Mahomet-Seymour borrowing limit raised with HB4688, a look at how the referendum would affect residential taxpayers

*Editor’s Note: The Mahomet Daily team has spent months looking at issues around the Mahomet-Seymour School District referendum. Information has come by way of interview, FOIA, looking at the Champaign County GIS and listening to board and Bulldog Blueprint meetings. This article is part of a series that will examine financial and development information as taxpayers decide how to cast their vote on June 28.

Right before the spring 2022 legislative session came to an end on April 9, Illinois House Bill 4688 passed, allowing the Mahomet-Seymour School District to exceed the allotted borrowing limit of 13.8-percent of the Equalized Assessed Value (EAV).

According to an emails obtained through FOIA (Freedom of Information Act), Superintendent Lindsey Hall informed Mahomet-Seymour School Board members of this on March 25, days before the bill passed. 

“Because of the bonds that are already outstanding, we have $30 million in available debt, and are obviously asking our voters for much more than that,” Hall wrote.

That measure, a $97.9 million referendum to build a junior high, bus barn and to make other upgrades throughout the district as funds allow, will be on the 2022 primary ballot. Early voting begins May 19 while all votes must be cast by the June 28 deadline. 

In order to bypass the Illinois School Code regulation,

“No school districts maintaining grades K through 12 shall become indebted in any manner or for any purpose to an amount, including existing indebtedness, in the aggregate exceeding 13.8% on the value of the taxable property therein to be ascertained by the last assessment for State and county taxes;”

the district was required to get legislative approval. Senator Chapin Rose (R-Mahomet) attached the request to a bill focused on teacher professional development that had a likelihood of being approved. Five other school districts were also added onto the same bill. The limit will only increase, though, if the referendum is passed. 

According to Chief School Business Official Heather Smith, the debt will be “invisible, meaning that it will not go toward our debt limit in case of an emergency.”

Smith, with help from Kevin Heid from Stifel Nicolaus, a brokerage and investment banking firm, said the district’s EAV is $435,682,461 ($396,677,157 + $39,005,304 from Tax Increment Funding (TIF)). 

The district’s outstanding debt as of April 14 was $18,390,000, meaning that the available debt limit just a month ago was $41,734,179. Should the referendum pass, and with the help of IL HB4688, the district’s new outstanding debt would be $116,290,000, 26.69-percent.

The amount the district borrows, though, will be contingent upon market conditions. In calculating the increases taxpayers would see should the measure pass, Heid used a 3.5-percent interest rate. While banks set the rate at which interest is accrued, the Federal Reserve recently raised rates to 5.27-percent for a 30-year mortgage. That rate is expected to increase incrementally over the next year. 

“We could do it in one or more issuances, whatever is beneficial to the taxpayers at the time.  Again, we will not know for sure until it is time to borrow the money,” Smith said. 

Bulldog Blueprint made a recent update to their website stating, “The information found here is intended to give an understanding of the estimated impact that could be expected based upon various scopes/scales of projects. It should be noted that these figures are based on conservative estimates related to Equalized Assessed Value (EAV) growth, both immediate and further into the future, and estimated interest rates. These figures will change for early “order of magnitude” project estimates, until a time when the district could actually sell bonds following a successful referendum.” 

One reason the district pushed for IL HB4688 to be moved through in the spring of 2022 was to capture interest rates at the lowest they are expected to be in upcoming years, albeit higher than previous years. 

“If the legislature did not approve this now, the debt limit exception would not be acted on until at least Spring 2023,” Smith wrote in an email interview. “With looking at the potential of interest rates increasing from now until that period, there is a risk of having higher interest rates locked into these bonds.  Likewise, the delay in being able to issue the bonds, could result in higher construction costs due to inflationary impacts.”

The Mahomet-Seymour School District has worked on plans to build a replacement for Mahomet-Seymour Junior High since 2013, just three years after the district identified that the building was approaching over capacity. At that time, the building was projected to cost taxpayers $20 million, but the district questioned whether or not a referendum would pass. 

Instead, the district borrowed against sales tax dollars to build an addition onto the two-year old Middletown Prairie Elementary. The move did not require a referendum as an addition; only free-standing buildings require a referendum, even if a district has all of the money to make the purchase. 

Preliminary projections made before inflation and interest rates began to rise marked Mahomet-Seymour Junior High at $57 million. Whether that will hold true in a market that is seeing prices with a 17 to 23-percent increase from 2019 is yet to be determined. 

It’s also a mark that has been questioned by constituents who are asking the district to consider what the increased costs will do to their plan that has promised to bring needed classroom space throughout the district. While some taxpayers are willing to foot the bill for the proposed plan, others, looking at their recent tax bill which increased due to inflated home values, have asked if the plan is big enough for Mahomet-Seymour’s continued enrollment growth. 

Using 2021 EAV and the 2022 tax rate, the median Mahomet-Seymour homeowner is already paying more in property taxes than the median homeowner in other school districts throughout Champaign County. 

In looking at the median homeowner, it is important to note that half the people in Mahomet-Seymour pay more than $3370.99152 in annual property taxes to the Mahomet-Seymour School District, and half pay less than that amount based on assessed value. 

Should the referendum pass, the gap will increase:

In looking at the median homeowner, it is important to note that half the people in Mahomet-Seymour will pay more than $4056.06352 and half will pay less than that amount based on assessed value. 

Although Mahomet has seen some commercial growth since 2016, much of the tax burden continues to be covered by Mahomet-Seymour homeowners. 

Two TIF (tax increment funding) districts cover the east and downtown areas of Mahomet. Within TIF districts, all property taxes collected on assessed values greater than the value in the year the TIF was created are diverted to the TIF district, in this case, the Village. There is an exception in the East Mahomet TIF where 100-percent of the residential tax increment continues to go to each taxing entity and 50-percent of the commercial tax increment goes to the taxing bodies; the remaining 50-percent of the increment goes to the Village. The downtown TIF is set up like a traditional TIF, though, where 100-percent of the residential and commercial tax increment goes to the Village of Mahomet rather than to the taxing bodies like the schools, library, fire district, forest preserve, etc.  

As TIF dollars are used by the Village of Mahomet to encourage development in the designated areas, taxing entities, like Mahomet-Seymour School District, do not receive the full amount of tax dollars allotted to them during the life of the TIF district, typically 23 years. The idea behind TIF is that public money encourages development or growth within private development, increasing the tax base for all taxing bodies after the scheduled time expires. 

The East Mahomet TIF was set to expire in 2023 but was extended until 2031 in 2019; the Downtown TIF will expire in 2042.