Board hears financing plan for FMP 2.2; SAVE revenue borrowing could cover $119 million estimate

The Iowa City Community School District Board of Directors on May 13 received a presentation on financing options for Facilities Master Plan (FMP) 2.2, including how much the district could borrow against future SAVE (Secure and Advanced Vision for Education) sales-tax revenues.

District staff presented an estimated remaining need of $119,000,000 for FMP 2.2 and explained three capital funding buckets: SAVE revenue bonds, PPEL (the physical plant and equipment levy), and general obligation bonds that require a 60% public vote. "SAVE is Secure and Advanced Vision for Education, Statewide Sales Tax," the district presenter said. "And it's authorized through 02/1950." The presenter added that borrowing against future SAVE receipts is the primary funding strategy discussed for the projects on the FMP 2.2 list.

Why it matters: the board must weigh timing, interest-rate risk and tax-law compliance when choosing how to structure debt. Staff said existing SAVE revenue bonds carry about $147 million in principal and roughly $185 million including interest, with a roughly flat annual debt-service payment near $14.2 million through fiscal 2038. Under assumptions that keep that annual payment flat, staff estimated additional SAVE-revenue borrowing capacity of about $67 million in principal if structured to extend through fiscal 2043, rising to about $127 million in principal through fiscal 2048 (which would be roughly $160 million total obligation when interest is included). "SAVE revenue borrowing would be sufficient to fund the entirety of FMP 2.2," the presenter said, while noting the estimate and assumptions are subject to change.

Details and constraints from the presentation: - Current SAVE receipts: staff said the district expects roughly $19 million in SAVE revenue this fiscal year and that about $14.2 million of that is currently used for debt service (about 75–80% of SAVE proceeds this year). The remainder funds technology and community education programs. - PPEL use and limits: PPEL is primarily used for life-cycle and maintenance projects, can be borrowed against, but staff said it is unlikely to be the primary funder for large FMP 2.2 needs because it is already relied on for recurring maintenance items. - General obligation bonds: carry potentially lower interest rates but require a 60% voter approval and are levied through property taxes. - Statutory/tax compliance: staff warned about timing and arbitrage-rebate rules that apply to tax-exempt bonds — for example, proceeds must be spent against project costs in set timeframes or the district risks rebate obligations if investments out-earn borrowing costs.

Board questions focused on interest rates, bond rating and options to reduce long-term interest costs. The presenter said the district’s current long-term rating is AA and that recently issued debt structures have been backloaded (interest-only early years) which increases total interest cost; shifting more SAVE to immediate debt service or restructuring could reduce that inefficiency if the board chose to do so. When asked for a current interest-rate estimate, the presenter said he would provide updated figures at a later time.

During discussion board members noted alternatives if SAVE borrowing becomes constrained in future years: borrowing against future PPEL, pursuing a general obligation bond via voter approval, or changing the timing or scope of projects. Staff also flagged that SAVE is statutorily authorized through 02/1950 under current law and that the Legislature routinely extends SAVE when districts need runway for long-term bonding; staff said an extension around 2035 would be plausible but is not guaranteed.

What's next: staff said FMP 2.2 scope and the $119 million estimate may be refined at the next board meeting as priorities and escalators are finalized. The presentation did not include a board vote; the session was informational and part of an ongoing planning process.