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The Idaho Falls Board of Trustees has unanimously approved a measure asking parents and patrons to vote on a new School Plant Facilities Reserve Fund Levy on May 16. The levy will generate $3.3 million a year for the next ten years. The district plans to use those funds for a new elementary school on the south side of Idaho Falls through a lease purchase agreement.
“This new approach gives us a way to do what we can with what we have to try and build a new elementary school on Idaho Falls’ south side,” said Board Chair Hillary Radcliffe. “It won’t address all the district’s facilities issues, however, and the board will keep working with the community to find ways to resolve those other issues, specifically safety and security improvements and upgrades to Skyline and Idaho Falls high schools.”
How much will the levy cost?
The levy will cost $47 a year per $100,000 of taxable value. So, on a home with a taxable value of $300,000 ($425,000 Home Value - $125,000 Homeowners Exemption = $300,000 in Taxable Value)—the tax impact would be $141 a year.
How will the levy impact the district’s overall taxes?
- The district’s overall tax rate – what patrons pay to schools through property taxes – will be less, even with the new levy, because the district’s 2012 bonds will be paid off in August and will drop off the property tax rolls.
- The district’s current overall annual tax/levy rate is $205 per $100,000 taxable value, which includes $75 for the 2012 bonds.
- With the new levy, and the bonds completely paid off, the rate will drop to $177 per $100,000 of taxable value. ($205 minus the $75 from the 2012 bonds, plus $47 for the new levy)
What is a lease purchase agreement?
- Lease purchase is like “rent to own.” A district contracts for the construction of the school, and then leases the building with the right to purchase it. When all the lease payments are paid at the end of 10 years, the district may purchase the building for $1, and then owns the building free and clear.
- Lease purchase agreements are a relatively new way to fund municipal construction projects. They have been used successfully by Post Falls and Blaine County school districts, the College of Western Idaho, Fremont County, Ada County and the City of Twin Falls.
- The City of Idaho Falls is using this method to build its new police station.
Why use a lease purchase agreement?
The term of the lease purchase agreement matches the maximum 10-year term of the levy so total tax collections are less than with a 20-year bond, saving on interest payments.
How would this lease purchase agreement work?
- The district estimates the cost of the new elementary school at approximately $26 million. Financing that amount over 10 years with an estimated interest rate of 4 percent would result in annual payments of about $3.2 million a year.
- The levy would generate $3.3 million a year for 10 years, which provides a “cushion” for interest rates and construction costs.
- The district certifies its levy amount with the county each year so it could certify for less than $3.3 million a year if the actual lease payments end up being less than expected.
With mortgage rates at more than 6 percent, how could the district get a 4 percent interest rate?
Interest rates for public projects are much lower than mortgage interest rates for several reasons:
- Mortgage rates are typically for 30 years where the district is financing over only 10 years
- Public entities’ debt is tax exempt so an investor obtains the same net after tax return at a lower rate, and
- Financial markets regard public entities as better credits than individual borrowers. The City of Idaho Falls is paying an effective interest rate of about 2 percent on its 20-year police station lease purchase that it signed in 2020 when mortgage rates were over 3 percent.
How will the recently passed Property Tax Relief legislation impact D91 taxpayers?
The 2023 Legislature enacted property tax relief that provides school districts with money to pay off bonds and reduce property tax levies.
- Although formulas for tax relief are specified in the bill, amounts are not, according to a notice the Idaho State Tax Commission recently sent to county assessors, clerks and treasurers. The bill’s fiscal note provides overall ranges and, in any case, specific amounts to taxpayers cannot be determined until the conclusion of the fiscal year in July, until school attendance figures are determined in August, and until property tax levies are approved at the end of October, the notice says.
- Because D91’s bonds will be fully paid off by August 2023, all of the tax relief funds will be available to reduce the district’s supplemental levy.
What does the levy need to pass?
The levy requires 55 percent approval. Because this levy is for a specific dollar amount per year, a lower voter threshold is outlined in Idaho law. (A bond requires a supermajority or 66 2/3s of the vote.)
When is the election? The levy election is May 16, 2023. Polls will be open from 8 am to 8 pm.
D91 patrons will vote where they vote in any other election. If you’re not sure where to vote, check with the Bonneville County Elections office by clicking here.
Can I vote early?
Early voting is typically available two to four weeks prior to an election at the Bonneville Elections Office. Early voting ends the Friday prior to the election date. Learn more from the Bonneville Elections office by clicking here.