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School District Bond Sale Success Could Lessen Tax Increase

by on February 24, 2015 11:20 AM

Monday night's meeting of the State College Area School District produced some encouraging news for taxpayers.

The tax hike needed to pay for the high school renovation project might turn out to be smaller than was originally expected.

District business administrator Randy Brown told board members that they may not need to tap into the full 4.2 percent tax increase included in the preliminary budget for the 2015-16 fiscal school year.

The budget includes a 1.9 percent increase for operating costs, which is the maximum amount allowed by a state law called the Act 1 Index. The budget also includes that 4.2 percent tax hike, which was authorized by a referendum vote and will be used pay off the State College Area High School renovations.

“The actual number, because of the result of the bond sale last week, will be less than that amount,” Brown said, referring to the 4.2 percent increase, but added that the final numbers won't be known until later.

Under Pennsylvania law, districts must max out the Act 1 Index before applying for an exception that would allow the district to impose the additional taxes. The final tax increase won't be known until the Pennsylvania Department of Education provides an estimate under the PlanCon program -- which reimburses school districts for major construction projects.

As a result, the school board voted unanimously to apply for the Act 1 Index exception.

The school district issued the bonds last week, selling them at a premium rate and earning $85 million in proceeds.

The bond sale was held over the course of two days so that the district could offer them to area residents first. It wanted residents to hold some tangible financial stake in a new high school that they voted for by referendum.

“We had a very good sale last week,” Brown says. “It was a result of some very hard work by our team.”

Board member Jim Leous thanked Brown for the immense effort put into the sale, which went better than expected. Leous says that the attention to the local market was a great idea and he was happy to see it come to fruition.

“We heard from residents who said they wanted to participate in the sale and I’m glad we listened to them,” he says. “I’m glad we set it up that way. Thanks to our underwriters and financial advisors for the hard work.”

The district offered $30 million in bonds on the first day, bringing in $29 million in orders. The largest portion went to individual investors, highlighting just how strongly locals felt about getting a piece of the project.

A total of $51 million was raised on the second day, the institutional order period, and the total provided the district with the full amount in debt authorized by the referendum vote of $85 million.

The board also approved a motion to apply for a $2 million grant from the Alternative and Clean Energy Program. This would be used for the high school renovation project, which could help pay for heating and cooling system upgrades in the North Building.

The high school renovations have placed an emphasis on going green. The district hopes that the Commonwealth Financing Authority will provide the grant and assist in that effort.


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Zach Berger is the managing editor of He graduated from Penn State University in 2014 with a degree in print journalism. Zach enjoys writing about a variety of topics ranging from football to government, music, and everything in between.
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