Effort on to sell zero interest loanVoters in School District 200 are being offered an interest-free loan, and district residents may be seeing smiley-face signs around the area. Above the faces are slogans, “$11 mill!” and “0 percent.”
By: Bonnie St. James, The Hastings Star-Gazette
Voters in School District 200 are being offered an interest-free loan, and district residents may be seeing smiley-face signs around the area. Above the faces are slogans, “$11 mill!” and “0 percent.”
Those who are actively working to pass the bond referendum have put out the signs as reminders of the $11 million saving in interest the district will receive if the referendum passes because of the 0 percent to low interest rate the district will receive on the bond.
Residents in the School District vote on the bond issue in November.
The Minnesota Department of Education announced recently the names of school districts qualifying for interest-free or low-interest bonds through the Federal Reinvestment and Recovery Act. The Hastings School District has been approved for $16,754,000 in interest-free loans, 22 percent of the state’s total allotment from the feds.
“I think the allotment from the state makes a strong statement about our need,” Supt. Tim Collins said. “And I think the fact that the board, superintendent and a citizen task force have all endorsed these projects also helped us.”
What it means is that if the $19.25 million loan the School District is asking voters to approve in November, $16.754 million of that bond (loan) could be interest-free. Typically, the bond would be at 4 to 4.5 percent interest over a 20-year period.
The savings on the one-time loan could amount to $11 million over the life of the bond.
When the district built the high school, it did so with a $45 million bond issue, but the total paid by residents of the district came to $65 million with interest.
Along with the interest-free loan, the economy works to the advantage of the School District if voters choose to accept the loan, according to Collins. Construction bids for cities, counties and school districts are coming in low because of the number of companies in competition for the work.
How it came about
The original Federal Stimulus package contained money for school districts – Title I, construction and Special Education. The money for construction didn’t make the final cut.
Phase II of the stimulus package, the Reinvestment and Recovery Act, contained the money for construction, and Minnesota was allocated $75.85 million for interest-free or low-interest bonds. The money was turned over to the Minnesota Department of Education to manage.
Because of the work done for the bond referendum in the district, the Hastings School District had its information and documentation ready for the education department. The federal government wants the money spent quickly; it is, after all, a package to stimulate the economy. Hastings projects are ready to go.
Besides Hastings, other school districts being offered interest-free or low interest loans. Should voters in any of these school districts turn down the referendum in their district, the money that district was offered will go back into the amount being offered statewide, making Hastings eligible for a larger amount.
How these bonds work
When a bond referendum passes, a large financial firm offers large investors the opportunity to loan the money to the school district. In lieu of interest, the federal government offers the investors sizable tax credits as an incentive to loan the money.
Hastings’ bond referendum
The $19.25 million bond issue voters in School District 200 will be voting on will have three parts: It includes $6.8 million for roofs, windows and tuck pointing at Kennedy, Pinecrest and McAuliffe Elementary schools and at the middle school. There is $8.45 million for heating and ventilation at McAuliffe and the middle school. And there is $4 million to improve the educational space at the middle school (fifth-grade classrooms) and Kennedy and McAuliffe Elementary schools (kindergarten classrooms.)