A new Bowling Green High School will cost an estimated $70 million — but another $44 million also will be collected to pay for interest and future maintenance.
A resident contacted the Sentinel-Tribune about the estimated amount to be collected by an income tax for the new high school, which led to some questions about the actual cost of the project, which is on Tuesday’s ballot.
That amount has been estimated at $44 million over the $70 million cost of the project.
It is similar to the principal and interest payments made when buying a home, said David Conley, with Rockmill Financial, who is the financial adviser to the Bowling Green City Schools Board of Education.
The board placed a combined property tax and income tax on Tuesday’s ballot to raise $70 million for a new high school and renovations to the existing building.
Funding for the project is being split 70% property tax and 30% income tax.
A 3.95-mill, 30-year property tax is needed to repay $49 million in bonds that will be sold to fund the project.
According to the Wood County Auditor’s Office, that 30-year tax is estimated to collect $3.13 million annually and is estimated to cost the owner of a $100,000 home $138.25 per year.
It will collect an estimated $93.76 million over its lifetime.
The additional amount of the property tax collections above the $49 million needed for the construction and renovation will be used to pay the interest on the bonds, Conley said.
“It’s the norm when you borrow money,” he said.
Conley had estimated an interest rate of 5.25% when he sat down with board members in May to discuss how to finance the project.
He explained Thursday that the district will have the ability to borrow money based on the tax-exempt interest rate market, which is different from the taxable mortgage rate market. Typically, interest rates for municipal bonds are around 2% lower than mortgage rates.
The national mortgage rate on Thursday for a 30-year loan was hovering just over 7%.
Conley said voters have to approve a tax that will pay for both the principal and the interest of the $70 million borrowed for the project.
The 0.5% income tax, which will be collected for seven years, will bring in an estimated $26 million. That number was determined by using the district’s 2021 actual collection numbers of $3.8 million.
The 30% share of the project paid for by the income tax is $21 million.
Interest rates have been increasing and the difference is due to the estimated interest cost of borrowing for seven years, according to Cathy Schuller, treasurer for Bowling Green City Schools.
Someone with the district’s median income of $66,215 would pay an estimated $331 a year in income tax, according to Conley’s estimates.
A maintenance fund for the long-term care of the building is built into the income tax collection, Conley said.
Combined, $119.76 million is estimated to be collected over the life of these two issues.
“The actual costs for interest will not be known until the bonds are sold. At this point, that’s all estimated,” Conley said.