Orchard FarmSchool District

Proposed $18.4 million bond issue with an estimated zero tax-rate increase bond issue

What was on the April 3, 2018 election ballot?
On January 16, 2018, the Orchard Farm R-V Board of Education voted to place a $18,400,000 zero tax rate increase bond issue on the April 3, 2018 election ballot for voter approval. Passage of the bond issue will not increase the district’s debt service tax rate, which is used solely to retire bonded debt. Orchard Farm R-V has the capacity to issue $18,400,000 in bonds without raising its debt service tax rate to complete the Proposition R projects. As promised to voters since the September 2006 bond issue, Orchard Farm R-V has maintained its debt service levy - the portion of its tax rate that can only be used for the payment of long-term debt – at 73 cents per $100 of assessed value. 

What is a bond issue?
School districts will use bond issues to fund large and long-range construction, maintenance or repair projects that are too costly to cover with existing budget funds. The most common method by which school districts borrow money is through the issuance of general obligation bonds. A general obligation bond is an obligation secured by the full faith and credit and unlimited taxing power of the school district. By authorizing the issuance of general obligation bonds, the voters have also authorized the imposition of a debt service levy, payable from property taxes, in an amount sufficient to pay the principal of and interest on the bonds within 20 years. See an illustration.

How can we complete Proposition R projects without raising taxes?
The Missouri Constitution permits school districts to incur general obligation debt in an amount not to exceed 15 percent of the school district’s assessed valuation, as shown by the assessment for the year prior to the date on which the bond election is held. Bonds are low-interest loans the district pays back using funds from its debt service levy. The debt service fund cannot be used to pay for salaries or classroom supplies. Orchard Farm R-V can borrow up to $18,400,000 in general obligation bonds and the debt service levy of the District is estimated to remain unchanged at $.73 per 100 of assessed valuation of real and personal property. This is the same situation that has occurred since September 2006 when Orchard Farm R-V voters have approved multiple zero tax rate increase general obligation bonds for construction, repairs and improvements to schools and buildings in the district.

Orchard Farm R-V committed to keeping its debt service levy at 73 cents when voters approved these past bond issues and the district has kept this promise. With the approval from voters, Orchard Farm R-V will be able to complete the Proposition R projects using the same existing debt service levy.

Official ballot language
Below is the question voters were asked on the April 3, 2018 election ballot.

PROPOSITION R

Shall the Board of Education of the Orchard Farm R-V School
District borrow money in the amount of $18,400,000 for the purpose
of acquiring, constructing, renovating, repairing, improving,
furnishing and equipping new and existing school sites, buildings and
related facilities in the District, including expansion of the Early
Learning Center and Orchard Farm Middle School, HVAC and
bathroom renovations and land acquisition, and issue general
obligation bonds for the payment thereof, resulting in no estimated
increase in the debt service property tax levy? If this proposition is
approved, the adjusted debt service levy of the District is estimated to
remain unchanged at $0.73 per $100 of assessed valuation of real and
personal property.

Legal Debt Limit and Debt Margin