Urbana City Schools tax money to pay for the bonds covering the cost of the new school buildings is being held in interest-generating accounts, with the interest going toward the building project or repayment of the bonds to finance the project.
The district must follow a state-mandated procedure for how those dollars are accounted for and stored, Treasurer Mandy Hildebrand and Superintendent Charles Thiel said.
District voters approved a 7.15-mill, 28-year property tax levy to fund a portion of the $68 million building project; the state is paying 61 percent of the cost. The project will build a pre-kindergarten to grade eight school building and knock down and reconstruct the existing high school.
Hildebrand said the $31.35 million bond funds from the March 2015 bond sale are in a money market account at Fifth Third Bank. A second account holds the tax money voters pay twice a year, which is used to pay on the principal and interest of the bond borrowing. The first collection of property taxes occurred in January 2015.
Both accounts earn interest. The district could transfer the interest earned from the accounts the general fund, but Urbana officials chose not to do so.
“We want to protect the budget of the project,” Thiel said. “With the delay with the pre-kindergarten to grade eight building, we do not know what it will cost now.”
District officials planned to build the elementary/middle school building on land the school district owns off Community Drive next to the Champaign Family YMCA. The property is next door to the city of Urbana’s former landfill, which is leaking methane gas. The Ohio Environmental Protection Agency needs to determine how much gas is leaking, and if it is traveling to the school site.
The district is now considering building the high school first, but the delay with the elementary/middle school has put construction at least six months behind, Thiel said. Construction costs go up over time, so he is hoping the interest in the bond account will help cover that additional cost.
A second account holding the property tax dollars paid by district residents also collects interest, and Hildebrand said the school board wants to keep that interest in there to meet the required bond payments.
“When it comes time to make a payment (on the bonds), we pay out of that fund,” she said. “We have to be able to make that debt service payment.”
Hildebrand added the county auditor can adjust the millage rate each year depending on how the local property taxes are coming in. As long as they are stable, the millage rate could be adjusted down, and still bring in what is needed to make those payments. But if the local property tax base got hit by a bad year, that millage rate could be increased, and those earned interest dollars would be a good thing to have ready at that point.
Debt service is paid twice a year, Hildebrand added.
As of February, the district has earned $7,951.25 in interest from the bond account, Hildebrand said. Interest earned in the local tax collection fund as of February was $1,697.84. The interest in both is being credited to either the construction account funds or the bond repayment account, Hildebrand said.
The dollars in both accounts do not show up on the district’s five-year financial forecast. That forecast only includes operating funds and levies. Documents indicating balances for both the bond account and the property tax repayment account are public record, and members of the public can request copies of those documents.