Mesa and Chandler school districts may join the ranks of other districts in Arizona that are unable to sell voter-approved bonds in the future because of the recent housing crash.
Voters in Mesa approved a $230 million bond program in November. The Mesa Unified School District’s governing board on Tuesday moved forward with plans to sell the first $46 million in bonds in April. Those bonds will be used to start construction and renovation projects in the district and purchase technology.
And though the district’s financial advisors believe MUSD will have bond capacity to sell the next wave of bonds in 2014 — between $33 million and $50 million — after that it’s uncertain.
Arizona school districts are limited on how much bond debt they can carry at one time. Current state law limits that figure to 10 percent of the assessed valuation in a unified district. While property values around the East Valley are going up now — in some areas as much as 35 percent — assessed valuation typically lags behind two years.
The Mesa district was aware this could be a problem when it put forth its $230 million bond program, but it did so because of the many facilities needs in the district and the fact that there have been numerous attempts to change district bond capacity limits in the last few years.
The latest preliminary assessed valuation for the district was lower than expected. Its current assessed valuation is $2.7 billion. It had expected a decrease to $2.66 billion, but the preliminary report came in at $2.49 billion.
“We had anticipated it would continue to go down. We know the assessed valuation was two years behind and the recovery just barely started two years ago,” said Bobette Sylvester, the district’s assistant superintendent for business and support services. “There were bills floated last year and they went far before being killed in the end. Therefore, we went to the community with what our needs were, not what our legal capacity was.”
Bond capacity contracts and expands not only because of community property values, but also as districts pay off previous bond debt.
There have been several legislative attempts to change district bond capacity in recent years to reflect a number of issues school districts are facing.
More than two decades ago, unified school districts had the ability to bond up to 30 percent of their assessed valuation. Bonds were the most common way districts used to fund renovations of buildings and new construction.
But in 1998, that changed. A court ruling led to the state taking over funding of renovations and construction with Students FIRST and the creation of the School Facilities Board. With that in place, the state Legislature decided to lower bonding capacities. Unified school districts were limited to bond capacities of just 10 percent of assessed valuation. Elementary school districts or high school districts were limited to just 5 percent.
But schools have not seen much — if any — money from the state for buildings or repairs during the recession.
Just as property values tanked during the recession, so did assessed valuation, lowering the amount of money districts could have in bond debt.
In some cases, school districts with voter approval to sell bonds could not legally do so because it would put them over their lowered bond capacity limits.
That issue hit Higley Unified School District hard. The growing district planned to build schools, but couldn’t use bond money. In November, voters in the mostly Gilbert district approved a plan for it to lease buildings.
The Chandler Unified School District learned last month it may be unable to sell the last $21 million of its 2010 $84 million bond package because of reductions in assessed values.
Legislators put forth a bill again this year increase bonding capacity — allowing unified districts to bond up to 20 percent of their assessed valuation for a limited time. The Arizona School Boards Association and the Association of Arizona School Business Officials support it.
School districts hope this is the year something changes. Besides losing bond money the last few years, districts have seen their budgets cut by the state. That’s meant some repairs have been put off, or, when absolutely necessary, operations funds have had to be used.
Gov. Jan Brewer expressed her support to increase bond capacity limits in her budget report this year. School leaders hope that the issue will be pushed into approval with the state budget later this spring.
If it is changed, Mesa Unified can continue with its plans to issue bonds until reaching the $230 million voters approved.
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