Bond funding would give the District the upfront money to begin work on these flood safety projects sooner. Without bond funding, the District would have to wait until it has saved enough cash from tax revenue to pay for the projects one by one.
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The District utilizes most of its current maximum two-cent tax rate to incrementally raise capital funds. Less than a third of the two-cent tax rate is required for ongoing Maintenance & Operations (M&O). The existing two-cent tax is currently projected to support debt payments for over $100 million of bond debt. It is also currently projected that the bond debt payments coupled with the M&O costs would not require the full two cents.
The ballot language includes the State law required statement that the District must levy taxes sufficient to pay for the bonds; however, no tax increase is expected as explained below.
You can see in the information provided by the District’s financial advisor that there is capacity to handle the bond payments within our existing $0.02 tax rate.
The document presented to the Board calculates a likely minimum required tax rate of just over $0.0125 based on current assumptions for future operations and projected debt service.
Currently, we have no debt and our O&M budget is $3,000,000 which requires a tax rate of approximately $0.0059. The remaining money generated from the $0.02 (approximately $7,000,000 per year) is saved up over time to pay for CIP projects. See our recently adopted budget.
The Board’s intent is to shift to bond sales for the majority of the capital improvement program and pay back that money over time without increasing the tax rate. The Board committed to that intent by passing the “Contract with Voters Resolution” that requires us to verify before each bond sale that the debt service on such bonds is not projected to require the District’s ad valorem tax rate to exceed the $0.02.
State law restrictions and commitments to future bond holders prohibits us from guaranteeing that the tax rate will not increase once bonds are issued; however, I believe that the professionally developed projections demonstrate that a tax increase should not be required and under the "Contract with the Voters Resolution" no bonds or additional bonds can be issued if the tax rate is projected to exceed $0.02.
There are some costs associated with selling bonds such as interest payments. However, with quicker construction periods, the projects are less likely to be subject to additional costs from deferred rehabilitation and inflation in construction and right-of-way costs.