IDAHO FALLS — The Idaho Falls School District has received an updated forecast of potential tax hikes tied to its $100 million high school redesign project — though it’s still too early to tell exactly how much of an increase patrons can expect to see.
In July, financial experts outlined potential impacts a bond for the project could have on local property taxes. But an unforeseeable future and a changing financial landscape in the wake of the November election has one of those experts now revamping his outlook.
“I thought it would be a good time to rerun projections and analysis of the project,” said Eric Heringer, managing director of public finance at Piper Jaffray, an asset management firm headquartered in Minneapolis, Minn.
On Monday, Heringer walked the Idaho Falls School Board through two factors hindering accurate projections of a bond’s impact on property taxes: an unpredictable tax base and ever-changing interest rates.
A combination of low interest rates and a growing tax base softens the blow a school bond ultimately has on property taxes, Heringer explained. But it’s hard to say exactly where either factor will fall in Idaho Falls in the coming months — much less in the coming years.
The good news for those hoping to pass a $100 million bond for the project this August is that the district’s most recent 20-year growth rate is up, at 4.29 percent. Which also means the district’s net taxable value has grown by almost a $1 billion since 2006. A more valuable tax base ultimately results in a less noticeable tax impact when a bond receives the necessary two-thirds support needed to pass.
But growth since 2006 hasn’t been completely steady, Heringer pointed out. Idaho Falls saw three consecutive years of decline from 2011 to 2013. As a result, Heringer pegged his growth rate projections for the district at 3 percent in 2018. But he offered a variety of growth rate scenarios from 2019 to 2028.
Heringer’s most conservative growth projection during these years lies at 1 percent, which would spur an annual property tax increase of $73 per $100,000 of taxable value. A less conservative growth rate of 3 percent from 2019-2028 would bring annual tax hikes to $6 per $100,000 of taxable value. (Idaho Falls’ current monthly levy rate is $4.24 per $100,000 of taxable value.)
But time is also of the essence if the district wants to cash in on the historically low interest rates included in Heringer’s projections. Last summer, municipal bond interest rates floated around 2 percent. They’ve since spiked nearly an entire percentage point to 3 percent in the wake of the November election. Those kinds of spikes make it hard to pinpoint exactly where rates will be by the time the district gets its bond on ballots.
Heringer pointed to state subsidies for bond interest payments to ease the urgency. Idaho’s bond levy equalization fund, stocked annually by a portion of state lottery revenue, helps districts pay down interest incurred by bond issues.
According to Heringer, the state has kicked in $1.5 million on one of the district’s past bonds. But even the amount of subsidies fluctuates based on local market value, unemployment rates and per-capita income.
In other words, it’s hard to say how much in interest relief payments the state will shell out if the bond passes.
The board also presented a tentative timeline for moving forward with the project on Monday, including plans to gather more community input later this month, a review of possible locations for where to build the new Idaho Falls High School and what to do with the existing building.