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Taxpayers could save millions on school bond

In two moves, the Federal Way School District may save taxpayers up to $8.4 million.

The first move — selling construction bonds in four increments instead of five — will save the district several hundred thousand dollars. But a new government program could save taxpayers millions if the board goes in that direction.

The $149 million construction bond, which was approved in May 2007, was originally scheduled to sell off bonds in five increments of $25 million. However, due to favorable market conditions for bond sales, the district sold more than that the first two years, at $45 million and $27 million. The district will again sell more than the original estimate when it sells another $45 million in January.

"Every time you sell, there are costs associated with it," Chief Financial Officer Sally McLean said. "Now, instead with four, we are saving some money."

By selling the bonds in four increments rather than five, the district is saving taxpayers about $300,000 in costs associated with selling the bonds.

When it comes time to sell the bonds in January, there are a couple of options for the district.

In the past, the district has gone for tax exempt municipal bonds. However, this year as part of the government's stimulus package, there is a new option for bonds called Build America Bonds. They are sold as taxable bonds, but the federal government reimburses 35 percent of the interest paid, which for the construction bond, would save taxpayers $8.1 million in interest payments.

BABs are fairly new and have been around since July. So far, the Everett School District and Lake Washington School District have opted for them, McLean said.

Since the program is new, school board members asked questions regarding its safety.

"The risk is there, but it's minimal," McLean said.

McLean said she had talked to several school districts and two financial advisors about the BABs, and she feels confident in them.

If the district went with the tax exempt bonds as in the past, the district would receive $45 million from the sale and would incur $37.1 million in interest. However, with the BABs, the district would receive $44.7 million from the sale. But with the government paying back 35 percent of the interest, the interest payments would be $29 million.

Bond facts

The $149 million bond will rebuild five aging schools: Lakota Middle School and Lakeland, Panther Lake, Sunnycrest and Valhalla elementary schools.

The district’s transportation center, central kitchen and maintenance facilities will be rebuilt and relocated to an area near Celebration Park.

The bond will trigger $20 million in matching funds from the state to provide improvements to 23 Federal Way schools built before 1990, with the exception of Federal Way High School. Renovations will include repairing items such as heating, roofs and plumbing.

The district plans to complete the projects by 2013.

The bond will maintain the current property tax rate at $4.19 per $1,000 valuation of property as previous bonds expire.

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