Alternate revenue bonds allow for school addition without property tax increase.
Recently, the Illini Central CUSD#189 Board of Education approved a resolution that will grant it authority to sell up to $4 million in alternate revenue bonds for the purpose of building and equipping additions to the existing facility. The Board is proposing the construction of a 25,000 square foot addition to the building as well as renovations to the high school entry that will enhance security. The estimated cost is $7.3 million. The project will not impact property tax bills.
Alternate revenue bonds are funded through a designated source of revenue. They are not funded by a property tax levy. The district will use revenue from the County School Facility Sales Tax (CSFST) to make the bond payments. The CSFST is a 1% sales tax that exists in both Mason and Logan counties on items that qualify for the normal state sales tax. Illini Central receives over $300,000 in these revenues annually. The CSFST is a relatively new avenue to fund school construction projects without raising local property taxes.
CSFST funds cannot be used for salaries, staff, instructional materials, buses, or computer technology. These funds are designated for school construction, renovation, repairs, abate bond and interest payments, land acquisition, and fire prevention and safety.
The Board will use existing fund balances in combination with the bonds to fund the cost of the project. It is considering using at least $4.3 million in fund balances. A final determination of the split between fund balances and bonds will be made once the final costs are determined. If the district sells the maximum of $4 million in alternate revenue bonds, the annual payment would be about $300,000 and would extend for 20 years. The payback period can be reduced if less than $4 million in bonds are released.
CSFST revenue has gradually risen since it was passed in Mason County in 2014. The district anticipates annual revenues to be stable. According to law, the district must be able to provide a revenue source in an amount not less than 1.25 times of the annual debt payment. As a result, the district has also pledged a portion of the Corporate Personal Property Replacement Tax to meet this obligation. The district receives approximately $280,000 of CPPRT annually.
It is important to note that until the project is bid and a final cost is known, the actual annual cost and length of the bond is not determined. However, the district has established the goals of keeping the annual payment near the target of $300,000 and the payment period at or near twenty years. Interest rates and the amount of the bond issuance will influence the final terms. If more reserve funds are directed to the project, either the annual payment or the term can be decreased. Property tax rates will not be connected to the payment and terms of the bond.
Revenue from the CSFST will continue to be collected by the district. This project is designed to leverage that revenue in a way that will directly impact learning opportunities for students and increase the building’s security. Flexible learning spaces will allow the district to adapt to student needs, new approaches to instruction, and provide collaborative spaces for students to work. A new fitness center and gymnasium will provide expanded spaces to improve student health and wellness at a time in which students have become less physically active. Improved building entryways will increase the safety and security of students and staff.
Questions should be directed to Mike Ward, superintendent at 217-482-5180.