Dixon schools OK $650,000 in bonds, first step in long-range financial plan

DIXON – Dixon Public Schools approved $650,000 in taxable general obligation refunding school bonds on Wednesday, the first of several steps in a long-range plan to keep the district current on curriculum, technology and social-emotional services through 2045.

“I think that we’re putting our district in the best position possible for future needs, depending on whatever that may be … without burdening the taxpayer,” said Superintendent Margo Empen after the regular meeting of the board of education.

From the outset, the underlying objective of this debt restructuring is to keep that tax rate in the vicinity of 60 cents, rather than have it fluctuate because of sudden increases in equalized assessed value of taxpayer property. In 2022, the EAV jumped 8.68% and drove the tax rate down to 53 cents.

It is also to wean the district from long-term borrowing – it already has four debt service bonds issued in 2014, 2016, 2017 and 2019 – and instead implement a regular schedule of more modest short-term borrowing with lower interest rates that can be paid off with available resources, such as working cash gained through internet sales receipts.

Before the vote, which was unanimous, the board held a video conference with two of the financial advisors in this debt restructuring plan: Anne Noble, managing director of public financing at Stifel’s St. Louis headquarters, and Raphaliata McKenzie, senior vice president at Speer Financial of Chicago.

“This is something schools are constantly looking at and trying to figure out. How to be creative with finances, and get the job done that they expect us to do.”

—  Margo Empen, Dixon Public Schools superintendent

Sauk Valley Bank and Trust Co. of Sterling bid on the bond, which will mature in 2025 and have a rate of interest of 4.97%.

As board member Jon Wadsworth pointed out, in the area of school financing the $650,000 in bonds is a relatively small amount. “Feels like a trial run,” he said.

“It’s been a very smooth process for you,” Noble said.

McKenzie pledged to visit the district and do a “Bonds 101″ discussion as the district’s debt restructuring schedule takes shape.

These bonds won’t be used for a specific project, however – they will be placed in an escrow account on March 8 through an agent, BOKF National Association of St. Louis, and invested in U.S. Treasury securities. The proceeds will be used to pay the refunded interest payments and principal for outstanding 2017 and 2019 bonds.

By approving the $650,000 bonds at this time, the district meets the deadline of Feb. 28 from the local taxing bodies of Lee and Ogle counties.

Subsequent steps in the plan will be for the district to repay these bonds during the 2024-25 school year. This is a matter of timing, designed to manage the cash flow of bond payments to maintain that bond tax rate of 60 cents.

Starting in 2025, the first short-term borrowing opportunity takes place. The district will borrow $4 million to pay for the state-mandated 10-year health, life and safety survey, new technology and any needed curriculum.

In 2030, the district will borrow $4 million for new tech and curriculum. In 2035, borrowing another $4 million it can pay off the 2036 and 2038 revenue bonds. In 2040, borrowing $4 million will again be used for tech and curriculum upgrades. Clear of the debt service bonds in 2045, the district will be free to borrow up to $10 million, if it desires.

The 2045 date is important, because it coincides with the expiration of the tax increment financing district and the addition of the TIF properties being entered into the tax rolls.

The financial model is similar to the one used at Urbana District 116, which borrows $3 million over three years to upgrade its technology, paying down the lower-interest loan before the equipment becomes obsolete.

Noble said during a presentation at the January board meeting only about 10% of school districts have adopted this short-term borrowing model.

Empen said that districts that don’t have a large tax base need to be “creative” with finances.

“This is something schools are constantly looking at and trying to figure out,” Empen said. “How to be creative with finances, and get the job done that they expect us to do.”