Low interest rate reduces impact of construction projects for Moorhead School District taxpayers
January 25, 2016
Low interest rates will reduce the tax impact of the new school construction for taxpayers in the Moorhead Area Public Schools.
In December, the School Board approved the sale of general obligation school building bonds. Bonds with a principal amount of $74.6 million sold today at 2.78 percent interest, in part because of the district’s Aa3 rating from Moody’s Investors Services. Seven bids were received, and the School Board accepted the low bid from Bank of America Merrill Lynch, New York.
“This rate is spectacular,” said Joel Sutter with Ehlers and Associates, the district’s financial adviser. “The total principal and interest over the life of the bonds will be almost $18 million less than what we estimated last summer.”
Ehlers and Associates used a conservative 4.2 percent interest rate for estimates prior to the district’s Nov. 3 bond referendum. Those estimates called for taxes to increase $105 annually on a home valued at $150,000.
“In December we knew rates had come down and estimated it at 3.62 percent for the pre-sale,” Sutter said.
The tax impact for taxes payable in 2016, which was set in December based on estimates, will be less than the estimate provided prior to the November 2015 election. A home valued at $150,000 will see an increase of $96 annually, a decrease of $9 for taxes payable in 2016.
The tax impact for 2017 decreases further as a result of the low interest rate. A home valued at $150,000 will see an increase of only $79 annually, a reduction of $26 less than estimates prior to the election.
For taxes payable in 2017, agricultural land valued at $5,000 an acre will see an increase of only $3.13 an acre annually, a reduction of $1.03 an acre less than estimates prior to the election.
“This is a great day,” said Dr. Bill Tomhave, School Board chair. “It’s great to have it come in under estimates.”
The bonds will finance the construction of a K-4 elementary school and a grades 5-6 addition to Horizon Middle School and renovation projects, including upgrading and constructing secure entrances, at other district sites.