The Actual Financial Impact of the Bond
I am writing to express my concern with the way that the financial implications of the proposed school bond offering have been presented to the public. The School District has highlighted: “The estimated 30-year average tax increase for residents with a house with an assessed value of $26,600 (an approximate $1,689,000 market value) is about $3.23 per month” and made this a major selling point for the offering. This number is essentially meaningless, and the real number is approximately 25 times higher.
- Most people reading the Board’s materials would interpret them to mean that their taxes would go up by about $3 per month. What the Board actually means is that your annual taxes will go up by an average of $3 per month each and every month for the next 30 years, or approximately $1,000 per year (about $80 per month) in total. This is not at all apparent to someone who does not dig into the numbers.
- This presentation is similar to someone taking out a 30-year mortgage with payments of $360 per month and saying that their mortgage payments go up by an average of $1 per month. I have never seen anyone present a financial transaction this way in any context.
- It is also very misleading to credit the scheduled paydown of existing debt against the cost of the new bond. The bond must be evaluated on its own without considering the reduction in existing debt, since that would occur with or without the new bond issue. Conversely, the analysis ignores all the other factors that will cause taxes to rise in the coming years, with or without the new bond.
- At this point, the terms of the bond are only projections. No one knows what interest rates will be when the money is actually borrowed in 2023, so the cost could be substantially higher than presented. If interest rates are just 1% higher than projected, the cost would increase by almost $800,000 per year, or an additional $167 for the average home.
Here is a simple way of looking at this. As proposed, the debt service on the new bond will be $4.7 million per year once it is fully funded. There are about 4,700 homes in Rye, so the average household’s tax will increase by $1,000 per year due to the bond issue.
Another way to look at this increase is on a per-student basis. Using the School Board’s projections of future enrollment, this bond alone would add approximately $1,500 to the cost of educating each student. Obviously, this is on top of the $23,839 we are already spending per student.
The fact that the School Board has chosen this way to describe the financial impact of the bond indicates that its members do not believe the voting public will agree with them on the value of the transaction. It is completely wrong of the School Board to market the bond offering this way, and they do a great disservice to themselves and to the citizens of Rye.
- Kevin J. Degen