County Assessor James Cowan

County Assessor James Cowan discussed how the local tax rate affects the school bond issue.

Local property taxes can play into the overall outcome on a $195 million school bond issue as Stillwater residents prepare to vote on Feb. 14, Payne County Assessor James Cowan said.

Like county and city bonds, school districts use a school bond – a loan – to cover expenses such as maintenance on buildings. They are also used to acquire land and build new buildings.

As one bond is retiring, the school district starts a new one.

The way that taxes influence school bond issues relates to the “millage rates,” or property taxes, that are applied to the value of assessed property.

Payne County’s tax rate is set at 11.4%, which is lower than nearby counties, but the county would not save money by dropping the tax rate to 11% because millage rates would be increased to meet the bonding needs of schools, Cowan said.

Generally, when a school district sells bonds, it raises the millage rate to pay down the debt, which leads to an increase in property tax for residents.

Effect on the average family

Any tax increase for families would depend on how the bonds are issued.

“Stillwater schools cannot be indebted at $125,000,000 under state law,” Cowan said. “They can only be indebted up to 10% of their net assessed evaluation.”

They would be limited to $51,670,000 of outstanding debt at any one point in time. The way SPS can work within those limit is to break down the bond into smaller increments.

“When they were building new elementary schools, they issued bonds to get the money to pay the contractor,” Cowan said. “Then, as they paid the contractor, they sold more bonds and set their millage rate to cover the debt for that year.”

Interest rates determine how the bonds are issued.

“They may issue $25 million in bonds to finish the purchase of the shopping center and then they may issue some more bonds to demo it before they actually start building,” Cowan said. “It’s a multi-step process.”

Overall quality of life in the area

Cowan said he’s heard the argument that some people give, such as “I don’t have kids in school. I shouldn’t have to pay for this.”

Cowan encourages voters to take a look at the bigger picture.

“When you have good schools, that helps give you a overall higher quality of life in the area,” Cowan said. “That helps your value out. There’s a trade-off value in use versus bottom dollar.”

Considering other options

But school districts have little choice other than issuing bonds to cover expenses. One of the few options is having a corporate partner who can donate money to schools.

Cowan grew up in Bartlesville, where Phillips Petroleum was a great friend to Bartlesville schools. They helped build the football stadium and the track. The Coca-Cola distributorship that used to be in Bartlesville supplied a scoreboard.

“But as far as somebody coming in and being able to write $21,000,000 check to pay for (say), the Westwood School, that’s probably not going to happen,” Cowan said.

The millage rate, or tax rate

The millage rate is simply a property tax. One “mill” equals $1 per $1,000 of assessed property value.

Property taxes are calculated by multiplying the assessed taxable property value by the millage rate and dividing that sum by 1,000.

For example, if a person’s property’s value was assessed at $200,000 and the millage rate was 15 mills, the assessed property tax would be $3,000.

“There are (millage) rates that are built into every district,” Cowan said. “The county (millage rate) is 10.27 mills.”

County funds that have millage rates include the health department, a common fund, a building fund and sinking funds that fluctuate from year to year.

“The common fund is for schools and this goes collectively into one pot for all the different schools in the county,” Cowan said. “Then it gets dispersed out based upon the enrollment at the school.”

For the school districts, there are millage rates for a general fund and building fund.

“The sinking fund is what really dictates the rise and fall of the overall tax rate that (covers) the bonds that are outstanding to build the schools (and) to provide for buses,” Cowan said.

Compared to other counties

Compared to other counties like Jenks and Bixby, Stillwater has lower millage rates, but other counties have a higher tax base from things voted in years ago.

“I’ve seen millage rates as high as 130,” Cowan said. “Then, you’ve got rural schools (with a) millage rate of 75. They have to pass the bond issue. They’re much smaller and they try to keep the millage rates down so that they don’t punish the farmers.”

Cushing passed a couple of bond issues, and their millage rates went up, Cowan said. But they have seen a lot of growth and captured a lot of value in oil, so they have been able to lower their millage rates over the last few years.

“Overall, the tax rate is really pretty low here compared to the grand scheme of things,” Cowan said.

Oklahoma has done some good things with “capping” taxes, or limiting how much a state can tax its constituents, Cowan said.

Building with bonds

“The amount of the building fund is pretty limited,” Cowan said. The school can replace a roof on an old building or fix some plumbing.

“But to build new or acquire the land, you typically have to issue bonds,” Cowan said.

Typically, most school bonds are projected to not raise taxes.

“They tried to keep (taxes) as level as possible so you don’t have sticker shock on the bonds,” Cowan said. “They can do some projections as far as the growth. They can say, ‘look at what the school district has done in the past and where it may be going into the future.’”

The last few years Stillwater has experienced rapid growth, so values have been shooting up, Cowan said. In fact, the value has been going up faster than the capping rate.

At the end of the day

Cowan said that voters should look at the numbers and what’s been projected, as interest rates will be in constant transformation until the vote.

“I would make sure that if they didn’t max out their bonding capacity, what would you look at for payments, especially with interest rates rising,” Cowan said.

Typically, schools can get better interest with a bond versus an individual getting a loan from a bank, because a bond is a larger amount and is coming from a larger bank.

But Cowan cautioned that interest rates are still something to consider.

“If interest rates go up another percent, what does that look like? Another one percent a year makes a pretty substantial amount that you can be paying just on interest,” Cowan said.

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