We acknowledge that the price tag is considerable. But we believe now is the best time to make this investment in the future. Interest rates are low right now; we don’t know what they will be in another 5 years. The estimated savings in interest costs alone on this project is more than $20 million over 20 years.
We need the facilities now to meet the job demands of the present—and future. Vision 2020 allows us to plan for the future today. If voters approve the referendum, Western will be authorized to borrow the necessary funds over five years. The property tax impact on the owner of a $100,000 property is estimated not to exceed $3.25 per month or $39 annually.
- Coleman Center - Projected Budget: $26.5 million
- Kumm Center - Projected budget: $10.1 million
- Integrated Technology Center - Projected budget: $32.6 million
- Diesel and Heavy Equipment Center - Projected budget: $4.1 million
- Greenhouse - Projected budget: $1.6 million
- Parking Ramp - Projected budget: $4.9 million
What makes now a good time to borrow?
1. Interest rates are at historically low levels; the estimated savings in interest costs alone on this project is more than $20 million over 20 years.
In fact, interest rates are less than the rate of inflation.
What does that mean in dollars and cents? For each 1.00% reduction in the borrowing interest rate on a $79,800,000 financing, the total interest cost estimate over 20 years is reduced by $10,000,000.
- Average 20 Year Tax-Exempt interest rate over past 25 years is approximately 5.50% (Source: Thomson Reuters MMD index)
- Current market rates are approximately 2.00% below the 25 year historical average
- Market opportunity to avoid $20,000,000 of interest cost
The graph below shows the historical trends for interest rates.
The Municipal Market Data (MMD) Index is produced by Thomson Reuters. It shows Tax-Exempt Interest rates for large AAA rated municipal issuers. This index provides data going back 30 years.
2. Costs continue to rise.
Historical inflation rates indicate a 4.96% average increase in building costs since 1967. If we wait, costs will increase.
3. Western’s current long-term credit rating is “AA+” by Standard & Poor’s Rating Agency (S&P)
- Only 1 higher category on S&P rating scale
- Highest current rating for District based on S&P’s credit rating factors
- Provides access to high investor demand and lower cost of financing
Additionally, the S&P report indicated:
Simultaneously, Standard & Poor's affirmed its 'AA+' long-term rating, with a stable outlook, on the district's existing general obligation promissory note debt.
The short-term rating reflects our opinion of the district's:
- Very strong capacity to pay principal and interest
- Low market risk profile as it maintains strong legal authority to issue long-term debt
- Record as a frequent issuer that regularly provides ongoing disclosure to market participants.
The long-term rating reflects our opinion of the district's:
- Large and diverse economy, centered on the La Crosse metropolitan area;
- Stable finances, coupled with very strong reserves; and
- Moderate overall net debt with very rapid amortization.
4. Western’s Debt Capacity
The chart below shows Western’s capacity for incurring debt:
Western has non-referendum-related capital authority to borrow funds to maintain facilities and improve technology. Because we are a technical college, there is an expectation that we will have the latest technology for students to keep instructional programs up to date, including computers and other equipment like CNC machines and patient simulators. We are continually issuing and paying off debt for those purchases (seen in blue).
Since the 1980s, we have gone for referendum roughly every 20 years in order to complete larger projects. The last referendum (1996) has been paid off. The current referendum that will be put to vote on November 6 is seen in green.
The following chart illustrates the district’s property valuation, divided by county. Note that Western serves all or parts of 11 counties. Each year we review the data to see if there are any areas that are underserved. The goal is to share the cost proportionally, so that the share of total tax aligns with the percentage of students served.
|Comparison of Valuation, Tax Share, Population, and Student Enrollment|
|County||2011 Valuation||Share of Total Tax||Share of District Population*||Share of District Enrollment|
|Other District Counties||$102,808,480||0.62%||1.32%||2.15%|
*Based on population updates provided by the Wisconsin Technical College System
How This Impacts You
For the owner of a $100,000 property, the tax impact will be a maximum of $39 per year for up to 20 years. That’s about $3.25 per month. That’s the cost of a coffee drink and less than a gallon of gas.
$39/year is the most taxpayers will pay, and 20 years is the longest they would have to pay.