The Geneva school board Monday officially declared it is willing to stretch out the district's debt payments for four more years if it will help keep the amount of property taxes collected for debt level at about $17 million a year.
It adopted a debt reduction service plan that includes the possibility of refunding some of the callable debt in 2017 and 2018 and reissuing it at a lower interest rate, with repayments extended through 2029.
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Even at a lower interest rate, the total amount repaid could increase in that scenario. The increase would depend on how much debt is refinanced and the interest rate at the time, according to Donna Oberg, the district's assistant superintendent for business services.
But it would put some of the onus for the debt bill on future residents. Even a co-founder of Geneva TaxFACTS watchdog group, Bob McQuillan, voiced support for the idea, saying in February that current residents couldn't afford another $10 million a year in property taxes. By the late 2020s, many of the older residents may no longer own property in Geneva.
The plan also calls for continuing the district's practice the last three years of using abatement to keep the property taxes collected for debt relatively level. Without abatements or refundings, the annual debt service levy will rise to $23.6 million in levy year 2019, according to the plan. The district has used $14 million in surplus from its education fund to make payments.
And it mentions possibly deceasing bonds as another way. In a defeasement, the district could collateralize some of the existing debt by putting money or government securities in to an escrow account to cover the payout due, in exchange for obtaining a lower interest rate on the bond. That would remove the debt from the balance sheet.
The plan calls for parking cash for abatement or defeasance, no matter which operations fund it comes from, in the bond-and-interest and working-cash funds. The board decided not to put all such money in the bond-and-interest fund, because then it would be legally obligated to spend that money only on repaying the debt. Putting it in the working-cash fund gives it some flexibility, if it decides the money is needed for something else, such as a "catastrophic" capital need.
As of June 30, 2013, the end of the last fiscal year, the district owed $151 million in principal, and could pay as much as $293.9 million in interest.