$1.95033 per thousand of assessed property valuation is the projected debt service levy (tax) for the $191.525 million school bond if it passes, for the year 2018-2019 as shown as in Iowa City Community School District’s (ICCSD’s) “2017-2018 Certified Budget” 1 information, not $.98 as many bond supporters have promoted.
The total school levy (tax rate) is made up of multiple parts, including the 1) General Fund Levy, 2) the Management Levy, 3) the PPEL Levy, and 4) the Debt Service Levy. Added together, they are used as one input in calculating school property taxes. The PPEL Levy is currently constant at $1.67 per thousand dollars of assessed valuation. Other levies may change over time.
In order to encourage voters to vote for a school bond, bond supporters, including school officials, often want homeowners to think they will pay less in property taxes than a bond will cost over time. So school officials 1) in the short term, may manipulate one or more parts of the school levy in an attempt to show that a school bond has less impact than it truly will over the time in which the bond debt will be paid down and 2) try to time a new bond so that payments take effect just as an old bond is being paid off–so they can advertise that school taxes overall will not increase or will not increase much (neglecting to remind property owners that they have finished paying on the old debt levy).
Helpfully, Minnesota requires the following “notice in boldface type” to be put on ballots where voters will vote on a bond referendum. Iowa should do the same.
“BY VOTING “YES” ON THIS BALLOT QUESTION, YOU ARE VOTING FOR A PROPERTY TAX INCREASE.”
The part of the school levy to pay attention to when determining what a school bond will truly cost is the debt service levy.
To calculate the impact of the projected debt service levy (tax) for ICCSD’s proposed $191.525 million dollar bond, on a homeowner’s property taxes, compare 1) the school property tax rate with the bond debt service levy in it to 2) the school property tax rate without the bond debt service levy.
The projected additional property taxes to service general obligation bond debt for 2018-2019 if the $191.525 million dollar bond referendum passes are about $268.13 per year for a homeowner whose home is assessed at $250,000.
If, for example, in five years, the home’s assessed value increases from $250,000 to $275,625, and the bond debt levy drops from $1.95033 to $1.7654 because the property tax base grows, a homeowner will still pay around a projected $268 per year to support debt related to the bond referendum, if it passes and assuming the district’s projections are accurate.
ICCSD currently plans for payments on its bond principal of $191.525 million (with interest and other costs projected to be $275 million) to be made each year to the year 2042 so more than one generation will bear this debt.
With only 44,127 non-exempt property tax paying parcels in ICCSD this past spring, that works out to over $6,000 per parcel. Sure the tax base will grow and some property owners will pay more or less than others; however, let’s face it, this bond is going to be expensive.
1See the chart at the top of page 28 of ICCSD’s 2017-2018 certified budget information.