Bozeman High School $125 million bond issue monthly tax impact for a $100,000 home

Bozeman High School $125 million bond issue monthly tax impact for a $100,000 home

Thanks to low interest rates, the $125 million debt that voters agreed to take on to build Bozeman’s second high school and renovate Bozeman High will cost taxpayers one-third less than estimated during the 2017 election.

The savings to taxpayers will be nearly $35 million, says Steve Johnson, deputy superintendent.

“I feel great” about the savings, Johnson said. “Obviously we try to be conservative, but this is way better than we anticipated it would be. It’s going to save taxpayers over the long haul quite a bit of money.”

The School Board will meet Monday noon at Willson School to approve the sale of the final batch of bonds, $25 million, to pay for the upcoming renovation of Bozeman High.

The interest rate on the bonds is 2.098%.

“That’s a wonderful rate,” Johnson said. “Things haven’t been that low in a long time.”

Working with D.A. Davidson as the bond underwriter, the school district agreed to the price Monday, and Tuesday most of the bonds were sold in a short time.

These bonds will be paid off in 16 years, rather than the typical 20-year span, to reduce interest costs.

The first batch of bonds, $100 million worth, was sold in 2017 to pay for constructing new Gallatin High School. It is under construction and set to open in the fall of 2020.

Now that all the bonds have been sold, the total costs can be added up.

During the 2017 election, voters were told the bonds would add $6.97 a month to homeowners’ tax bills for every $100,000 of assessed value. For a typical $300,000 home, that would be about $250 a year.

That was based on conservative estimates, Johnson said, because school officials don’t want people to be surprised by property taxes going up more than they’d expected.

Now that the actual costs are known, the bottom line is that property taxes will go up $4.59 a month for every $100,000 of assessed value. That works out to $178 a year for the $300,000 homeowner.

It means that instead of paying $93 million interest over 20 years, Bozeman taxpayers will pay $58 million.

A premium negotiated on the $25 million bond sale will bring in an additional $3 million. Part of that premium money will pay the first year’s bond payments so it won’t affect people’s property tax bills this year. That still leaves about $2.4 million that adds to the pot of money available for the high school reconstruction project.

Most of the bond purchasers are large investors like Fidelity or State Farm, which prefer not to have low 2% interest rates in their portfolios, Johnson said. So they negotiate to receive a higher interest rate, and in exchange they agree to pay a cash premium, something more than the $5,000 face value of each individual bond.

At Monday’s meeting, the board is also expected to ratify the purchase of 8 acres in the Woodland Park subdivision as a possible future elementary school site for $1.2 million, or $240,000 below the appraised price. The developers are also offering 2 acres of parkland to the school.

Gail Schontzler can be reached at gails@dailychronicle.com or 406-582-2633. Follow her on Twitter @gailnews.

Gail Schontzler covers schools and Montana State University for the Chronicle.

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