NO on the LOCS Bonds

Despite what you have seen on road signs and the information provided by the Lake Orion School system, the Bond proposal requires an additional 3.99 mills in taxes.

If you don’t believe me, read the ballot when you are voting. This is one place the school board cannot twist information to support their bloated request. This will represent a significant dollar increase in your taxes to repay the $250.6 million (principal and interest) they are requesting.

The school administration has been whining since Proposal A was passed in 1994. In the 24 ensuing years, they have refused to adjust their operating budget to provide the proper repairs and maintenance. In support of the 2016 sinking fund request of $35-plus million, some minor adjustments were made to sell the request to voters, but they must make the necessary adjustment to fund and maintain an ongoing system.

A few other logical questions voters should be asking themselves are:

1) Based on the “useful building” life calculations the board uses to decide we should demolish and replace a building, why shouldn’t we bulldoze downtown Lake Orion? 2) The board used GMB Architecture & Engineering to assess the facilities, which I have been told was done for free. As you know, the bigger the project, the more they make. Now, without any competitive quotes, they are the architect for the entire project and will be making $10.4 million.

3) The request includes $30.5 million for technology, does this seem excessive to you?

Thomas Sanna

Orion Twp.

 

2 Responses to "NO on the LOCS Bonds"

  1. Michael W.   October 26, 2018 at 8:23 am

    A few points of factual clarification regarding Mr. Sanna’s post from someone who neither works for LOCS nor has any family members employed by LOCS:

    FACT: Ballott Language is largely dictated by Michigan Law and created almost entirely by attorney’s working on behalf of a public entity. Public school districts along with any other public institution/municipality who has the ability to authorize and sell bonds has little flexibility beyond the actual millage rate to alter the ballots language. In short, the current bond proposal is indeed an additional 3.99 debt mills but will not likely increase the current debt mills paid by taxpayers in Lake Orion. Why you ask?

    Here is why: current district bond debt, like all other public schools in Michigan, and most likely in other states, is paid no more than twice per year: November 1 and May 1. On these dates, both principal and interest are paid by the school district using revenue collected from property owners using the debt millage as the basis of taxation. These payment(s) usually consist of both principal and interest of the existing debt (old bonds) that a public school district has on their books. In short, it is similar to a mortgage payment in that a district is paying down existing bond debt each year. This fact allows a school district to issue further bond debt while maintaining the same debt millage rate but it prolongs the debt millage rate for taxpayers beyond the current debt/bond payoff date.

    So, LOCS is not lying, they are reasonably certain that the new LOCS bond proposal, if passed, will not alter the current debt millage rate paid by taxpayers. They have to say “isn’t likely to increase” because they are being honest: If taxable values in the district decrease (unlikely) then the millage rate could indeed increase but this is not foreseen due to several economic indicators. However, It is indeed prolonging the debt millage rate on the back-end, ~ 30 years from now. So, the statement “This will represent a significant dollar increase in your taxes to repay the $250.6 million (principal and interest) they are requesting” is not entirely true, it’s all about timing. Assuming this bond proposal passes and no other debt is issued over the next 30 years by LOHS, existing debt will have been entirely paid off and the current debt millage rate will have been greatly reduced during this timeframe due to the annual debt service by the district. It is this way for all public entities who issue debt.

    Furthermore, ~ 80% of most public school district’s operating funds (a district’s General Fund) is dedicated to salaries and benefits of all district staff. The remaining 20% is used for a variety of functions such as curriculum, transportation, building and maintenance, administration, athletics, etc. Couple these facts with an entity who is solely dependent on per pupil (FTE) income from the State (and also a relatively small amount of Federal dollar (grants)), its easy to understand why there is not several hundred thousand per year, let alone several million dollars per year remaining to fund necessary facility upgrades, etc. Public school district’s are not a for profit business, most are likely to have a small addition to their general fund’s fund balance each year if they are fortunate enough to have moderate to improved enrollment figures and/or more revenue and less expenses.

    Public school district’s who are also fortunate to have a positive fund balance are discouraged from “raiding” this fund balance to pay for capital improvements, etc. since it weakens their financial outlook and will inevitably cause a credit rating decrease by Moody’s or S&P, thus causing any future bond sales to be priced higher and increasing the interest rate resident’s pay on that future bond debt. Raiding the fund balance also is not favored since it’s often treated as for “emergencies only” and once the funds are depleted, they are gone forever and the risk of becoming a deficit district increases….NOT GOOD!

    Many public school district’s spend hundreds of thousands or millions of dollars(depending on size of district and financial ability) in facility maintenance and operations each year but like someone’s home, capital equipment, roofs, parking lots, driveways, boilers, etc. have a useful life. In addition, most older mechanical equipment is not efficient and the purchase of some new equipment is more efficient and helps reduce gas and electric expenses in the general fund.

    Due to all of the above facts, public school district’s have two major choices to pay for district-wide capital improvements: Bonds and sinking funds, whether you like it or not!

    Michael W.
    Orion Twp.

    Reply
  2. Jake Singer   October 27, 2018 at 12:40 am

    The ballot language says “The maximum number of years any series of bonds may be outstanding, exclusive of refunding, is not more than twenty (20) years; the estimated millage that will be levied to pay the proposed bonds in the first year is 0 mills (which is equal to $0 per $1,000 of taxable value); and the estimated simple average annual millage that will be required to retire each series of bonds is 3.99 mills annually ($3.99 per $1,000 of taxable value). The annual debt millage required to retire all bonds of the School District currently outstanding and proposed pursuant to this ballot is expected to remain at or below the current annual debt millage of 7.49 mills.”

    Mr. Sanna misinterprets the portion that references 3.99 mills annually. This simply means in the absence of any other debt, LOCS would only need to levy an average of 3.99 mills to retire these new bonds. It does not say that 3.99 mills needs to be added onto the existing 7.49 mills being charged. In fact, it says the exact opposite. “the annual debt millage required to retire all bonds…is expected to remain at or below the current…7.49 mills.”

    This millage is not an annual increase, it is an extension. From the ballot language, “The estimated duration of the millage levy associated with that borrowing is 13 years and the estimated computed millage rate for such levy is 7.49 mills.”

    This is a responsible proposal that brings in funds needed to make our schools Safer, Smarter and Stronger without digging deeper into the annual budgets of Orion area residents. Please reject Mr. Sanna’s misinformation by voting YES on November 6th.

    Reply

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