If We Vote Down the Park City School Bond, Do We Essentially Get Two Schools for Free?
You may have heard the school district wants to float a bond for rebuilding our schools. The bond is for $56 million and would be paid over 20 years. This bond is up for vote on November 3rd.
One of the reasons touted for doing the bond is an affordable interest rate. When a municipality issues a bond, the tax payers are responsible for paying back both the principle and the interest on the bond. So, in the case of this proposed bond, the Park City tax payers would be on the hook for 4% of the bond price each year (or likely a little less due to a good credit rating). Historically, 4% is a pretty good interest rate; therefore, I see why the school board is touting it.
Yet, we shouldn’t lose sight of the fact that 4% of $56 million, each year, is a lot of money. I know a few local financial folks are readers, so please correct me if I’m wrong… but the annual interest on a $56 million bond seems like it would be about $2.25 million each year. Over 20 years, that would be about $45 million in interest that the taxpayers would have to pay under this initiative (again, please correct me if I don’t generally understand this). In today’s dollars, that interest amount ($45 million) could fund the construction of two new schools.
The school board has said that we have a choice. We, the citizens of the school district, can either float a bond and pay $123 per year for 20 years or we can pay outright over the next few years ($335 per year for 5 years, or $550 for 3 years) to pay for these new schools.
It seems to me that if we look at this community wide and choose to pay as we go over the next 5 years, and avoid the interest charges associated with a bond, we could have two new schools for “free.” It almost seems like a no brainer. Am I missing something?
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