Bozeman High School

Bozeman High School is seen in this May 2016 file photo.

Bozeman school officials are getting ready to sell $25 million in bonds to pay for a major renovation of Bozeman High School and if all goes as they hope, taxpayers wouldn’t see any tax increase from that project next school year.

School board trustees voted 8-0 Tuesday night to sell up to $25 million in bonds this fall to take advantage of interest rates that are near a 10-year low.

On June 10, government bonds were selling with a 2.14% interest rate, according to data from Bridget Ekstrom of D.A. Davidson.

“This is the perfect time to lock in interest rates,” Ekstrom told trustees.

The Bozeman School District already has an Aa2 bond rating, the best in the state, she said.

District officials now can start preparing for the bond issue so that by the end of August or early September they’d be ready to go to the market to sell their debt. By then the state’s new property reappraisal numbers should be in, and they’re expecting “significant growth” in local property values, which would help the bond rating.

Mike Waterman, school district business director, said he can’t guarantee it, but there’s a good chance that the school district will receive enough money from the downtown tax increment finance (TIF) district to cover the entire first year’s bond payments for the $25 million.

“So hopefully there’s no tax impact from the $25 million next year,” Waterman said.

That could help the school district at a time it may need money.

The district will likely go to voters next May to ask for millions of dollars for the transition to open Bozeman’s second high school, and it might even have to ask then for money to build elementary school No. 9 to keep up with student growth, Superintendent Rob Watson said.

Last year the school district received $826,790 from the downtown TIF, Waterman said. The school district can use TIF money for just two things — tax relief or building up its reserves, he said.

The school district has used TIF money in the past for annual bond payments for the $5 million borrowed to renovate Hawthorne School.

The city of Bozeman created the tax increment district decades ago as a way to increase investment in downtown. TIF money is paying off the city’s debt for building the downtown parking garage.

As downtown construction increases, the property taxes generated downtown increase. The additional tax money or increment is divvied up between the city, county and schools.

Ekstrom said they’re worried because Federal Reserve officials have raised interest rates nine times, though there’s talk now that the Fed may lower rates in July. There’s also concern because a presidential tweet could send interest rates up or down, Waterman said.

Bozeman voters in 2017 passed a record $125 million bond to build a second high school and renovate Bozeman High. The first $100 million has already been sold, and new Gallatin High is more than half finished.

Once the new high school opens in fall 2020, half the students will move out of Bozeman High. Then work will begin on adding a two-story classroom building, auditorium and new entry to the original high school.

The $100 million in bonds already sold now cost property owners $4.59 per month for every $100,000 value of their home or business. That’s less than the $5.43 predicted during the 2017 election, Waterman said.

The $4.59 per month works out to $55.08 a year per $100,000 value. That’s roughly $150 a year for a typical home.

Another advantage of selling bonds now is that if the money isn’t needed immediately, it earns interest while it sits in the bank, Waterman said.

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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