Cary Grade School District 26 Board President Scott Coffey explains below what the School Board did with its property tax levy for next year:
D26 implemented a two-pronged approach to the levy this year.
First, we applied the CPI rate of 2.1% against the operating levy and secondly, we created a mechanism to economically defease $4.2 million of the debt service levy over the next seven years, of which, approximately $760K will be recognized for the levy collected in 2018.
The net effect for an average taxpayer for 2018 will be to see another reduction in their taxes of about 0.3%.
The NW Herald wrote an article about it 4 days ago: http://www.nwherald.com/2017/12/22/cary-school-district-26-board-takes-another-bite-out-of-debt-obligations/ayl1err/
As to the defeasement strategy, it’s rather complicated but, basically the district is going to take $4 million of its current funds and deposit it into an escrow account which will purchase tax-exempt securities.
A schedule is setup to have these securities mature at certain dates over the next seven years and use the maturing principal and earned interest to make future debt service payments rather than levy the taxpayers.
The escrow account deposit and investments are irrevocable so that a future Board cannot reverse this decision and then fully levy the taxpayers instead.
It also means that the D26 taxpayers are not subject to a future Board’s prevailing opinion regarding the annual abatement decision that is prevalent today.
Over the last 18 months the Board has aggressively attacked the final remaining debt service for the 7 year period between 2018 and 2024.
During that time, the Board has refinanced bonds resulting in $572K in interest cost savings, established a Bond Sinking Fund that will call (i.e. Early Redemption) our 2011-C series Bonds early resulting in $2.050 million in savings, and implemented the irrevocable bond defeasement escrow fund which will result in roughly $4.2 million in savings.
The bottom line is that the last 18 months has seen the Board wipe out almost 25% (or $6.8 million) of the taxpayers’ burden on all of the remaining debt service.