The Olentangy Board of Education will decide what to do with $18 million in bond residuals in the coming month.

The Olentangy Board of Education will decide what to do with $18 million in bond residuals in the coming month.

The bond residuals are principal funds left over when a capital improvement or new construction project is completed under budget, district Treasurer Becky Jenkins told the board Feb. 9.

The residuals are from two bond issues: $77 million in bonds the district issued in 2005 to build an elementary school, a high school and to pay for improvements to Shanahan Middle School which have a residual of $2 million; and $89.9 million in bonds the district issued in 2008 to build three elementary schools, a middle school and to expand Olentangy High School which have a residual of $16 million.

The projects for the 2008 bonds came in well under budget because the economy crashed and construction companies were bidding lower than anticipated, Jenkins said.

"The development committee would have planned the projects and bonds in 2007," Jenkins said, "We had no idea what the economic climate was going to do. And the district cannot go to bid without having the bonds sold and the money in place."

The Ohio Revised Code restricts the use of bond residual funds to paying for additional capital improvement projects that are "consistent with the description of the original bond purpose" and for transferring to a bond retirement fund, Jenkins said.

The residuals currently sit in the corresponding project funds, said Brad Sprague, a financial adviser to the district.

The board would have to approve moving the money to a different fund Sprague said, and a decision would need to be made because the federal government would tax the money were it not reallocated.

In November, Superintendent Wade Lucas formed an ad hoc committee to look at what to do with the residual funds.

The committee recommended transferring $13 million to the district's bond retirement fund, $3.2 million for an energy improvement project including lighting and heating and cooling system upgrades and $1.8 million for smaller projects such as roof and paving repairs.

Jenkins said recommended putting the $13 million in the bond retirement fund to avoid an increase in property taxes that would be necessary to pay the district's annual debt service which is about $28 million. According to documents from the Delaware County Auditor's office the district has about $340 million of debt.

The district's bond revenue is collected at 8.72 mills and is estimated to bring in $27.8 million dollars this year. By law, millage must be increased if the debt service cannot be met.

The district has used a no-new-millage approach to bond issues, made possible by a number of factors including the rapid rate of new construction and increase in property valuation in the district. Jenkins said the district doesn't want to increase the debt millage, and wants to hold down property taxes.

However, the county auditor's office recently performed a sexennial reappraisal, which found that the property values in the district decreased about five percent.

That decrease can affect the amount of property tax revenue that the district brings, as is the case with the district's bond revenue, Jenkins said.

"This is the first year that the district has experienced a precipitous drop in assessed valuation as a result of the county's sexennial reappraisal of property. Over the past decade the district has accumulated a reasonable balance in its bond retirement fund. Several projects have also come in well under budget creating what is being referred to as bond residual. It is planned for the lion's share of this residual to be transferred to the bond retirement fund. The district will draw down on this balance over the next several years in order to avoid the need to raise bond millage rates on the taxpayers thereby maintaining the no new millage pledge. Barring further significant deterioration of the district's assessed valuation - not expected - the district will be able to keep its no new millage pledge even though the property values have taken a negative turn that could not have been anticipated at the time the pledge was made," Jenkins and Sprague told ThisWeek in a written statement.

Jenkins said if the $13 million were not used to cushion the reappraisal effect, the district would have "to increase the millage collection by the highest of 1.43 mills which would cost the average taxpayer - about a $300,000 home - approximately $131 per year. We don't want to do that."

District officials did not respond by press time to the question of whether reducing the debt would prevent any millage increases.