DICKINSON – In October 2023, Dickinson School District voters overwhelmingly approved a $69 million bond referendum. Bond funds were earmarked for infrastructure improvements across the district, including expansions and renovations to Dickinson High School and security upgrades at elementary schools to improve student safety.

Proposed Measure 4, on the ballot in North Dakota’s November 2024 general election, could reshape property taxes across the state. If passed, the measure would prohibit state and local governments from levying taxes based on the assessed value of real estate, with certain exceptions. Specifically, it would allow taxes to be levied to pay off bonds, but would impose limits on the types of levies political subdivisions, including school districts, could levy.

LOCAL IMPACTS

The district secured a $15 million construction loan from the Bank of North Dakota at a fixed interest rate of 2% over twenty years. Given potential changes brought about by Measure 4, Dickinson Public Schools reconsidered its financial plan regarding the phasing of sales for the remaining $54 million of the original $69 million in taxpayer-approved bonds. After consulting with financial and legal advisors, district officials recognized a risk in the original plan to gradually sell and draw down the bond funds over several years.

“Because of the uncertainty and the limbo we are in right now, we are in danger of having an unfinished project,” said Dr. Marcus Lewton, superintendent of Dickinson Public Schools, referring to selling the bonds, totaling $54 million, before the November 2024 general election. “That would not be responsible – I believe.”

The concern is that Measure 4, if passed, could impose new restrictions on local governments, including school districts, on how they collect property taxes. While the measure would still allow taxes to be collected to pay off existing bond debt, it could complicate or limit the district’s access to the remaining bond funds if the sale of the bonds is delayed until after the measure’s potential approval.

To mitigate these risks and ensure full access to all bond funds approved by taxpayers in October 2023, Dickinson Public Schools has decided to sell the remaining $54 million in bonds within one year rather than over multiple years, thus avoiding potential obstacles if Measure 4 is approved.

“Traditionally, the sale of these bonds would be done over several years to meet construction needs,” said Stephanie Hunter, executive director of DPS, regarding the potential impact of Measure 4. “But given what we are facing, that risk is simply too high.”

This decision reflects a broader pattern of public institutions adapting to changes in legal and financial arrangements. As they look ahead to the general election in November, the district’s actions underscore the importance of anticipating potential challenges that could affect their ability to meet their obligations to the community.

The decision to sell the remaining $54 million worth of bonds at once is intended to align with the estimated tax impacts identified in the October 2023 bond referendum. The goal is to control how much taxpayers contribute annually to servicing the debt, even if the funds are drawn down all at once. According to the Congressional Budget Office (CBO), under favorable conditions, proactive debt management can help stabilize future fiscal impacts, although the exact impact will depend on various factors, including potential changes as a result of Measure 4.

Critics argue that an approach like the one the district is considering could result in higher short-term debt service costs because the district would have to pay interest on the full amount from the start, rather than just the portions that are drawn down as needed. The decision would lock in current interest rates, potentially protecting the district — and taxpayers — from future increases.

In a volatile economic environment, this could help manage long-term costs more effectively, even if it means slightly higher payments in the short term.

The tax impact should reflect the estimated tax impacts set during the October 2023 bond referendum and remain stable. The voter-approved bond repayment plan is designed to control how much taxpayers contribute annually to pay down the debt. Whether the funds are drawn down gradually or all at once, the total amount of repayment, including interest, should remain within the limits originally approved by voters. By securing the funds now, the district aims to keep tax rates predictable and stable and protect residents from potential disruptions should Measure 4 be approved.

Based on financial risk management principles, which suggest that setting a fixed interest rate can provide stability in an uncertain interest rate environment, the timing may be opportune.

As of August 2024, the municipal bond market is showing some promising signs despite the challenges it faced earlier in the year. Interest rates remain high due to aggressive Federal Reserve policies, which have driven municipal bond yields to their highest levels in over a decade.

However, the market was volatile, and fluctuations in bond prices and yields brought both challenges and opportunities. The first half of 2024 saw increased issuance of municipal bonds, driven by strong investor demand, particularly in the high-yield segment.

For school districts and other municipal entities, this means that while the cost of issuing bonds may remain high due to market volatility, there are also opportunities to secure low-cost long-term financing due to strong credit fundamentals and high investor demand in the municipal market.

According to the Municipal Securities Rulemaking Board (MSRB), the increased costs associated with issuing bonds in a volatile market are due to factors such as increased interest rate risk and transaction costs. These risks force school districts to consider issuing bonds sooner to secure more favorable interest rates and thus more effectively ensure long-term financial stability. Delaying bond issuance in a volatile environment could result in higher borrowing costs, which would impact the school district’s overall budget and financial planning.

According to the school district, this decision is about risk management.

They will hold their annual public budget hearing and input session on Tuesday, September 10, at 5 p.m. in the Professional Learning Lab, followed by their regularly scheduled board meeting.

This meeting provides an opportunity for community members to discuss the bond resolution and express their views on the school district’s annual budget.

Residents are encouraged to participate.

Regarding Action 4, the public can stay informed through the following resources:
● Secretary of State of North Dakota: Secretary of State
● BOLLTPEDIA: Ballotpedia
● Facebook: Stay local ND

LeAnn M. Stasiowski is the Community Pulse reporter for The Dickinson Press, covering education, business and cultural events. She profiles local businesses and entrepreneurs, reports on economic trends and developments in education, and highlights arts, entertainment and dining in the area. From attending school board meetings to reviewing local festivals and restaurants, LeAnn delivers comprehensive reporting that celebrates and informs the community.