In 1995 and 2008, voters in the Palo Alto Unified School District (PAUSD) approved bond measures that provide an essential source of locally-controlled funding to keep local schools safe and modern. Given the ongoing state budget deficit and cuts to education funding, without the 1995 Building for Excellence bonds ("B4E bonds") and 2008 Measure A Strong Schools Bond ("Strong Schools Bond"), PAUSD would not have funding to provide the facilities to accommodate student enrollment growth, classroom technology for 21st-century education and critical upgrades to protect the safety of our students and teachers.
The results of these investments can be seen at all of our campuses in the form of completed projects and ongoing construction. Other projects are in the planning stages and scheduled for completion in the coming years. Facility improvement updates and reports issued by the Citizens’ Oversight Committee (COC) can be found by visiting the “Strong Schools Bond page” on the PAUSD website.
Our national, state and local economies have changed dramatically since the passage of the B4E bonds and Strong School Bonds. As such, the Board of Education must make ongoing decisions regarding the sale and structure of the bonds in order to continue delivering the promised school facility improvements while also securing the best possible terms for local taxpayers. This process in analogous to how a homeowner may consider paying down or refinancing a home mortgage as interest rates or other market conditions change.
On June 12, 2012 the Board of Education voted to make important changes to the structure of the Strong Schools Bond that reflect current economic realities. While these changes require a short-term increase in the tax rate levied to repay the Strong Schools Bond, the move will save taxpayers an expected $800 million in future financing costs. The restructuring allows the District to issue primarily conventional, current-interest bonds with much lower interest rates and shorter terms than would otherwise be required. Without the restructuring, the District would be forced to issue primarily deferred interest bonds with maturities of up to 40 years, a substantially more expensive alternative.
The Board also approved the refinancing of the remaining B4E bonds, taking advantage of historically low interest rates. This refinancing will save taxpayers an estimated $1.5-$2.0 million in interest costs on the existing bonds.
Both moves are in response to dramatic changes that have occurred in the housing and municipal bond markets since the Strong School Bond program was approved in 2008. Growth in the District's assessed values has slowed dramatically, and the pace of future growth is uncertain. At the same time, while interest rates on conventional bonds have fallen, the rate on long-term deferred interest bonds have risen substantially.
Together, these actions enable the District to continue the Strong Schools Bond building program at its current pace, while minimizing the financing cost to District taxpayers. The combined bond tax rate for 2013 will reflect a rate of $60 per $100,000 in assess value for the Strong Schools Bonds, plus approximately $35 per $100,000 for the B4E bonds. This rate is expected to declined each year until 2023, when a long-term rate of $60 per $100,000 will be achieved.