Roughly $8 million of $28 million Prop P surplus uncommitted
June 08, 2005 - Mehlville School District officials anticipate spending nearly $20 million of an estimated $28 million surplus in Proposition P revenues through 2021-2022.
A roughly $28 million surplus of revenue needed to retire bond-like certificates issued to fund the Proposition P district building improvement program is projected through 2021-2022 despite a proposed reduction in the tax rate, according to information re-cently provided to the Board of Education by Randy Charles, assistant superintendent for finance and the district's chief financial officer. The information was obtained by the Call under the Missouri Open Meetings and Records Law, also called the Sun-shine Law.
Voters in November 2000 approved Proposition P, a nearly $68.4 million bond issue funded by a 49-cent tax-rate increase.
However, the Board of Education voted Nov. 3 to approve a revised Proposition P budget totaling $88,927,440, a roughly 30 percent increase over the nearly $68.4 million building improvement program envisioned in 2000.
To fund Proposition P, bond-like certificates of participation totaling $83,730,000 were issued in two separate sales — one for $36.9 million in 2001 and a second for $46.83 million in 2002.
Since the original certificates of participation were issued, the Board of Education twice has approved refinancing of some of the bond-like certificates, most recently on May 19.
Board of Education President Rita Diekemper asked Charles at the May 12 board meeting to provide information about when the revenues generated by Proposition P would exceed the costs of construction work.
In his May 20 response, Charles stated that the total amount of revenue generated by the Proposition P tax rate through 2021-2022 would be $171,477,912 with principal and interest payments totaling $143,550,789, leaving a surplus of $27,927,123. Of that anticipated surplus of $27,927,123, $19,794,648 is projected to be spent on construction, leaving a total of $8,132,475 in uncommitted funds, according to Charles' information.
"Major construction will be completed during the summer of 2005,'' Charles' response stated. "Roofing projects will be completed through 2009. Consequently, there will be construction costs for these projects through 2009-'10. From that year forward, the district will need to pay the Wide Area Network lease from these funds — $229,560 per year.''
The chief financial officer also noted that the amount of the projected surplus would increase by about $400,000 as a result of the May 19 advance refunding of some of the certificates of participation.
"Following the COP refunding approved by the board May 19, 2005, the final estimate of uncommitted funds will increase approximately $400,000 because the principal and interest payments will decrease by this amount,'' Charles stated, noting he would provide updated information to the board once detailed principal and interest payment schedules are received from A.G. Edwards & Sons.
During a recent board budget workshop, Charles had indicated that the current 49-cent tax-rate for Proposition P would be reduced as a result of a significant increase in the district's assessed valuation.
"When we talk about the tax levy for next year, we've got to remember that the CPI (Consumer Price Index) for the month of April really ties us down to how much of that increase in assessed valuation we're allowed to capture in terms of additional tax revenue,'' Charles stated at the April 28 board meeting. "You're limited by your actual growth or 5 percent or the April CPI, whichever is smallest and right now it looks like the April CPI is going to be in the neighborhood of 3 percent. So that's the figure we used in putting this draft together. Because we had such a significant increase in assessed valuation, it will probably cause — it will cause us to make a significant decrease in the levy. I don't have that number right in front of me, but we do anticipate that we'll reduce a portion of the 49 cents that's allocated to Prop P. We've run the long-range cash-flow projections on that, it will be more than enough to continue to make our principal and interest payments on our certificates of participation and fund the remaining roofing projects I think we have coming up in the next three to four years, but we'll probably — it looks like we'll take a reduction in the Prop P portion of two to four cents.''
In response to questions from Diekemper, Charles said at the same meeting, "... If we do not roll back a portion of the Prop P (tax rate), that's capital, then that means we're rolling back however many cents it is — if it's eight cents, 15 cents, .5 cents — that will force us to roll it back all on the operating side, OK? It would cause us to roll that back at a disproportionate amount in the general fund and the special fund if we ignore the 49 cents of the capital fund. We need to roll that back proportionately across all funds — except debt service ...''
After further discussion about the 2005-2006 Propo-sition P tax rate, he said, "... We'll be collecting as much money, but it will take lesser of a levy to accomplish that.''
The information provided to the board by Charles projects reductions in the 49-cent Proposition P tax rate will range from 4.07 cents to 4.5 cents over the life of the certificates.
For example, the tax rate will drop to 44.93 cents for the 2005-2006 school year. Additional decreases are anticipated in subsequent years until the tax rate reaches 44.5 cents for the 2012-2013 school year where it is expected to re-main until the certificates are retired in 2021-2022.
District officials first projected a surplus of Proposition P revenue over what was needed to retire the bond-like certificates in the spring of 2003. At that time, a surplus of $25,819,282 was projected. By the fall of 2003, the amount of that projected surplus had increased by more than $5.1 million to $31,002,255.
While the projected cost of the districtwide building im-provement program originally was estimated at nearly $68.4 million, the first Proposition P budget approved by the board in October 2001 totaled $72.4 million. A revised Proposition P budget totaling $86,725,000 was adopted by the board in September 2003. The Proposition P budget again was re-vised last November and now totals $88,927,440.