3B - Bond Issue
By increasing the bond’s length from the traditional 20 years to 25 years, the annual payments are reduced but the additional compound interest makes the total cost higher. The district calculates the interest costs and fees for selling the bonds to be as high as $452 million. Depending upon the compound interest rates the additional five years may cost an extra $200 million over the usual 20-year term.
Related to the bond term is how the payments are scheduled. The ballot language authorizes new taxes of $72 million/year. Dividing the total bond of $987 million by 25 years yields equal payments of nearly $40 million. The difference between $40 million and the ballot’s $72 million comes from a stair-step schedule where this bond’s payments start low and then as previous bonds (1997, 2004 and 2012) are paid off, this (2016) bond’s payments are increased by an amount similar to the bond payments paid off to keep the tax payments for all the bonds relatively level over the 25 years. Opponents claim this is similar to “balloon payments”.
This has the advantage of keeping this (2016) bond’s costs low in the first years - proponents state the cost per $100,000 assessed value is less than $50/year or for the average $300,000 home the annual tax bill would only go up the $150/year that is deemed politically acceptable. When the property tax for this (2016) bond is eventually raised then this bond’s cost could double although the total of all bonds could remain level.
The second big issue is the plan to move 6th graders from elementary to middle school. Opponents argue building extra classrooms in middle schools to accommodate 6th graders will use $100 million of the total $535 million bond or nearly 20%. A consequence of the move to middle school is elementary schools will lose population which may put some of them below the 300-student level in which school closures are considered.
None of the bond is slated to pay off the $45 million in Certificates of Participation the Board sold to build Candelas school. COPs are the mechanism used to get around the TABOR rule against long-term debt without voter approval. In a legal semantic exercise the district makes “lease” payments to a dummy corporation that does the actual borrowing. To get around TABOR the “lease” must be renewed every year. These lease payments are paid out of the operation budget instead of the capital budget.
School Budget Update
Although the district considered closing five elementary schools it finally decided to close only one school this year. Even with the closing, the district continues to have excess capacity - 13,000 seats according to the Denver Post. The Board remains committed to a plan to move 6th grade students from elementary school to middle school.
At press time, the Board was still working on its budget. Questions remain on the level of state support. The Board is seeking to increase employee compensation by $20 to $25 million this year.
As is often the case in political debates, each side believes they speak the real truth and the other side tells lies. The reality is both sides SPIN the facts and present them in the best possible light (from their perspective). For example, the Support Jeffco Kids (SJK) website claims in a September 21 blog entitled “3A 3B Myths and Truths” that another organization’s handout “contains a lot of inaccuracies, myths, outright lies and misleading information”. To help sort out the charges and rebuttals, we did an assessment of some of the arguments.
(1) Buy Now, Pay Later scheme – SJK responds that borrowing rates are at historic lows.
While it is true rates are low, that fact alone doesn’t address the issue of the eventual costs. SJK states the bond structure is intended to “mitigate” tax impact. Although the longer term will increase the total interest paid, it does lower the initial annual payments. This issue goes to the advantages and disadvantages of long-term versus short-term borrowings.
(2) This bond’s longer term will cost more in interest than would a shorter-term loan. SJK response is “finances can be complicated for some people to understand” and we have a staff who understand how to borrow and save money.
This “trust me” argument doesn’t leave us anything to analyze.
(3) Lengthening the bond’s term from 20 years to 25 years is 20% more than was presented in earlier community meetings. SJK argues this is untrue and state law allows 25 year terms.
While the state law citation is correct it doesn’t address the argument that lengthening the loan term will increase the total costs more than was discussed earlier in the summer when the Board was looking at a bond of only $420 million.
SJK goes on to explain that lengthening the bond’s repayment terms will result in lower monthly payments. Since the trade-off between long and short term borrowing is established both sides are technically correct. Since both sides are just highlighting the advantages of their positions there is no myth to analyze.
(4) 22% is not allocated. SJK states 78% is allocated to hard costs of brick and mortar and 22% is designated for engineering and architectural designs.
This appears to be an interpretation of what “allocated” means. 22% is not assigned to specific building projects but is set aside for miscellaneous-type expenses including design work.
(5) $30 million goes to building 2nd gyms and turf fields. SKJ justifies this expenditure as a matter of safety and educational equity.
Educational equity and even safety are not easily quantified hard facts but rather involve judgment calls. Therefore, we can’t assess the justifications. However, SJK does not contest where the $30 million is being spent so we can’t characterize the issue as a “myth.”
One issue raised during the school bond debate is why marijuana tax money can’t fund schools. To begin with, the hype about marijuana taxes was exaggerated to convince voters to legalize it. The actual revenues are less than predicted. Secondly the $24 million raised must be spent throughout the entire state. Jeffco has received about $500,000 and even we were to get more it wouldn’t solve our budget needs.
New Jeffco School Board
Seeks Tax INCREASE
Lakewood City Council reversed direction and decided NOT to put a de-TABOR measure on this November’s ballot. This means Lakewood citizens will receive the nearly $4.5 million excess due to them under TABOR in the form of a temporary one-year drop in city property taxes.
The surprise reversal appears to be in recognition that with a huge proposed tax increase measure already on the November ballot for the school district a second tax measure may have been politically disastous for both tax increases.
After a two-year break from power (during a 3-2 Republican majority), the unions regained control of the Jeffco R-1 School District last year with a recall that put five Democrats on the School Board. Once back in power, the liberals quickly proposed a increase in spending and a tax increase to pay for it.
Under TABOR this proposed tax increase must be approved by Jeffco voters. The proposal consists of two separate ballot issues:
3A - an approximately 10% increase in the general school property tax rate to pump in $33 million per year into the general district budget (this is called a mill levy override), and
3B - a bond issue to borrow nearly a billion dollars over twenty five years for capital construction. The ballot allows for taxes to be increased as much as $72 million per year.
In addition to the usual arguments about schools needing more money and everyone else is raising taxes, this year’s proposal has a couple interesting elements.
In order to keep the annual tax bills in the first years smaller and therefore politically more tolerable, the term of the bond was increased from the traditioinal 20 years to 25 years. Secondly, the bond construction budget is impacted by a plan to move 6th graders from elementary into middle school.
Jobs Impact - Effect on Business?
While most of the debate centers around the burden on homeowners, the tax increase for businesses will be three times greater since state law requires the value of businesses to be assessed three times higher than residences.
What impact the higher taxes will have on local businesses (and their jobs) has not been analyzed.
What is also not discussed is what impact the tax hike with have on the affordability of housing in Lakewood. The additional property taxes will increase the cost of both home ownership and renting. The additional housing costs could in turn put more political pressure on the City to intervene into the local housing market.
Jeffco R-1 School Board
In addition to the City, County and State issues, November’s ballot will include election of two new members of the School Board.
In District 3, Stephanie Schooley faces Robert Applegate.
In District 4, Joan Chavez-Lee faces Susan Miller.
Online School Election Resources
Jeffco School District
Jeffco Students First
Support Jeffco Kids
Reference US Colorado Ranking
Public school revenue per student (2014-15) pg. 39 $12,578 $10,696 #37
Expenditures for public schools per student (2013-14) pg. 54 $11,356 $9,702 #32
Per person property tax revenue for schools (2012-13) pg. 33 $1,399 $1,334 #21
Average teacher salary pg. 18 $57,420 $49,828 #34
Understanding the School Bond
& Mill Levy Override
In designing the mill levy and bond ballot issue, the District’s objective was to keep the perceived cost under $150 per family. The plan calls for two stages. This year’s tax increase will be followed by another tax increase in 6 to 8 years for the remaining amount sought. The eventual goal is to have Jeffco taxes more in line with the rest of the country.
On your property tax statement there are multiple school district taxes. One tax is for school operations and another is for capital projects (buildings), i.e. bonds.
Tax revenues to the district generally go up every year (except recessions) because the county’s property valuation goes up when home values increase and more development occurs. However, proponents argue these increases are too small to keep up with needs.
3A - Mill Levy Override
This meaure increases the property tax slated for general school operations. Technically the ballot language places no restrictions on how the district can use the money. However the districts says it will use nearly $30 million of $33 million to offset decreases in state funding (referred to as the “negative factor”).
While the ballot language lists several goals for the money it does not specify details of how the money would be allocated if the state contribution were to increase or decrease in the future.
School District Seeks New Superintendent
After voters rejected the mill levy and bond issue, the union-dominated school board decided to remove District Superintendent Dan McMinimee. With six months left on his contract, McMinimee was relieved of his managerial duties and replaced with an interim superintendent who will serve until July 2017. However, McMinimee will continue to receive his salary until his contract ends in July.
The district is currently advertising for a replacement. The advertised base salary is $300,000. This compares to McMinimee’s base salary of $220,000 plus up to $40,000 in performance bonus. This would be about a 36% increase in the base salary in a two year period.
In 2014, the previous superintendent, Cindy Stevenson, received a base salary of $205,500 plus $20,000 in performance bonus and $10,000/year retention bonus
Where Colorado Ranks
We hear lots of numbers being thrown around in this debate. As the old saying goes, figures never lie, but liars figure. We will try to provide a 3rd party independent review to help make some sense out of the numbers.
One of the frequently quoted numbers is Colorado’s ranking among the fifty states (or 51 with the District of Columbia). Although the numbers vary, it is often argued Colorado ranks near the bottom of all states. For an independent assessment we went to the National Education Association (a teacher union group) website (www.nea.org). It included a report entitled 2016 NEA rankings & estimates with over a hundred pages and dozens of charts.
We extracted a few of the more relevant ones below. While Colorado did not rank first in the nation, neither was it last. For most measures it was closer to the middle of the pack.
Jeffco’s Recovering Economy
Property taxes have grown since the recession. Here are four major categories. All the other categories are not listed. Source - Jeffco Treasurer website.
2012 2013 2014 2015
County $157,861,630 $158,372,608 $169,177,514 $170,277,818
Schools $336,758,728 $349,680,984 $350,561,781 $351,683,582
Lakewood $7,562,451 $7,591,621 $7,695,848 $7,703,154
Total $626,706,636 $641,501,547 $655,931,884 $664,723,951
Jeffco R-1 School District News
3A - Tax Increase
The District seeks to raise property taxes by an amount equal to $33 million per year. Since the property taxes collected for Jeffco schools general operations was about $330 million in 2015 this would amount to about a 10% increase. The property tax for operations will increase 4.164 mills (Treasurer figures) or 4.06 (District’s figures).
Jeffco’s population is 551,798 (2013 census). So the additional $33 million/year amounts to about $60/year per person or nearly $240/year for a family of four.
The ballot language states the increase is for “educational purposes”. It lists the objectives as being attraction/retention of staff, security, and instruction resources. The final paragraph has some undecipable language regarding TABOR.
A major issue in school financing is the funds received from the state. The state has cut back on its contribution thus requiring local districts to make up a larger share. One of the stated goals of the mill levy override is to backfill this shortfall from the state. What is not clear is if the state sees local schools raising more taxes, could they further reduce their contributions thus negating some of the increase in funds for Jeffco.
3B - Bond Issue
The ballot language increases district debt by $535 million. The total repayment cost is authorized to be $987.22 million meaning $452.22 million is slated for interest and fees (over 45% of the total repayment). The mill levy for bond repayment will be 9.161 mills (Treasurer’s office).
On a per capita basis, each person’s (man, woman & child) share of the debt would be $1,789 (over $7,156 for a family of four).
In order to keep the additional property taxes below the $150/year/ household pain threshold, the Board took the unusual step of increasing the bond’s term from the standard 20 years to 25 years. This is similar to lowering one’s high monthly car payments by increasing the loan term from 3 years to 5 years. While it does create lower monthly payments the additional compound interest increases the total repayments. Opponents claim it could add nearly $200 million in total repayments.
Other School Info
A little trend analysis of the Jeffco School District. Over the past decade student enrollment has remained relatively stable going from:
District employees (all classes)
2007 - 7,987
2015 - 9,187
increase - 1,200 (+15%)
Property taxes collected
2006 - $321,218,457
2015 - $351,683,582
increase - $30,465,125 (+9%)
Recent mill levy overrides:
2012 - $39 million/year
2004 - $38.5 million/year
1999 - $35.8 million/year
Total Increase = $113.3 million per year