K.I.D.S. COMMITTEE
Lobby Efforts Supporting Riverside Local School District
Issue 1 Frequently Asked Questions: BOND LEVIES
Q: What is Issue 1?
A:Issue 1 is a 5.37 mill bond levy on the May 3, 2022 ballot. If approved by voters, the funds raised will allow the Riverside Local School District to raise $147,725,000 to construct a new 6-12 campus. This campus would include a 6-8 Middle School and a 9-12 High School with shared common spaces. This proposed campus would be built on the current Riverside Campus property.
Q: What exactly is a bond levy?
A: A bond levy is a levy offered specifically for construction activities. The levy comes with a specified term and dollar amount and dollars raised can be used only for the purposes set forth in the ballot language.
Passage of a bond levy grants legal authority to the school district allowing them to issue investment bonds in the municipal bond market which are then purchased mostly by institutional investors.
Bonds are generally sold on the open investment market within 1-3 months of the levy passage. This allows the district to have all the cash required to finance the construction project in advance of the project's expected start. The initial bond proceeds are invested by the school district and those funds earn interest until spent on construction costs. Interest earned can then be used to further offset project costs.
Proceeds from annual tax collections generated by the levy passage are used to pay off the principal and interest on those municipal bonds. The annual tax levied to property owners cannot be more than the expected annual payment required for interest and principal on maturing bonds in any given year.
Q: How will funds from Issue 1 be used?
A: Funds from the Issue 1 bond proceeds are restricted to the purpose set forth in the bond levy language. Issue 1 bond levy language will allow the funds to be used for new construction, improvements, renovations and additions to school facilities. Included are technology, furnishings, and all items necessary to equip the facilities for educational purposes.
Q: Are there restrictions on the uses of the bond levy funds?
A: Yes, the funds CANNOT be used for district operations costs such as salaries, benefits, or instructional materials.
Funds from the Issue 1 bond proceeds are restricted to the purpose set forth in the bond levy language. Issue 1 bond levy language will allow the funds to be used for new construction, improvements, renovations and additions to school facilities. Included are technology, furnishings, and all items necessary to equip the facilities for educational purposes.
Q: How was the dollar amount of Issue 1 determined?
A: The $147,725,000 amount was estimated by taking into account a variety of factors. Building construction cost estimates were provided by the Ohio Facilities Construction Commission (OFCC). Estimates were also provided for furnishings and fixtures. These estimates were updated as recently as October 2021.
The district has included in the amount reasonable estimates for demolition of existing facilities, landscaping, installation of roads and driveways, utility improvements and parking lots.
Q: What is the length of this bond levy? How many years will Issue 1 collect taxes?
A: Taxes will be collected to repay the bonds for a maximum period of 37 years unless the district is able to take advantage of early repayment opportunities if the possibility arises. Once the bonds are repaid in full, no further taxes may be assessed.
Q: How is this term determined?
A: A team of external financial professionals who specialize in the financing of municipal construction projects determines the useful life of all classes of assets that are included in the project.
The life of a bond levy cannot exceed the calculated useful life of the assets being placed in service.
Q: How is the bond interest rate determined?
A: Once the dollar amount and the repayment term are determined, the next step is to calculate the interest rate. The interest rate is determined by market factors. Professional underwriters and municipal bond experts have been consulted for this purpose.
Based on their knowledge of the financial and investment market, the estimated demand for bond securities in the marketplace, and the credit rating the District will apply for, the bond advisers are able to provide a prediction of the interest rate at which bonds will sell on the open market at the date of expected issuance. It is estimated that the Riverside bonds would be ready for market issuance in June of 2022.
The interest rate for the Riverside Local School District tax-exempt construction bonds issuance in June of 2022 has been estimated at 4.0%. The actual interest rate at that time may be higher or lower based on market factors, but the 4.0% is a benchmark that was used for purposes of calculating a levy millage.
Q: How is the millage rate determined?
A: : Once the amount needed, the length of term and the interest rate have been determined, the information is sent to the County Auditor's office. The County Auditor uses the information provided to calculate the amount of taxes necessary to be collected to repay the bonds as they mature annually. The amount to be collected from each property owner is calculated using the total value of all parcels of taxable property located in the district.
The millage for the Riverside Local Schools project is estimated at 5.37 mills annually. While the repayment needs will remain relatively constant throughout the 37 year term of the bond, if property values increase over time, the necessary required millage rate will be decreased based on the growth in market value of properties in the district.
The county auditor's office cannot collect more than what is required to pay the debt service cost in any given year.
Q: What will the levy millage for Issue 1 cost me as a property owner?
A: If passed, Issue 1 would cost property owners $15.66 per month per $100,000 of property valuation annually. For this calculation, property valuation is your property's appraised market value as indicated on the Lake County Auditor's website.
A levy calculator is available on the Lake County Auditor's website.
Q. Can a bond for new schools be compared to a mortgage on a house?
A: This is exactly the essence of the transaction. The District will "borrow" the funds from investors who will purchase the bonds in the open market. The bond purchasers will expect to be paid interest and principal over the life of the bond term much in the same way a bank requires a homeowner to repay both interest and principal on a home mortgage. The interest paid to the bond purchaser is set up front at the time the bonds are sold - just as a home mortgage has an interest rate attached at the origination date of the mortgage. The millage of the bond levy is set so as to be sufficient to repay both interest and principal on the borrowing.
Q: Who determines if bonds should be refinanced or paid off early?
A: The district already has established relationships with transaction based bond underwriters and municipal tax advisers who will assist in these complex conversations in an on-going basis throughout the life of the bond term. These highly qualified professional advisers will provide the district with the most currently available and up-to-date information about market interest rates and the options available to the district. If there are opportunities for the district to save money by taking advantage of lower interest rates, these professionals will render their opinions (on how, when and why) and give the Riverside administration and Board of Education all the information needed to guide them to a decision that is in the best financial interest of the district taxpayers.
This is a routine part of bond management once the bonds are issued.
A portion of the bonds under Phase 1 have already been refinanced allowing the district to reissue under more favorable terms - thereby saving approximately $1,300,000 on the total repayment required for that portion of the project. The initial Phase 1 millage as passed in November of 2016 started at 1.92 mills and is now collecting at 1.35 mills.
A refinancing opportunity reduces the millage needs and the county auditor is then able to collect less tax from residents to meet the reduced need.
Q: Can millage be reduced based on other factors that do not include refinancing?
A: Yes. The county auditor will adjust the mills annually so the district only collects enough revenue to pay the principal and interest on the bonds. It is likely that the millage will be reduced over the bond term due to several factors:
- The actual interest rate achieved once the bonds are issued
- Increased tax valuation from new residential and commercial development in the district
- Increased tax valuation from triennial updates and sexennial reappraisals performed by the County Auditor as required by law
- Refinancing the bonds as market conditions allow.
Q. What communities does Riverside serve and will all properties be taxed equally?
A: Riverside School District includes the communities of:
- Painesville Township
- Concord Township
- Grand River
- Leroy Township
- Parts of Painesville (city)
- A limited number of properties in both Madison and Chardon
All properties in the communities noted (and the limited properties in other communities) will be taxed at an equal millage rate.
Q. How do school tax rates in the Riverside District compare to other school districts in Lake County and Northeast Ohio?
A: Out of 9 Lake County school districts, Riverside currently has the third lowest school tax rate.
Current effective millage rates for Lake County School Districts are as follows:
- Wickliffe - 52.9 mills
- Willoughby-Eastlake - 46.3 mills
- Fairport Harbor - 44.64 mills
- Painesville City - 42.83 mills **
- Kirtland - 36.77 mills
- Mentor - 33.18 mills
- Riverside - 32.08 mills **
- Madison - 20.28 mills **
- Perry - 21.94 mills **
** Indicates that these districts are members of the Lake County School Financing District which levies a combined tax with a 1.94 effective millage. This tax is an advantageous way for these four districts to share a portion of the tax generated by the Perry Nuclear Power Plant. Millages above include the Financing District levy millage.
NOTE:
Millage rates source - Lake County Auditor Schedule A - Tax Year 2021 / Collection Year 2022
IT SHOULD ALSO BE NOTED THAT A MAJORITY OF THE RESIDENTS SERVED BY RIVERSIDE LOCAL SCHOOL DISTRICT DO NOT HAVE A CITY INCOME TAX IMPOSED ON RESIDENTS as Townships are not permitted to levy income taxes per Ohio law. In addition to the millage rates above, Wickliffe, Willoughby, Eastlake, Fairport Harbor, Painesville City, Kirtland, Mentor and Perry Village all impose a 2% voted income tax on their residents for the provision of local services. Madison Village imposes a 1% voted income tax on residents.
The Riverside Local School District includes Concord Township, Painesville Township and Leroy Township - where no city income taxes are imposed by law. These communities rely solely on the assessment and collection of property taxes for the funds needed to pay for local services.
