AASD project’s math debated
District to double up payments last 17 years
Altoona Area School Board candidate Ed Kreuz went to social media recently to claim the current board’s plan to pay for an $88 million high school project with a 0.61-mill tax increase is impossible math.
“This is not possible if you do the math. (Superintendent) Charles Prijatelj is trying to confuse the taxpayers again before the elections. The District is paying the minimum on the loan principal for the first 10 years … $88 million plus interest is a payback of $141 million,” he posted.
But documents from the district’s bond counsel say the math does work.
If the project is approved, the district would begin borrowing for the project starting at the end of 2017.
Overall, the total debt service to be paid from May 2018 to May 2052 totals nearly $141 million, according to documents of the district’s bond counsel Boenning & Scattergood.
But that total includes $40.5 million in outstanding debt for the junior high school. Subtract that from the total, and the cost of repaying the $63 million in bonds for the high school project with interest calculated conservatively at 4 percent is about $100 million. The district plans to use $25 million from its reserves to lower the amount being borrowed.
The payback on the high school project is planned to be $2 million per year for 34 years generated by a total 0.61 mill tax increase.
That alone wouldn’t be enough to cover the $100 million debt. The rest would be paid through what Boenning & Scattergood managing director John McShane calls a “wrap-around” payment.
The payment of $2 million per year for the first 17 years of the project’s debt service is $34 million.
In 2034, the junior high school debt will be paid off. However, the district plans to continue levying the same debt service millage and taking the $2 million that was going to pay off the junior high and adding it to payments for the high school.
That means a total of $4.2 million would be paid annually for the final 17 years. That includes the $2 million from the 0.61 mills from the proposed tax increase and the $2 million from the existing millage currently going for the junior high school.
That adds up to a total debt service payment of $71 million over the final 17 years of the project, and brings the grand total paid over 34 years to a $105 million.
The plan set by Boenning & Scattergood purposely schedules the payment on the loan principal to be light at first so that the impact on the district budget and taxpayers is no more than $2 million per year until it’s paid off.
There are four main components of the $88 million project, including $48.1 million for the new building; $19.1 million for renovations to the A building and Altoona Area Public Library work; $7.8 million for demolishing the old B building and sitework; and $13 million for soft costs, such as professional fees, technology, security and construction contingencies, according to Reynolds construction and KCBA Architects.
The district plans to use $25 million from its cash reserves for the project.
Then, the district plans to borrow up to four separate bond issues over a five-year period for a total of $63 million to fund the rest.
Kreuz agreed that most initial payments on any loan cover interest.
“But it’s more of a ratio than what they are going to do. For example, I pay the interest on a loan while my house is being built. But they are doing it on a bigger scale. It’s being stretched out until 2051; my daughter will be paying on this,” Kreuz said.
About three-quarters of the roughly 28,000 commercial and residential properties in the district — with an assessed value of up to $115,000 — are estimated to have a total $70 or less added to their annual tax bills when the full 0.61-mill tax increase is in place.
The district’s plan to pay back the bonds calls for a series of small tax increases — in $214,000 increments — over 10 years until the hike totals 0.61 mills. It will then remain at that level to pay for the debt service through the life of the bonds.
The district also is set to receive $14 million from the state in PlanCon funding during the bond repayment period.
“It works,” board member Dutch Brennan said of the matg.
The funding analysis is available on the district’s website: www.aasdcat.com.
Prijatelj stressed that Boenning & Scattergood is the No. 2 bond counsel in the state, judged by volume of work.
If the plan is enacted and if the district doesn’t want to add debt service millage, it’s basically frozen from issuing more bonds for 30 years.
“There can always come a point when you do have another millage impact if another building is added,” Prijatelj said.
If any more debt is added, it would be for a new elementary school, he said.
Building capacity at the current schools is the issue.
A new elementary school would cost about $25 million. Renovating or adding on to an existing school would cost about the same, Prijatelj said.
He said the new high school, however, may negate the need for a new elementary school. In addition to replacing the 90-year-old B building, the new high school building is planned to relieve overcrowding in the district’s elementary schools.
Currently, ninth-graders go to the junior high. Once the building project is complete, the plan calls for the ninth-graders to move to the high school, opening up space in the junior high for sixth-graders.
With the exodus of sixth-graders from elementary schools, there would be more elementary classrooms to replace ones lost when two elementary schools were closed in 2013.
Mirror Staff Writer Russ O’Reilly is at 946-7435.