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Mehlville officials project $31 million surplus in Proposition P funding

Mehlville School District officials are projecting a more than $31 million surplus of revenue needed to retire bond-like certificates issued to fund the Proposition P districtwide building improvement program through 2021-2022.

The projected surplus of $31,002,255 totals $5,182,973 more than the surplus of $25,819,282 projected earlier this year by district officials.

Mehlville voters in November 2000 approved Proposition P, a nearly $68.4 million districtwide building improvement program funded by a 49-cent tax-rate increase.

A revised and reformatted Proposition P budget approved in September by the Board of Education projects the total cost of the building program at $86,725,000.

Randy Charles, assistant superintendent for finance and the district's chief financial officer, told board members Oct. 27 the previous projections were based upon actual figures for 2001-2002 and estimated figures for 2002-03 and beyond.

"I asked Brent (Bell, the district's director of accounting) to update those calculations last week because we obviously had the actual figures for '02-'03," he said. "When we did that, obviously we were a little conservative for the growth estimates for '02-'03 and then that growth, because of exponential increases when you take that out over 19 years ...

"The bottom line is, if we were to leave our tax levy or that particular tax rate of 49 cents, we're now projecting that it would generate a little bit more than $31 million beyond that which is needed to make the payments on the certificates of participation."

Superintendent Tim Ricker said he believed it was important for Charles to bring the recalculated certificate revenue projection to the board's attention during a board meeting because he wanted it to appear in public record.

Charles previously has said that each cent of the levy generates about $135,000 in revenue, which is subject to increase based on assessed valuation changes. The amount the district pays to retire the certificates also should increase during the next 20 years as they begin to reach maturity, according to Charles.

Of the 49-cent-voter-approved tax-rate increase, 41.6 cents is being used to retire the certificates and 7.4 cents is going into the district's capital fund. At an Oversight Committee meeting July 30, Charles said that the 7.4 cents being placed into the district's capital fund would total $13.30 per year for a resident whose home is valued at $100,000.

According to Charles' statements in July, the 7.4 cents would generate about $1 million in district capital funds each year — but that number has changed. With the new projections, the 7.4 cents has the potential to earn $1.5 million per year, at least $31 million more revenue than needed to retire the certificates of participation.

The district implemented the 49-cent tax in 2001 and currently is scheduled to tax Mehlville residents until the 2021-2022 school year. District officials originally predicted it would take 20 years to pay off the certificates.

President Cindy Christopher stated reasons she believed accounted for the projected extra $6 million in tax-rate revenue. "This number has increased as a direct result of the fact that we have done some prudent financial things up front and also interest rates went down from the time we put the verbiage on the ballot ...," she said.

Charles agreed and said market conditions were favorable to the school district, which increased those projections even further.

"And this number has changed simply because we're using estimates of a 1-percent growth in the non-reassessment years and a 4-percent growth in the reassessment years," Charles said. "I think that 1-percent growth obviously was a little conservative. The 4-percent growth next year might be overshooting a little bit."

He said that day he had looked at Consumer Price Index results from the U.S. Census Bureau. He found that since September of last year, the Midwest region's CPI is about 1.9 percent.

"That would cap our growth under the levy," Charles said. "So, good news now, but I'd still like to have a wait-and-see attitude."

Board member Rita Diekemper noted that a negative effect also could trickle down through the years.

Board member Bill Schornheuser said the board is excited that currently "it's a positive number."

"Right now, yes," Diekemper responded. "We have 18 more years to go before we know."

For the district, Ricker later told the Call that this means Mehlville has enough funds to cover all of its Proposition P projects. But those are just projections, he emphasized.

The board has indicated, he said, that its intention is for any additional examination of surplus Proposition P funds to be put on hold until all of the projects are finished.

As long as the economy is the way it is and as long as there are no drastic changes in the COP and bond market, he said, the amounts of money the certificates are producing is not a surprise.

"As long as it shows a positive influence, I'm optimistic, but again those are projections .... My conservative nature is to not look at that for anything other than what it is, which is projections," Ricker told the Call. "Not to say that's money in the bank or we're going to go on a spending spree or we're going to recommend to the board to give that money back or whatever.

"I think that's community money. We're just reporting it as to what we think it'll generate. So, that's for the board and the community to make decisions on in a future date ..."

The pay off on the certificates takes 17 more years, Ricker said, so it should take a while before the district truly knows how much revenue the certificates will generate. But it shouldn't take the district 17 years to know where it stands with the certificates, he said.

"Conservatively, I think once those projects are done, then you just get the best knowledge from the COP and bonding people. You get the best knowledge from our financial people and you decide what you want to do ... obviously if you are going to generate more money, there's the possibility of over time, paying them (certificates) off early."

Charles estimates, however, that paying the certificates off early only would gain the district three years.

Ricker said he understands some people look at it as "only three years," while others could say that it is three years of tax money back into community member's pockets.

The trend of the last two years has been a good one, he said, but the future may bring a different trend.

"Who knows 15, 14, 10 years from now where the economy's gonna be, where the market's gonna be? The key is that we want to be able to fulfill the promise of that first phase of the Facilities Master Plan,'' he said.

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