School bond to cost less

Low interest rates mean less impact on taxpayers

Posted

Due to extremely low interest rates, the Rockville Centre School District is going to get a great deal on its bond for construction, and save residents hundreds of dollars in the process.

When the district’s $45.9 million bond was approved in a referendum last March, officials estimated that at the height of repayments, it would cost the average homeowner an extra $128 or so per year in taxes.

But now, with low interest rates, the district will be able to bond $35 million of the total at 3.25 percent. For the average home, that will mean an extra $45 in taxes per year for the 29-year life of the bond.

Superintendent Dr. William Johnson explained that in most cases, school districts take out loans called bond anticipation notes to begin paying for construction projects like those planned for South Side High School and Watson Elementary School. Each year, a district typically takes out a larger note, using some of it to pay off the previous year’s loan and the rest to fund more work.

A district usually does that for a few years to see if interest rates go down before it bonds tens of millions of dollars. “In our case, we see nothing other than that the interest rates are going to rise,” Johnson said.

The $35 million the district is looking to bond would cover the cost of the expansions at South Side and Watson, both of which have already been approved by the State Education Department. The remaining $10.9 million would go to smaller projects around the district, like improving individual classrooms, continuing the installation of air conditioning systems, masonry reconstruction and building code upgrades. That money would be bonded on an as-needed basis by the district.

By the time the district bonds the remaining $10.9 million, interest rates will likely be higher than they are now, but the total cost to the average homeowner should still be well under the initial estimate of $128 per year. The district can’t bond for the other projects now because they have yet to be approved by the Education Department.

At the Board of Education meeting on Nov. 19, the board discussed the possibility of repaying the bond faster. Paying it back over 20 years would cost residents more in each tax bill, but would save the district about $8 million overall. In the end, the board decided to go with the longer-term bond that would have a smaller impact on residents’ tax bills.