School board considers $240 million bond proposal
(THIS WAS WRITTEN IN JULY, before the school board put the bond proposal on the November ballot. While that makes some of the discussion outdated, there is still some background about how bonds work and recent history of school bonds in Dearborn that voters may find useful.)
The Dearborn Board of Education is expected to vote Monday on whether to put a ballot proposal for a $240 million bond issue before voters in a special election in November.
I believe voter awareness and understanding of issues make for the best decisions, so I have put together this explanation and analysis of the matter. Property taxes are becoming a bigger issue in Dearborn, resulting recently in at least one town hall meeting and a lengthy public comment session with the City Council. So, this is worth dissecting.
This information is not meant to advocate a vote for or against the likely bond proposal. I say that because I know the tone may come across as harsh, and it’s not meant to influence you to do anything more than understand the issue and know what you’re voting for.
Any bluntness is not meant to reflect poorly on our dedicated school board members and superintendent. I want to also thank David Mustonen, longtime communications director for the district, for providing answers to questions I posed so I can be certain to share information that is accurate. David is a gem and a great ambassador for Dearborn Public Schools.
The July 22 school board meeting will start at 7:00 p.m. at the Administration Building (Ten Eyck), 18700 Audette. You can watch the meeting on the Dearborn education channel, channel 19 on Comcast and channel 15 on WOW.
Let’s start with the basics.
What is a bond issue?
A bond issue is how a school district borrows money for major projects.
The district sells bonds with the promise of repaying the bond-holders their principal and interest. It’s like a mortgage to buy a house; you borrow money from the mortgage holder and make regular payments until the amount you borrowed is paid off, with interest.
Those who buy the bonds (in effect, loaning money to the district) need some guarantee that they’ll get their payments. So residents of the school district vote to approve the bonds – meaning the residents agree to repay what the district borrows through a property tax.
Michigan Proposal A of 1994 says that most operational funding for public schools will come from the state. This was a change from having each district mostly supported by local property tax, which proved to be an inequitable system.
So, Proposal A does not let local school districts put millage proposals on the ballot for the operations of the schools. (Dearborn is among many districts that have some exemption from that rule, but let’s set that aside for now.)
However, the state recognizes that a school district has expenses beyond teaching our kids. Each district is responsible for the upkeep of their own buildings. So Proposal A does allow school districts to ask voters to approve special taxes to pay for new buildings, renovations and general upkeep.
And that’s what the school board is going to put before voters this fall: Asking us to agree to pay enough property taxes to cover the additional debt the district will take on for school improvements.
Dearborn Public Schools’ recent history of bond issues
Voters in the Dearborn Public Schools District approved a $150 million bond issue in 2002 for major construction in the district. This included four new schools, additions at the three high schools, and technology and infrastructure upgrades.
The district came back to voters in 2013 for another $76 million in bonds, which voters again approved. This was for enhanced security at the schools, new school buses, more technology upgrades and other items.
Now, the district wants voters to approve $240 million for more general renovations.
The simple arithmetic I learned at Whitmore-Bolles Elementary tells me that this new bond proposal is a big one. Perhaps the largest ever (I don’t have records before 2002) and as big as the last two proposals combined.
School district leaders will explain all of the projects this money will pay for, and try to convince you that it’s all necessary. I’m not for a moment saying that it’s not; I’ll leave that for you to decide.
But they’ll also tell you that, as if by some sorcery, this proposal is not a tax increase. Now that, I’ve got to call into question.
How can district raise $240 million without raising taxes?
It really can’t.
Proponents will say this is not a tax increase. If you look at it sideways, that’s kind of true. But also kind of misleading.
If voters approve the bond proposal in November, a homeowner will pay the same tax rate (millage rate) for bond payments next summer as they are paying this year (4.82 mills total). It is accurate that your tax bill won’t be any higher (except for inflation) next year than it is this year.
However, you are being asked to approve new bonds, and with those new bonds will come a new tax.
The trick is that the millage rate for school bonds previously approved (in 2002 and 2013) is scheduled to drop next year. After charging us a total of 4.82 mills this year and in each of the past few years for school bond payments (on your summer tax bill as DBN SCHL DEBT), the existing bonds next year and the year after will only require around 2.7 mills for the payments. And in three years, what we owe on those 2002 and 2013 bonds will only require us to be billed around 1 mill, roughly speaking.
So, we’re paying down the debt we have previously approved, and our annual payments are going to get smaller as a result. It will still take us until 2033 to pay them off entirely, but the annual payment for most of that time will be roughly a quarter of what we’re paying now.
Rather than let our annual debt payment drop, the school district wants us to approve a new bond issue, which will require a new tax. They’ve gotten out their calculators and figured out how much they can borrow ($240 million) to keep our annual payment at the current rate in the years going forward.
So they can say this is not a tax increase, and that’s one way to look at it.
But there’s no way we can sell new bonds (borrow $240 million) and not pay it off with new taxes. It may be designed so you don’t feel more pain in the pocketbook than this year. But make no mistake, you will be raising your taxes from what they would otherwise be next year.
Why put this on a special election this November?
I’ve said this many times before about this and other ballot proposals. But it bears repeating.
I have a concern that this bond issue will be put before voters this November when there is nothing else on the ballot. I have long believed that tax elections should be held when the most voters will participate. As a stand-alone proposal, voter turnout will be tiny. Maybe as low as 10 percent. Many voters won’t even be aware the question is being put forward.
If all taxpayers will pay the tax, I believe it is wrong to knowingly ask the fewest number possible to approve it.
The low turnout makes it easier for the school district to target voters in a campaign who are most likely to vote. You can bet that all schoolchildren will bring home with them information reminding parents of the bond election, being very careful to not ask for a yes vote (which would violate election law) but knowing that driving turnout among parents is in the proposal's favor.
In other words, I believe that such an election allows the taxing unit (city, schools, county) to give themselves an advantage in getting their proposal approved. Perhaps it's such an advantage that the school district is willing to pay the $50,000 cost of holding a special election, which is the estimated price tag because the school proposal is the only thing on the ballot. In other words, if there was no school bond vote in November, there wouldn’t be any election this year.
Meanwhile, if they wait until next year, there are three elections, presidential primary in March, regular primary in August and presidential election in November. Presidential election would be the fairest place for it. But by then, we would have had a lower summer tax bill, and any new bonds would then unquestionably be a tax increase. See how that works? The same ballot proposal that won't be a tax increase this November, would clearly be a tax increase next November.
School officials will say that they need to start the building improvement work right away and not lose time by waiting that long for an election. But, with current bond millage scheduled to decrease next year, the whole "this isn't a tax increase" argument is a factor.
I take issue with some school board comments that this isn’t their problem, that’s it’s up to voters to be aware and participate. I agree that voters should be more aware and participate more. But I don’t like the “too bad” response related to the low turnout. School board members know a special ballot will get a low turnout. They could choose to accept the reality of voter turnout and wait until the most voters possible will take part. It’s their decision.
OK, let’s give the school board a break
The superintendent and school board members have a responsibility to do what’s best for Dearborn Public Schools. This would include trying to get as much money as possible into the district, whether for classroom instruction or building renovation. Any decisions they make on this bond proposal are, I am certain, made with the best of intentions for our district's best interests.
I’ve made some rough points here, about the board’s timing of the ballot question, and the argument about whether this is or isn’t a tax increase.
I’ve made those points because I believe the people deserve to have a clearer understanding of all of this.
I’m not advocating for or against a vote on the proposal. I just want you to be properly informed.
So, please make sure you understand this issue thoroughly. And, most importantly, be sure to vote.