BLAIRSBURG - At a special meeting Thursday night, the Northeast Hamilton school board heard a proposal for early retirement of the debt service bonds for the new elementary school building.
Matthew Gillaspie of PiperJaffray, presented a proposal to the board which uses surplus tax levy funds to retire the district's general obligation school bonds by 2019 - a decade earlier than planned.
Piper Jaffrey is the investment bank servicing the school's financing on the new elementary school building.
"You have the opportunity to lower the levy big time," Gillaspie told the board.
Earlier this month at the board's regular March meeting, Superintendent Patrick Hocking reported that the proposed school budget for 2013-2014 would be $2.4 million with a decrease in the tax levy from 11.48 percent valuation to 10.63 percent valuation.
In addition, the district's surtax would drop from 15 percent to nine percent.
At that meeting, Hocking explained the district could lower the levy and surtax because of the increase in agricultural land values and the tax benefits derived from the windmill farms.
At last Thursday's special board meeting, Gillaspie further explained that the assessed value of each windmill totals approximately $2 to $3 million. He estimated those totals were approximately the assessed value of 10 houses in Blairsburg.
"People who live here are benefiting immensely from windmills," he said.
While the windmills lessen the tax burden for patrons, Gillaspie told the board it would be more beneficial for the district to keep the levy at a constant level.
"You could reduce the levy now but two or three years in the future, it will have to come back up," Gillaspie said. And although the rate increase at that time would only be a return to the 2013-2014 levy, it would be perceived by district patrons as a tax increase, he said.
Gillaspie proposed that the district maintain the tax levy at a steady level and use the surplus dollars to pay off the elementary school bonds in 2019 - a decade ahead of the 2029 schedule.
The district would realize an annual savings of $169,950, said Gillaspie. Each year, the school district could choose to follow the same course and by 2019, the total savings would amount to $464,000.
"The math doesn't lie," said Gillaspie. "It is really simple."
He stressed that the plan would not jeopardize any funds in the district's other accounts, he said.
Even though Piper Jaffrey's plan proposes the district not decrease the levy valuation to 10.63 percent, it still reduces the levy from the 2012-2013 level which was 11.48 percent.
The proposed budget would set the levy to 11.13 percent valuation. Patrons would be taxed $11.13 per one thousand dollars in valuation for the 2013-2014 fiscal year.
The proposed budget would also see the district's surtax reduced from the current 15 percent to 9 percent, said Hocking.
Gillaspie presented an alternative proposal which would refinance the bonds. That plan would save the district $110,997 annually, but would lock it into following that plan until 2029. There are also additional expenses and fees associated with this plan, he said.
Another potential problem with that plan is that it could adversely affect the district if land values fall or an unforeseen event occurs which threatens the district's funding.
More than a dozen schools in Iowa have or are planing to use surplus tax levy dollars to address debt service reduction, said Gillaspie.
Although some district patrons may not agree with the proposal because tax rates will basically remain level rather decrease, the tax savings over time will be beneficial to everyone in the district, said Gillaspie.
"You will be looking out for the benefit of most of your taxpayers," said Gillaspie.
The board voted 4-0 to advance the proposal and will vote on the Debt Service Resolution at the April board meeting. Board member Randy Greenfield was absent.
In other business, the board gave Hocking, board member Randy Greenfield and School Principal Dennis Bahr authority to negotiate on the district's behalf in talks with New Coop of Blairsburg concerning the sale of the old bus barn and to inquire on a land purchase east of the current school campus as a location for the new bus barn.
A public hearing will be held prior to the board's regular meeting on April 11 concerning the bus barn.