DICKINSON — In October 2023, voters in the Dickinson Public School District overwhelmingly approved a $69 million bond referendum . The funds from the bond were designated for infrastructural updates across the district, including expansions and renovations at Dickinson High School and security enhancements at elementary schools to improve student safety.
Initiated Measure 4, on the North Dakota November 2024 general election ballot, could reshape property taxation across the state. If approved, the measure would prohibit state and local governments from levying taxes based on the assessed value of real property, with certain exceptions. Specifically, it would allow taxes to be levied to pay off bonded indebtedness but would impose limits on the types of levies that political subdivisions, including school districts would be able to utilize.
LOCAL IMPACT
Because of the uncertainty and the limbo we are in right now, we could run the risk of having an unfinished project, which would not be responsible – I believe.
– Marcus Lewton, Dickinson Public Schools Superintendent
The District secured a $15 million construction loan with the Bank of North Dakota at a fixed 2% interest rate over the course of twenty years. With potential changes introduced by Initiated Measure 4 on the horizon, Dickinson Public Schools reconsidered their financial plan regarding the selling phases for the remaining $54 million in bonds of the initial taxpayer approved $69 million bond. After consulting with financial and legal advisors, district officials identified a risk with the original plan to gradually sell and draw on the bond funds over several years.
“Because of the uncertainty and the limbo we are in right now, we could run the risk of having an unfinished project,” Dr. Marcus Lewton, superintendent of Dickinson Public Schools, said regarding not selling the total $54 million in bonds prior to the November 2024 general election. “Which would not be responsible – I believe.”
The concern is that Measure 4, if passed, could impose new restrictions on local governments, including school districts, in levying property taxes. While the measure would still permit taxes to be levied to pay off existing bonded indebtedness, it could complicate or limit the district’s ability to access the remaining bond funds if the drawdown sale of the bonds is postponed until after the measure’s potential approval.
To mitigate these risks and ensure full access to all bond funds approved by taxpayers in October 2023, Dickinson Public Schools decided to sell the remaining $54 million of the bonds in one year ,rather than over multiple years, avoiding potential obstacles if Measure 4 is approved.
“Traditionally the sale of these bonds would take place over the course of several years, to meet those construction needs,” Stephanie Hunter, DPS business manager, explained regarding the potential impact of Measure 4. “But that risk is just too high with what we are facing.”
This decision reflects a broader pattern of public institutions adjusting to changes in legal and financial regulations. As the November general election approaches, the district’s actions underscore the importance of anticipating potential challenges that could impact their ability to fulfill commitments made to the community.
The decision to sell the remaining $54 million in bonds all at once is intended to align with the estimated tax impact provided during the October 2023 bond referendum. The goal is to manage how much taxpayers contribute annually to service the debt, even if the funds are accessed all at once. According to the Congressional Budget Office (CBO), managing debt proactively during favorable conditions can help stabilize future financial impacts, though the exact effect will depend on various factors including potential changes resulting from Measure 4.
Critics argue that an approach like the one the district is considering could lead to higher short-term debt service costs since the district will be paying interest on the full amount from the outset, rather than just on portions drawn as needed. The decision would lock in current interest rates, potentially protecting the district — and taxpayers — against future increases.
In a fluctuating economic environment, this could help manage long-term costs more effectively, even if it means slightly higher payments in the short term.
The impact on taxes should reflect the estimated tax impact amounts provided during the bond referendum in October 2023 remain stable. The bond repayment plan, as approved by voters, is designed to manage how much taxpayers contribute annually to service pay the debt. Whether the funds are drawn gradually or all at once, the total amount to be repaid, including interest, should stay within the limits originally approved by voters. By securing the funds now, the district aims to keep tax rates predictable and stable, shielding residents from potential disruptions if Measure 4 is approved.
Informed by financial risk management principles, that suggest locking in a fixed rate can provide stability in an uncertain interest rate environment, the timing could be beneficial.
As of August 2024, the municipal bond market is showing some promising signs despite the challenges it faced earlier in the year. Interest rates remain high due to aggressive Federal Reserve policies, which has driven municipal bond yields to their highest levels in over a decade.
However, the market has been volatile, with fluctuations in bond prices and yields creating both challenges and opportunities. The first half of 2024 saw increased issuance of municipal bonds, driven by strong demand from investors, especially in high-yield segments.
For school districts and other municipal entities, this means that while the cost of issuing bonds could still be high due to market volatility, there are also opportunities to secure favorable long-term financing due to the strong credit fundamentals and high investor demand in the municipal market.
According to data from the Municipal Securities Rulemaking Board (MSRB), the heightened costs associated with issuing bonds in a volatile market are due to factors like increased interest rate risk and transaction costs. These risks compel school districts to consider issuing bonds sooner to lock in more favorable interest rates, thereby managing long-term financial stability more effectively. Delaying bond issuance in a volatile environment could result in higher borrowing costs, which would impact the overall budget and financial planning of the school district
This decision, according to the school district, is about risk management.
They will hold the annual public budget hearing and input meeting at the Professional Learning Lab on Tuesday, Sept. 10, at 5 p.m., followed by their regularly scheduled board meeting.
This meeting will provide an opportunity for community members to discuss the bond resolution and express their views regarding the school district’s annual budget.
Residents are encouraged to attend.
In regards to Measure 4, the public can stay informed through the following resources:
● North Dakota Secretary of State: Secretary of State
● BOLLTPEDIA: Ballotpedia
● Facebook: Keep It Local ND
LeAnn M. Stasiowski is the Community Pulse reporter for The Dickinson Press, covering education, business and cultural events. She profiles local businesses and entrepreneurs, reports on economic trends and educational developments, and highlights arts, entertainment and dining in the region. From attending school board meetings to reviewing local festivals and restaurants, LeAnn provides comprehensive coverage that celebrates and informs the community.