Updated Post 3/16/2024:
If Prop R 2024 passes, the $150M bond will ultimately cost taxpayers $274M in principal and interest over 20 years. This can be deduced from two financial documents: (1) Lindbergh’s end-of-fiscal year 2023 financial statements of Lindbergh, and (2) the amortization schedule I sunshined requested from the District in the past couple of weeks. The latter I have included in full below. I am not a CPA, and thus what I write is based on my own understanding of the financial statements and projections provided by the District. Let me explain.
The District is currently obligated to pay our existing bonds’ principal and interest payments of $215,258,015 (as of June 30, 2023; Note 9 on page 19 of Lindbergh Financial Statements For Year Ending June 30, 2023). Payments on these bonds are currently scheduled to end in 2040. In contrast, if Prop R 2024 passes, the total principal the District owes will be $316,568,954 and the total amount of principal and interest paid out by 2045 will be $489,739,556 (pages 5 and 3, respectively, of Piper/Sandler’s amortization schedule for Lindbergh Schools District dated September 15, 2023). That is HALF A BILLION dollars we be paying for buildings for the next 20 years.
We are being asked to approve Prop R 2024 for $150M, but the total cost if we do so will total $274M. That is the difference between the two situations – not passing Prop R 2024 and paying off our current debt or increasing our debt by passing Prop R 2024.
Why the big difference? It is due to the District’s planned deferral of payments on the principals of the three tranches of Prop R 2019 out to 2029 (one tranche) and 2031 (two tranches), and the deferral of two tranches of Prop R 2024 out to 2033 (one tranche), and 2037 (one tranche). All of this can be seen on page 5 of the Piper/Sandler amortization schedule (below). Until these dates are reached, taxpayers will only be paying interest on some tranches.
Alternatively, using the same payment schedule that is being planned by the District if Prop R 2024 passes (table below, second column and page 2 of amortization schedule), the District could fully pay off its current debt of $215,258015 (principal and interest) in less than 10 years (2035). It might actually be less than 10 years since more principal could be paid off each year with this aggressive payment plan, resulting in less interest payment. At that time, the District could eliminate its current 0.83% debt levy. This would be a 23% reduction in Lindbergh-related real-estate tax.
As a fiscal conservative, I try to minimize the interest I pay on debt. Thus, I do NOT think it is financially prudent to borrow $150M and then pay back $274M in 20 years. By deferring the construction of some desired items in Prop R 2024 such as the three gymnasiums and agricultural center, we can ultimately pay much less interest and still get everything accomplished. The resulting windfall savings of 0.83% could either be used to reduce taxpayers’ real-estate property tax or essentially “reallocated” to the taxes that can be used to increase teachers’ salaries and/or provide resources that directly help our students learn such as after-school and weekend tutoring. Deferred gratification is a good thing to exercise in the long run.
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Original Post:
There are multiple capital-improvement needs in the District that should be addressed soon. These needs include the reroofing of Truman Middle School to limit interior water damage, reclaiming the swimming pool space, replacing the HVAC system so that all antiquated classroom AC window units can be removed, and so forth. Numerous other, albeit smaller projects, included in Prop R 2024 should also be done soon.
I think a smaller proposition would have been more prudent at this time to address the much needed items. In turn, without a clear understanding of future property appraisals in this post-pandemic high-mortgage-rate era, I would have preferred the school board not including at this time higher priced items such as the construction of three gymnasiums and redevelopment of the Farmer’s Market property. I have seen the need for separate gymnasiums but think a separate prop should have been proposed in three to five years or later after completing a lower-cost Prop R 2024. By then we would have a clearer picture on how quickly property values might increase in the District and also the future trend in student enrollments. With my own finances, I am a fiscal conservative keeping expenditures within my means, not maxing out my line of credit, and always having a healthy rainy-day fund. I would similarly handle tax-payer dollars.
I had to make recently a Sunshine request with the District to gain more information regarding the proposed funding of Prop R 2024. I made this request in order to know what the total debt amortization schedule for the District would be if Prop R 2024 passed. I received a 5-page amortization schedule for the $150M prop from the District. I am including this schedule below.
The total expenditure on principal and interest for the next 21 years (i.e., to 2045) will be ~$489M if Prop R 2024 passes. This is a lot of money. Although we can afford this level of payment if property values continue to rise each year at an average rate of 3.5%, I am one who strives to not overextend myself when possible. The debt will have to be paid one way or another. I would have preferred a smaller Prop R this year and another one in 3 to 5 years. I know I might be ignorant of important information that necessitated the current Prop R size, but with the information I currently have, I would have gone with two props. That is why I am voting NO on April 2.
