Clinton Township,Macomb TownshipMarch 06, 2013
Chippewa hopes to soften property-tax hike
Plan calls for refinancing portion of $514 million debt
By Robert Guttersohn
C & G Staff Writer
CLINTON TOWNSHIP — Chippewa Valley Schools is hoping to limit a tax hike on its residents by quickly refinancing a portion of its $514 million debt before a newly signed state bill goes into effect March 28.
The Chippewa Board of Education adopted at its Feb. 25 meeting a resolution authorizing its financial consultants to look into the resale of two former bond issues from 2003 and 2005, which they believe could be financed under a lower interest rate. The Board of Education approved the resolution 5-0. Board members Tammy Reynolds and Julie Fitzgerald were not present for the vote.
The district believes the reissuance of the two bonds could also limit a state-mandated hike in the debt millage the district levies on its property owners.
Of its debt, the district owes $143 million to the School Bond Loan Fund, a state program that loans districts money for capital improvement projects. Previously, the only requirement for school districts to borrow from the fund was that it levied at least 7 mills from its residents to pay the state back. Chippewa, which assesses 7.65 mills for debt, has been borrowing from the fund since 1967. In December, Gov. Rick Snyder signed into law a bill that created a mandatory repayment date. And if that repayment date could not be met, the new law requires districts to raise property taxes until the payment date was met.
Chippewa is required to pay the $143 million by 2040, but is currently projected to not do so until 2058, according to the House Fiscal Agency. In order to meet the 2040 deadline, residents of Chippewa Valley district would see their millage rise from 7.65 to about 10 mills beginning in 2014. The refinancing could limit the increase to 9.75 mills, according to paperwork provided to the board before its vote. The difference would save a household with a home valued at $100,000 nearly $25 annually.
When the district’s financial consultants discovered the new law — which was introduced as Senate Bill 770 and is now called Public Act 437 — doesn’t go into effect until March 28, they realized there was still enough time to refinance its debt and lower the millage rate increase on its residents.
“We had planned to do this, but when Senate Bill 770 was enacted, we thought we couldn’t do this,” Superintendent Ronald Roberts said to the board. “If we’re going to do it, it needs to get done.”
The district would reissue its 2003 and 2005 bonds at a lower interest rate. The current interest rate on both of those bonds are near 5 percent. Robert Naughton, vice president of Stauder, Barch and Associates and a consultant for the district, told the board he might be able to reissue the two bonds at 3 percent interest.
The lower interest rate would translate to savings of $11.8 million over the 21-year life of the bonds, according to paperwork filed with the board. Essentially, the money that will be freed up from the savings will allow the district to pay back the state at a faster pace, Naughton explained.
But the reissue must be done before March 28, while the expiring school bond fund rules are still in effect, Naughton said.
“We are replacing bonds that were issued at a higher rate of interest with bonds at a lower rate,” he said. “These refunded bonds — if we can price them and deliver them by March 27 — it would be under the old rules.”
Naughton said the board’s approval will give him just enough time to sell the bonds before the law’s effective date.