Steve Board on the Richland School District and defeasance

Richland School District Superintendent Steve Board discusses its Board of Education's decision to prepay debt, called defeasance, to save interest costs while holding its tax levy rate level.

By Zac Schultz | Here & Now

April 25, 2024 • Southwest Region

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Steve Board:
So when we passed the referendum in 2020, the first year that that went on the tax burden, you know, it was just that. It went up and it went up to $9.12 per thousand to our tax rate or mill rate. The next year, the school district, because we're positively aided, we got aided on that money from the state and so if everything were just left to just natural reduction, our property taxes in our community would've actually went down in years two and three because we would've gotten aided on those expenditures. Our school board decided to not put us in a position where our mill rate or our tax rate was unhealthy low, which it was prior to the passage of the 2020 referendum — we were down into the fives at one point. And so we wanted to stabilize that mill rate and then use that to prepay some of our existing debt. We had a 2016 referendum that was passed and our debt payment was structured so that we didn't make a single penny of principal payment until 2026. We were making all interest payments. And so by using what's known as defeasance, we kept the tax rate at $9.12 and then used that additional revenue to prepay some principle on that 2016 debt. As a result, we've taken an $8.7 million debt and we've got it down to just over $4 million in just a couple of years, and so then we've been able to use that gap to do this operational referendum essentially at a zero tax impact. If it fails, we would stabilize the mill rate, keep it at $9.12, and continue to pay off that debt, and if it passes, we would stop the defeasance and apply it towards this debt.

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