Baxter County Friends of the Taxpayers

MEETING NOTES

BAXTER COUNTY FRIENDS OF THE TAXPAYERS

SATURDAY, FEBRUARY 23, 2008

BCFT Director Frank Kaye called the meeting to order at 1:00 pm at Western Sizzlin Restaurant.  He welcomed everyone and invited guests to introduce themselves.

Treasurer’s report:  Balance as of 1-26-08 was $755.85.  Deposits were made in the amount of $370 (dues & donations); disbursements of $5.67 for photocopies; leaving a balance of $1120.18.

Membership report:  Suzan reported that dues were still being accepted and that only a few people have yet to renew for 2008. Cost is $15 for one person, $25 for a couple.  Anyone not paid by April 1 will be removed from the roster.  A quorum was present at the meeting.  She asked if everyone had had a chance to read the minutes from the last meeting, and offered copies to new members and anyone who had not received them.  There were a few corrections made; the minutes were then approved as amended.

Old Business

School bond issue: Frank reported on the school board meeting held Thursday night (2-21-08) and said that there was one positive outcome from that meeting, as a direct result of what the taxpayers have done so far: by voting the bond issue down in September, it forced the school administration to revamp the plan.  Their attitude on certain things has changed – for example, the original proposal included $275,000 to redo the roof at Guy Berry School, to be financed for 30 years, for an estimated total cost of $500,000 (with interest).  Because that project was removed from the plan after the last bond issue failed, the district ended up doing it with existing money in 2 stages; the first stage was completed last fall at a cost of $31,755; this second stage will cost about $50,000.  After the school board meeting, Frank congratulated Mr. Walker (director of auxiliary services, which includes the maintenance department) for making the responsible decision to proceed using existing district funds.

A member said he had heard two different numbers for the bond issue:  $34.5 million and $41.1 million; which was correct?  Frank explained that the $34.5 million was just the part that would be spent on construction and renovation projects at the schools; the $41.1 million includes paying off the existing debt on the 3.92 mill bond from 2003 ($5.8 million), plus financing costs. 

One of our researchers explained that the total amount actually paid back over 30 years will depend upon the interest rate for the bond.  The millage rate is a separate issue, which is set by the board based on advice from the bonding agent (and approved/disapproved by the voters).  Even accounting for the 16% overage required by the bond company (excess revenue that guarantees payment on the bonds during the first 5 years), the rate the board is asking for will generate income well in excess of what is required to pay back the bond.  No extra payments are permitted during the first 5 years of the bond, but after that time the indebtedness can be paid down.  These bonds are also insured by a bond insurance company, but such companies have been in trouble lately with mortgage lending problem; this may have an effect on the bond market, but it’s too early to tell.

A member asked what will be done with the excess revenue that accumulates.  It was explained that this money can be used by the school district for anything it wants, and that the state constitution allows them to do this.  Another member asked what the “2% buydown” was; one explanation was that it was to get a better interest rate.  He also asked why bond insurance is required, when the state of AR is legally committed to take over any bonds that are defaulted on by school districts.  One of our researchers explained that attaching a AAA insurance rating to a bond makes it more appealing to investors; it also helps protect against default if a district goes bankrupt (it happens).  In his opinion, especially if the bonding process is competitive, the 2% buydown was the bonding company’s commission for successfully brokering the transaction.

A member asked for an explanation of what the school district does with the excess funds generated by the millage rate.  Frank explained that the district levies 25.29 mills for Maintenance & Operations (M&O); 25 of those mills are a state-mandated minimum, the other .29 mills were already in place at the time the mandate was put into effect.  They can have a separated dedicated millage exclusively for maintenance/repair, but they no longer have one (it was discontinued in 2003).  There is also a separate millage for capital improvements, currently at 3.92 mills.  So there are 3 separate tax categories that get levied against the assessed value for all property in the school district.

The excess – whatever’s left in the debt service revenue account after they make the annual bond payment – can be used for anything the district chooses to use it for.  The 25.29 mills for M&O doesn’t provide them enough money to cover all their expenses, so they use the excess to pay for utilities, teacher salaries, fuel for the school buses, athletics, whatever.  His position is that the district needs to straighten out its funding streams so that the tax revenue that comes into the M&O budget will cover their expenses (i.e., live within their budget) and the excess can be used to pay the bond off early.

A member asked how much of the current 3.92 mills actually gets used to pay off that bond.  Frank told him that it generated about $1.2 million in tax revenue last year; the annual bond payment is about $700,000, leaving an excess of about $500,000.  One of our researchers explained that if the district were to use all the excess funds available to pay down the current bond, it would be paid off in a little more than 4 years.  Instead they’re planning to refinance it and extend it for another 30 years.

Frank went on to explain that the 2006 assessed value for the district was about $467 million; the revenue generated from that with the new 6.87 mills will be about $3.1 million per year, or $93 million over the next 30 years, assuming a 0% increased in assessed property values.  The annual bond payments will total about $82 million, leaving a minimum surplus of about $11 million over 30 years to use however they choose.  If the assessed values go up 5% per year, at the end of 30 years the district will have taken in excess funds of over $157 million.

Frank then explained what plan had been developed to let people know our position on the bond issue.  Five of our members have done copious amounts of research and are developing a fact sheet, similar to the one from last time, but it will contain just the facts … no editorializing or “Vote No” this time, just let people read the facts and make up their own minds.

If we put an insert in the Baxter Bulletin again, it will cost about $750-$850 for 10,000 1-color flyers, which is considerably more expensive than last fall.  Frank said we’re trying to limit the flyer to a single side with 5-6 bullet points to make it easy to read and understand.  An expanded version will be available on the website.

Frank asked for discussion on spending the money for the insert.  After several minutes of discussion it was voted to proceed with an insert for the Baxter Bulletin and potentially a trifold brochure to hand out at meetings or door-to-door, regardless of the cost; there is sufficient money in the treasury to cover it.  It was also agreed to have it reviewed by people outside the committee to make sure it’s easy to understand.

A member asked who in the state was tasked with inspecting public buildings for safety and good construction.  Frank answered that he had no idea related to public facilities; for schools, the state department of education facilities division inspects the buildings and identifies deficiencies.

One of our researchers explained the Lake View lawsuit back in 2002-03 and the evaluation of every school building in the state.  The study (completed in 2004) produced estimates of how much it would cost to bring every building up to the new state standards, as well as estimates for growth over the next 10 years.  He did a comparison of 5 other school districts of comparable size to MH; each one had about 4000 students, and their estimated repair costs varied widely, partly due to varying building conditions, and in part because each district is assessed according to the “wealth index” of the area.  MH’s estimated repair cost is about $9 million, and its wealth index is 2% (we’ll have to pay 98% of the cost of the construction).  Harrison’s estimated repair cost is also about $9 million, but its wealth index is 36% (they’ll only have to fund 64% of the cost).  Some districts in the state will receive almost 100% funding from the state because they’re very poor districts.

A member suggested that building condition issues should be taken care of separately from the bond issue.  Frank said that many of the discrepancies are related to ADA compliance issues (door hardware, etc.), and some of those are being taken care of at the present time with current budget money.

The subject of yard signs was brought up.  After brief discussion it was voted to reuse the yard signs from last bond election; they will be ready by next meeting.

With no further discussion, the meeting adjourned at 2:20 pm.  Next meeting is scheduled for Saturday, March 22, 2008, at 1:00 pm at the Western Sizzlin’ Restaurant, Hwy 62 next to the Ramada Inn; come at least a half hour early if you would like to have lunch before the meeting starts.  There is NO requirement that you purchase a meal to come to the meeting.

Suzan P. Kaye, Secretary
Thursday, March 20, 2008