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New High School Funding

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1. Why is a 1/2 cent sales tax increase considered good for the city of Madison?

The Qualified School Construction Bond loan is interest free. Normally when the city borrows money there is an interest payment associated with the loan. An actual example are the four school bonds that the city refinanced in July. The city consolidated four bonds into one and refinanced them at the current low rate of 5.13% for 30 years. So, if the city were to try and borrow the $36 million at 5.13% for 30 years, we would need to pay back about $34 million extra in interest for a total payment of $70 million.

2. Why is the City Council looking to increase the sales tax by 1/2 cent?

Council is looking to raise the sales tax by 1/2 cent to pay for our Qualified School Construction Bond loan. The loan is for $36 million, to be paid back in 16 years. The loan is an interest free loan.

3. Would a property tax be considered instead of a sales tax?

Yes. Residents would be able to vote next year whether they wanted to replace the sales tax with a property tax.

4. How much will the 1/2 cent sales tax increase bring in for the city?

Based on our current levels a 1/2 cent sales tax increase will bring in $2,400,000 per year.

5. Will the 1/2 cent increase cover the reimbursement of the entire loan?

Yes.

6. If the residents voted in a property tax increase in 2010 why would the sales tax not go away until 2012?

The soonest a property tax could be on a ballot is late 2010. If Madison residents then voted “yes” for the property tax, revenues generated from that tax would not become due until October 2011. The City would then not receive the majority of the revenue until January 2012. Thus, the sales tax would stay in effect until property tax revenue actually was received which based on the estiamtions to date would be January 2012.

7. Will this sales tax increase be enough to build the 2nd high school?

The estimated cost of the 2nd high school is $63 million. The city and school board refinanced existing school bonds this summer freeing up $22.5 million. The $36 million Qualified School Construction Bond loan brings the total available for the new high school to $58.5 million. The difference will be made up by either obtaining lower than estimated building costs or by building less.

8. What is the timeline for building the second high school?

A project this large typically takes between 30-36 months. Thus, the goal would be to bring on the second high school in the 2012-2013 school year.

9. What is the Qualified School Construction Bond Program?

The Qualified School Construction Bond Program is a new tax credit program created by the American Recovery and Reinvestment Act (ARRA). The program allows school districts to issue bonds for new school construction, rehabilitation, repair of public school facilities, acquisition of land, and acquisition of equipment to be used in public schools. The program provides tax credits, in lieu of interest, to bond buyers who would normally be paid interest by the school districts. Essentially the federal government is paying the interest for the school district in the form of a tax credit, allowing the school district to only pay the principal on the bond.

10. What is 1 mill worth in the City of Madison?

$485,000

11. How are you going to account for operating cost of the new school?

If a property tax is passed, the operating cost is factored into the millage rate increase. If a property tax increase is defeated, the sales tax generated from increased economic development, residual revenue raised over and above the 2.25M debt payment, and reappropriating existing school funds would be used.

12. Would you consider a sunset clause for a property tax?

Yes, it would be considered for the construction portion of the millage.

13. Is infrastrucutre costs factored into the school cost projections?

Yes, with direct site improvements and improvement district funds.

14. Is the construction management company paid a flat fee or a percentage of construction?

Flat fee

15. Is the construction managemer and architect the same firm?

No, SKT are the architects and Voelker and Associates is the construction management firm.

16. How was the 175 square foot per child calculated?

Standard number based on the programs and activities offered at Bob Jones High School.

17. Are there community members involved in the definition of the new school?

Yes

18. Would a property tax vote be local or state wide?

The City would work with the legislature to make it a local vote.

19. Are there funds set aside for operating reserves within the school system?

Yes, there is a $10M or 55 day operating reserve set aside currently.

20. Does the $36M QSCB go away if we do not capitalize on it?

Yes, the money would go back to the state to be reapportioned to other districts.

21. Has the City considered a hybrid sales tax/property tax solution?

That is a good quesiton and one that will be looked into.