters
IOWA CITY, Iowa – The Iowa City school district could be asking voters as early as two months from now for approval to borrow money to pay for school projects.
Such a move could make hundreds of millions of dollars available to the district for construction projects – money school officials say is needed to meet building needs to deal with fast-growing student enrollment.
No decisions were made by the school board at its meeting Tuesday night, but things could be moving fast in the coming weeks. The board voted to have Superintendent Stephen Murley submit a recommendation by next week on how to move forward.
The board was scheduled to talk about changing a policy that sets aside $32 million for a new high school, with a majority of board members having said they'd rather that money go to elementary school projects. It's an issue that has divided the community as officials try to figure out how to meet all of the districts building needs with a limited amount of money.
Instead, the board tabled that discussion and heard a presentation from Craig Hansel, the district's chief financial officer, on financing options open to district.
The Iowa City school district traditionally has used a pay-as-you-go approach for construction projects, he said, spending sales tax money that already has been collected. The district's needs, however, are larger than the sales tax funds it gets each year, Hansel.
The other option is borrowing. There are two main methods for this.
One is what is known as general obligation bonds. The Iowa City school district's borrowing capacity is $281 million. A bond issue would require 60 percent approval from voters in a referendum that would ask for a specific amount to be used for a specific purpose. These types of bonds would increase property taxes.
Another option is tax anticipation revenue bonds, or TARBs, as Murley calls them. The school board can approve these itself and they do not affect the tax rate.
These bonds would borrow against sales tax revenue. Johnson County voters approved a school infrastructure local-option sales tax, better known as SILO, in 2007. The state later renewed the tax statewide through 2029.
The 2007 vote also approved a revenue purpose statement on what the money would be used for. To tap TARBs, Iowa City school district voters would have to approve a new revenue purpose statement to supersede the current one.
As soon as a new revenue purpose statement is approved, the board could borrow $100 million, based on current enrollment, Hansel said.
So, the school board would need to go to voters for either borrowing option.
Borrowing money does lead to paying interest, but Hansel said interest rates are at 40-year lows and are less than the annual inflation for construction costs. He encouraged the board to consider borrowing money, comparing it to having a home mortgage.
"I think there's some real win-wins here for you as a board," he said.
The next available election dates are Dec. 4, and then next year in February, April, June and September. The deadline to file for the Dec. 4 election is Oct. 19.
The board did not discuss the merits of borrowing or a preferred election date. It will save that discussion for its Oct. 16 meeting, depending on Murley's recommendation. The board wants Murley to say whether the board should turn to borrowing and, if so, if it should seek general obligation bonds, TARBs, or a combination of both.
Board member Tuyet Dorau, however, referred to the Dec. 4 date as "favorable."
Johnson County voters are being asked in the Nov. 6 election to approve a $46.8 million bond issue on to build a criminal justice center.