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Financial adviser outlines districtSAVE revenue, borrowing options and limits
Summary
A consultant told the Clear Creek Amana board the district collects about $4 million a year from the statewide SAVE sales tax, has room under state debt limits to sell remaining referendum-authorized bonds and should be cautious about borrowing against future SAVE receipts for big projects.
Tim Oswald, who presented to the Clear Creek Amana Community School District board, summarized the district's sales-tax revenue (known in Iowa as SAVE), recent borrowing and the constraints the district faces on using SAVE as collateral for debt.
Oswald told the board the district currently receives about $4,000,151 in SAVE revenue in the current budget year and that, using projected enrollment growth and modest inflation, that could rise to a little more than $4.3 million in the coming year.
The context matters because some districts use SAVE receipts to secure bonds. "Every SAVE dollar we borrow and commit to a payment out into the future is a SAVE dollar we don't have available in the future for some other purpose," Oswald said, urging caution as the board considers major capital projects.
Why it matters: SAVE-backed borrowing can yield reasonably-priced debt because markets consider SAVE a stable statewide tax stream, but it reduces future flexibility. Oswald said the district has relatively modest outstanding SAVE debt that should be paid off in coming years and that annual SAVE debt service in recent years has been about $1.2 million, leaving several million each year for other uses under current receipts.
Key numbers and constraints: Oswald said the district has comfortable capacity under the state's statutory debt limit after recent and upcoming bond sales. "After we sell the bonds here this fiscal year, you're going to end the year with a remaining debt limit of just over $42,000,000," he told the board, which he said represented roughly a 28 percent cushion. He also said the district had sold about $29 million of voter-approved G.O. bonds to date, with about $36 million yet to sell under the authorization. He noted the district issued about $13.5 million in bond anticipation notes to finish the Oakville project and expects to pay those off as the remainder of the bond authorization is sold.
Restrictions and community process: Oswald reviewed two separate petition rights that attach to spending SAVE for athletic facilities and to borrowing SAVE receipts. Athletic facilities that are detached from a school building (for example, a stand-alone field house or separate parking and entrance) require an additional public hearing and are subject to a voter petition process. He said Waterloo recently faced such a petition this year.
Cost and market signals: Market pricing for SAVE-backed debt, Oswald said, typically is "somewhere between two and three tenths of a percent" higher than voter-approved general obligation (G.O.) debt, because the revenue stream is statewide but the security is typically the SAVE receipts rather than the full faith-and-credit of local property tax.
Board follow-up and staff direction: Board members asked for more detailed, year-by-year SAVE cash flow modeling so they can evaluate trade-offs between capital projects, potential borrowing and preserving operating flexibility. Oswald recommended populating a multiyear SAVE cash-flow table with realistic annual expenses to inform any decision to borrow against that revenue stream.
Ending: The presentation closed with board members asking staff to provide the more detailed projections Oswald recommended and to crosswalk SAVE cash flows with existing debt-service schedules and planned capital projects.
