Opponents of the Little Rock School District's proposal to raise $160 million in new money for capital improvement projects said Monday that the tax plan will cost the district as much as $154 million in interest over 30 years.
The Citizens Against Taxation Without Representation grass-roots organization held a news conference in front of the Little Rock School District's headquarters Monday to highlight the interest costs and other fees that would be tied to bond issues supported by a proposed 14-year extension of the district's 12.4 debt service mills.
Early voting starts today for next Tuesday's special election on extending 12.4 of the district's total 46.4 tax mills, from 2033 -- when the mills are now due to expire -- to 2047. Early voting can be done at five sites in the city.
The extended levy would not increase a property owner's yearly tax bill for schools in the state's largest district, but the property owner would pay the same rate for a longer time period, making it possible for the district to issue bonds and generate revenue that would go toward the construction of a new $90 million high school for 2,250 students in southwest Little Rock, the conversion of the existing McClellan High into a kindergarten-through-eighth-grade school, and improvements at all other district campuses.
[DOCUMENT: Little Rock School District's estimated debt service schedule]
"Our committee strongly recommends voting against the proposed tax on the May 9th ballot," former Pulaski County Circuit Judge Marion Humphrey said on behalf of the organization. "We refuse to say this tax is a 'plan' to help our schools because plainly it is not. Instead, the proposed multimillion dollar debt .... makes our public schools financially weaker."
Humphrey said district leaders have listed projects to be accomplished -- including construction, roof replacements, heating and air conditioning system replacements, improved athletic fields, and new windows -- but have failed to disclose the borrowing costs.
"The most expensive item is never mentioned by the state-appointed school superintendent -- $154 million in interest costs," said Humphrey, who also noted other related fees: $3.9 million for bond underwriters, $303,000 in municipal bond adviser fees, $153,000 in bond counsel fees, $94,000 for a Moody's rating fee, and $25,500 in trustee and escrow agent fees.
Humphrey acknowledged that every school district that issues bonds for capital improvement projects must pay interest and fees.
[DOCUMENT: Resolution from Education Commissioner Johnny Key]
"Sure, but the public needs to know," he said. "Our issue is disclosure to the public of what actually goes to the kids as opposed to what goes to the bond holder, the lawyers. The public deserves to know that -- exactly how much we are going to have to pay for the $160 million and who benefits from it. It's our business and our money."
Kelsey Bailey, the district's chief financial officer, said later Monday that the 4.2 percent interest rate cost cited by the opponents to the tax extension includes the district's existing debt and proposed debt over 30 years and not just the proposed 14-year extension.
"Even when you buy a house, if you keep it 30 years, you can multiply what you paid for the house by maybe 1.7 percent -- you paid $100,000 for the house and finance it over 30 years, you are going to end up paying about $170,000 for that house," Bailey said.
"That's just the interest cost. It's nothing different than any other bonds," Bailey said about the district's plans for raising money.
[DOCUMENT: Baker Kurrus position on May 9 special election on millage extension]
"The only difference now is that the rates are favorable and you may get rates that are less than 4 percent when rates used to be 6 or 7 percent," Bailey said.
The 12.4 debt service mills in the Little Rock district currently raises $43.1 million a year in revenue, of which $13.5 million is earmarked this year for bond debt. The surplus of almost $30 million a year is used to meet other district operating costs, including maintenance, equipment, salaries and utilities.
If the tax extension is approved by voters, allowing the refinancing of existing bonds and the issue of new bonds, the district's debt service would increase to an estimated $21.4 million each year between 2019 and 2041, at which point the debt service would drop to about $3.7 million a year between 2042 and 2047. That is according to a report to the district from Stephens Inc., the district's financial adviser.
Opponents of the 12.4 mill extension have argued that the school district could pay as it went for a new high school in southwest Little Rock and other improvements by pooling the surplus debt service revenue with the $37.3 million in special desegregation aid that the district will receive for the last time in the 2017-18 school year.
Little Rock Superintendent Mike Poore has said that the district will use the desegregation money, district savings and money from the extended tax rate to finance the new high school on 56 acres on Mabelvale Pike behind the Home Depot and Wal-Mart stores.
However, Poore has said that relying on surplus debt revenue for the construction projects would result in school closures beyond the three that are being closed for the coming year, and employee reductions.
"I don't want to do that," Poore said last week.
Jim Lynch, part of the Citizens Against Taxation Without Representation group, said Monday that anticipated increases in the assessed value of property within the Little Rock district would generate more revenue for the district. The 12.4 mills that now generate $43 million for the district are projected to generate $46 million in 10 years and $51.5 million in 20 years, Lynch said, based on a 2016 report to the district from Stephens Inc.
Bailey, the district's chief financial officer, agreed that there will likely be increases in assessed property values. That will help the Little Rock district, which has an annual budget of about $350 million a year, cover inflation and even the loss of revenue as the result of some students leaving the Little Rock district for independently run, public charter schools, he said.
The district will be able to meet the debt payment obligations created by the proposed bond issues for building improvements, Bailey said.
"We wouldn't even be going forward if we couldn't," Bailey said. "We wouldn't have bought land if we couldn't."
As for the potential loss of more students to charter schools, Bailey said the 24,000-student district will likely always have more than 20,000 students.
"You just have to continue to right-size your district based on the competition and what we have here.," he said. "You still are going to have schools that need to be updated. The charter schools aren't going to take all of the Little Rock School District students."
Early voting will be from 8 a.m. to 5 p.m. today through Friday and Monday in the Pulaski County Regional Building, 501 W. Markham St., in Little Rock.
Early voting will be from 10 a.m. to 5 p.m. today through Friday at the following locations:
• Sue Cowan Williams Library, 1800 S. Chester St.
• Southwest Community Center, 6401 Baseline Road.
• Second Presbyterian Youth Center, 600 Pleasant Valley Drive.
• West Central Community Center, 4521 John Barrow Road.
Polling locations will be open from 7:30 a.m. to 7:30 p.m. on election day next Tuesday.
Metro on 05/02/2017