FAQ for Worth County's Bond Issue

The bond issue for the Worth County School will be held on April 5th along with local municipal and school board elections. See ballots in this week's Sheridan Express.

by Superintendent Dr. Matt Martz

Last year I wrote about the different funds that are used to pay for our public education.  Funds 1 & 2 are used to pay for the operating expenses of the school district (buses, food service, utilities, and teacher’s pay). Fund 4, capital improvement, is used for equipment purchases and small maintenance purchases.  Fund 3, or the debt service fund, is used strictly for building projects or large improvement to the facilities.

On April 5, the Worth County R-III Board of Education will ask voters to extend the 25 cent Debt Service Levy.  This levy will not cause patrons yearly taxes to rise and will give the school district $500,000 to make improvements to the building and grounds. At the March board meeting, the Board of Education heard from ConEdison Solutions, a construction management company, regarding the costs of projects that have been proposed from the district facilities committee.  The Board will need to prioritize the projects in order to stay within the $500,000 budget.  Projects that the committee recommended include replacing the gymnasium bleachers and gym flooring, replacing guttering, resurfacing the elementary playground, and reconstructing the roadway that extends around the East and South sides of the building.

If the voters approve the bond levy on April 5, the board will move quickly to make that determination and work would begin as soon as possible. 

I am including some of the more frequently asked questions regarding this bond levy.  Please contact the school if you have additional questions.

Worth County R-III School District

(Frequently Asked Financing Questions)

1.      What is the financing proposal of the Worth County R-III School District?

            The Board of Education is seeking voter approval at the April 5, 2016 election for a $500,000 general obligation bond issue that extends but does not increase the current $0.25 debt service tax levy of the District.  The proceeds from these bonds are to be used for the purpose of providing funds to complete safety and security improvements to the parking lot and playground; to repair and replace the gymnasium floor and bleachers; and to complete other remodeling and repair improvements to the existing facilities of the District.

2.                  Explain what a general obligation bond is and how it relates to the financing for this project?

Under Missouri law the only way a School District can legally borrow money for school facility improvements or construction on a full faith and credit basis is to seek voter approval of a general obligation bond issue.  A “general obligation” means that the School District can and must levy sufficient taxes to repay the principal and interest associated with the bonds.  With voter approval of at least a four-sevenths majority at the April 5, 2016 election the District can then sell the $500,000 of bonds in increments of $5,000.  This financing process gains access to numerous investors at favorable terms compared to what would happen if the District was dependent upon a single lender to supply the funding. The interest earned by the investors is exempt from federal and state of Missouri income taxes.  With the interest being tax-exempt, the actual rate the District has to pay is much lower than would otherwise be the case for a typical loan.  Based upon current interest rates in the municipal bond market the average interest rate is expected to be less than 3.00%.

3.                  How can the $500,000 general obligation bond issue be referred to as a no tax increase program?

The current $0.25 debt service fund levy is adequate to repay the existing bonds plus the $500,000 of new bonds by extending the levy eight years (from fiscal year ending 2020 to 2028), but not increasing it above the current level.  This is feasible due to growth in assessed valuation and very low interest rates in the current municipal bond market.

4.                  Can the District pay the bonds off early to save interest expense?

            Yes, the bonds will contain optional redemption (call) features that enable the District to repay them at no penalty in the event fund balances become large enough for that to occur.  The call feature also provides the District the opportunity to refund the bonds to take advantage of lower interest rates in the future, if the overall economic conditions create that set of circumstances.

5.                  Will local investors have an opportunity to purchase the Bonds?

Yes, the bonds will be available to local investors prior to being offered to others.  If you are interested in purchasing some of the bonds, let the District offices know and they will insure you are contacted after the election.

6.                  What type of rating will the general obligation bonds have?

The District can expect to receive an AA+ rating by Standard & Poor’s Corporation on the general obligation bonds.  Missouri school districts issuing general obligation bonds for construction purposes are eligible in most cases to participate in the State of Missouri Direct Deposit Program.  This program provides each issuer with an AA+ rating.