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No Goal? No plan? No millage. (Part 3)

Let's pretend your monthly mortgage payment (principle and interest) is $1,000 and you have only two more years to go before your mortgage is paid-off.

Will renewing the bond increase property taxes?

The answer is yes--but it won't increase your tax bill--yet.

Supporters of the bond seem to think taxpayers can be fooled into thinking the $23 million will appear from thin-air. They want voters to believe they have only to say yes to a $23 million handout, so why would anyone vote no?

Let's use an example to better explain how taxes will be increased, then later visit some legislation that may put Ferndale School District taxpayers at risk for having their taxes increased even more.

A simple example:

Let's pretend your monthly mortgage payment (principle and interest) is $1,000 and you have only two more years to go before your mortgage is paid off. That means that in 24 months your income will increase $1,000/month, or $12,000/year. That's a bigger pay increase than most people will ever see in their lifetime unless they change jobs.

Now, while still two years away you ask your banker for an $100,000 loan. Instead of increasing your monthly payment your banker simply adds 10 more years to the end of your mortgage. Now, instead of getting a $1,000 increase in two years you won't be getting it for 12 years. With interest included you'll have given your banker another $120,000 that would have gone into your pocket.

Did your mortgage go up or stay the same?

For the purposes of this article we'll skip considering that your house is only worth $200,000 and that it's twice as big as it needs to be, your utilities expenses are twice as big as they need to be, your carbon foot-print is twice what it should be, and you spend twice as long cleaning it than you would a home rightsized to your family's size. Given all that, does it make sense to borrow $100,000 in the first place?

How you may be at risk for increased monthly payments:

On December 14, a Detroit News editorial urged readers to keep school bond debt in-check. It starts:

Because of sinking property tax revenues, more and more school districts have turned to a state revolving loan fund to help them meet payments on bonds they sold for new construction or remodeling buildings. Obligations in that fund have shot up to $1.2 billion during the real estate crisis, or the equivalent of $60 per student, and are threatening to more than double in the next 10 years.

Using our example from above, if a school district has to pay $1,000/month to its bond holders but when property values drop and the district can only afford to pay $700/month, the state School Aid Fund lends money to the district to make up the $300/month difference.

The money for making up the difference between falling property values, the taxes they generate, and what school districts owe has ballooned to $1.2 billion--and because that money comes out of the school-aid fund, there is $60 less per-student to spend on books, curriculum, equipment, and teachers.  You know, the things that have a far greater impact on our children's education than decorating.

A problem under the existing rules is that school districts can roll their state debt into new bond issues for additional construction projects before the old bonds are paid off. State repayment thus can get extended past 30 or 40 years. The state, meanwhile, has issued general obligation bonds to raise the money it loaned the school districts and long since repaid the general obligation bonds.

That should sound familiar. The Ferndale School District hasn't paid off a single single bond since at least 1995, and the proposed bond will extend our indebtedness out 29 years--to 2041.

To keep school district bonds from eating further into per-pupil spending, Lansing is considering new legislation. 
Pending Senate legislation would rein in these practices not just by putting a $1.5 billion lid on the total the state could allow school districts to borrow. 
It also would require school districts involved in the state program to at least once a year recalculate the millage rate they use to pay off their construction bonds. A school district would have to raise its millage rate whenever necessary to meet the principal and interest payments on its bonded indebtedness.  
When asking voters to approve a bond proposal, the school district would have to notify them that the proposed millage rate wouldn't necessarily remain the same, but actually could go higher.

This is an easy law to support. It would require school districts to actually pay for their renovation projects without borrowing money from students. The bite is that when property values fall taxpayers may be required to pay more.

Our $1,000/month may go up when we can least afford it--when our property values are falling.

Given this background, it's more important than it has been that taxpayers hold their school boards and administrations accountable for student performance. The relationship between schools and property values is student performance and property values, and a strong inverse relationship between standardized test scores and foreclosure rates--the higher the scores the lower the foreclosure rate.

Without our district's board and administrators having a clear goal to increase our community's student performance, and a clearer goal for achieving that objective, taxpayers should vote no on the new school millage.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Ardy February 28, 2012 at 07:08 PM
"Ardy, I searched around and wasn't able to collaborate your recollection of the RO bond debate." I'm not surprised in the least; either your research skills are as weak as they appear or you're just playing dumb. I get the feeling after asking around regarding your interaction/s with the RO district that you know that is exactly how it went down. However, I guess there is always a chance that you were completely oblivious to what happened; using past observations of your commentary on any subject it is completely within the realm of plausibility.
Ardy February 28, 2012 at 07:15 PM
"I like to have intelligent discussions that are based on facts." Hmm. I guess that explains the multiple inane rants from your keyboard. The facts are: His kids benefit from higher taxes that the residents of Royal Oak pay. Gagne's kids were in the district at that time the bond issues went down. Gagne's kids are part of the problem Royal Oak was having with "paying higher taxes for other cities kids" Gagne's complains about how there is declining enrollment, when his family contributes to the declining enrollment problem. I mean, let's get real and serious here. The guy is just one of those complainers about absolutely everything in this City. Pardon me, but I get a little sick of hearing how bad things are supposedly going around here from people like Gagne, House, et. al. , when this City has completely transformed itself from basically a #@! hole to something really special over the last 15+ years. Geez ... give me a break!
becky hammond March 03, 2012 at 07:59 PM
I googled "what raises property values" and get many hits, and can't find school test scores. I find that walkable neighborhoods, curb appeal, the way the house SMELLS, are mentioned; I find lists of improvements that are critical, but I find that, obviously, only people with school-age kids even potentially put test scores on their lists. By the way, it is not remotely the job of our kids to improve our home's values. It's especially not the job of anyone else's kids to improve your house's value. What are we coming to? It's also reasonable to put much more weight on the opinions of those invested enough to be directly involved. I and many other residents don't lend much credence to views of people removed from the situation. Same way I won't judge churches by the opinions of atheists, won't ask someone who doesn't own a car which repair shop is best, won't vote for a politician who hates government so much he/she wants to drown it in a bathtub. Credible people are involved people.
Thomas Gagne March 03, 2012 at 08:23 PM
"I and many other residents don't lend much credence to views of people removed from the situation." Neither do many Detroiters. I think a willingness to consider all viewpoints, especially objective ones, is a better measure of open-mindedness.
Thomas Gagne March 04, 2012 at 02:50 AM
Becky, you should have looked harder. http://www.biggerpockets.com/renewsblog/2011/04/06/school-districts-real-estate-prices/ "'Without a doubt the 'right' school district increases value by 12 to 14 percent in my area even in today's market,' said Maria Picardi-Kenyon, a long-time Realtor located in New Jersey. 'I've spoken with many clients who are convinced that a preferred school district provides as much as 20 percent or more value to a home.'" http://investor.move.com/releasedetail.cfm?ReleaseID=500445 "State assessments, independent ratings from websites like GreatSchools and Education.com and annual magazine rankings of America's top high schools have not only made it easy for parents to factor school test scores and parent-teacher ratios into their buying decisions, they've cemented the relationship between home prices and school quality." http://www.qualityeducation203.org/cms/index.php?option=com_content&view=article&id=76:good-school-mean-high-property-values

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