By Pete Smith
The Carmel Clay School Board is considering taking on new debt and refinancing old debt to capitalize on the favorable rates in the current bond market – all without raising the current tax rate.
The move is possible because of the refinancing savings, a projected increase in assessed valuations in the coming years for properties throughout Carmel and a window of opportunity in terms of the district’s debt payment schedule. In fact, the district’s tax rate could even decline.
The board has scheduled a public hearing at 7 p.m. May 19 to discuss the possibility of refinancing more than $26 million in 2005 First Mortgage Bonds that had been used for the construction for West Clay Elementary School. Assistant Superintendent Roger McMichael said the move could end up saving about $1.3 million over the life of the bonds.
McMichael said that refinancing the bonds was part of an overall plan to manage the debt service tax rate during the next ten years.
The district also would like to borrow an additional $6 million to cover routine school maintenance and upgrade costs.
“We’re not anywhere close to a panic situation,” McMichael said. “If we don’t move forward with this, what happens? Nothing catastrophic.”
The loan is necessary to cover budget shortfalls, the district said. Its capital projects fund has lost $3.3 million because of the state circuit breaker law and the reductions in assessed value to residential property during the recent economic downturn. In addition, $1.7 million of the fund’s money was used to purchase land for a potential new school west of the proposed Silvara development at 116th Street and Spring Mill Road.
The land was approved for purchase by the school board at its November 2012 meeting on an installment land contract from Scott Jones, the creator of ChaCha.
The largest of the maintenance projects include a $1.7 million replacement of the Mohawk Trails Elementary School roof, $850,000 in technology network upgrades and a $775,000 replacement of the Smoky Row Elementary School HVAC system.
“I think they’re needed so that Carmel schools can continue to maintain these facilities in a responsible manner, and in a manner this community is accustomed to and expects,” McMichael said.
But the maintenance projects pale in comparison to the larger costs associated with major renovations likely needed for Carmel, Cherry Tree, Orchard Park and Smoky Row elementary schools between 2019 and 2023. That’s because they would’ve had no major renovations done in the past thirty years at those points.
To accommodate those, the district would like to acknowledge that it could need to bond for $20 million in 2019. And even then, the tax rate would still be projected to decline.
McMichael said that the current debt service tax rate is $0.32, and that with the new borrowing the rate would still decline to an estimated $0.28 over the next 10 years.
The first series of bonds are projected to eventually total $6.3 million in debt with interest factored in and they would be repaid within three years.