Analyzing Lakeland bond’s tax impact on patrons

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EDITOR’S NOTE: This article was reviewed by Lakeland Joint School District Finance Director Brian Wallace, who told The Press he thinks it’s accurate.


R — Post Falls

The July 26 Coeur d'Alene Press article about the Lakeland Joint School District's $70.9 million bond measure on Aug. 27 has created some confusion among voters.

The ballot states that the annual cost to the taxpayer will be $147 per $100,000 of taxable assessed value. The Press article states that the cost impact will be $41 per $100,000 of taxable assessed value. Which is the right number? In fact, both are correct.

As usual, the devil is in the details, the assumptions and the definitions.

The article goes on to say that the cost impact for the owner of a $300,000 home will be $82 per year, or roughly $7 per month. Although the assessed value is $300,000, the taxable assessed value is $200,000 due to the homeowner exemption of $100,000 for a house of that value.

The $147 annual cost on the ballot is based on straightforward rules directed by House Bill 626, passed in 2018. It is a simple calculation using the amount of the bond, the duration of the bond, and the current taxable value. It is felt to be unrealistic by financial planners because it does not take into account all factors that impact the overall tax rate.

Most importantly, it does not allow for estimated future growth, which increases the tax base and thereby reduces the bond repayment cost for each property owner. The taxpayers’ overall annual cost for the district taxes may be reduced if some of the other existing tax levies drop off.

The new bond is only a portion of the total taxpayer indebtedness for the school district. When viewed in this light, the new bond represents an increase of less than 10 percent of the current obligations. The objective of the bond repayment schedule is to slightly increase the overall tax rate back to the 2018 levels.

The payments for the new bond will be reduced during the first few years to partially offset the payments being made for the two existing bonds.

As the old bonds expire in 2023 and 2025, the cost of the new bond will gradually be increased to keep the overall tax rate level.

The $41 figure in the article has some modest growth assumptions built in, which is part of the reason for the lower estimated cost impact. Just as with a credit card with a low introductory rate, the early unpaid principle is added into the loan. For this bond, the annual cost, even with the growth assumptions, is estimated to be no more than $182 per $100,000 assessed value for the last 11 years of the bond. Future growth in excess of the assumed values would drive this cost down.

A rough analogy can be made to a homeowner who has a mortgage payment of $1,500 per month and has only five years left to pay. If he buys a new house with a mortgage of $1,700 per month, his cost impact, or cost increase, is only $200 per month. However, instead of being mortgage-free in five years, he is now indebted for 20 years at the higher monthly cost.

The projects that the bond is intended to fund are certainly worthwhile. Are you more concerned about cost impact or the total cost of the bond? The choice is left to the voters on Aug. 27.

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