Property Tax Frequently Asked Questions
Please click on the individual questions below to see the answers. If you don’t see your question, please email us at info@supportferndaleschools.com
- What Is a Bond Request?
- How Much Would the Bond Change My Property Taxes?
- How Are Education-Related Property Taxes Calculated?
- How is the Annual Bond Rate Calculated?
- If My Property Assessment Increases, Will My Bond Payment Increase?
- How Much Interest Do We Have to Pay the Municipal Bond Investors?
What Is a Bond Request?
The State of Washington does not fund construction or major maintenance of public schools. To raise enough money for major capital construction projects, school districts must ask local voters to approve the sale of municipal bonds. Money collected from school district property taxes is then used to pay the principal and interest on those bonds.
For this bond request, payments to bond investors will occur over a period of up to 22 years, which spreads out the cost of the construction and reduces the annual impact on your property taxes.
How Much Would the Bond Change My Property Taxes?
In Table 1 below, you can find an estimate of the annual cost of only the new bond, based on the annual assessed value of a property and the annual new bond rate.
One of the goals of the District is to maintain a fairly stable bond rate over time. Between 2020 and 2022, the total bond rate (existing 2006 bond + proposed new bond rate) is designed to stay steady at $1.66 per thousand dollars of assessed value, then remain at 1.66 after the 2006 bond is paid off in 2023.
The 2023 bond rate of 1.66 is based on having sold all $112 million in bonds to investors and the total value of all property in the school district increasing by 1% per year from 2020 to 2023.
Table 1: Estimated Annual Cost of New Bond Only
In Table 2 below, you can find an estimate of how much you have paid, and will pay, in annual total education-related property taxes. The new bond will take effect in 2020, so your total education-related property taxes will go up that year.
Due to changes by the state legislature in response to the McCleary decision (the State Supreme Court ruled the Legislature was underfunding basic education and violating the State Constitution), the Total Rate increased in 2018. But these same changes also mean the Total Rate decreased in 2019 because our local education levy rate dropped from $3.48 to $1.50 per $1,000 of assessed value. How the Total Rate is calculated is explained in the next question.
Table 2: Estimated Annual Total Education-Related Property Taxes
How Are Education-Related Property Taxes Calculated?
In Table 3 below, you can see an estimate for a $350,000 property, showing the owner’s annual portion of the costs of a new high school, critical facility repairs and upgrades, District-wide safety and security improvements, and a modernized Performing Arts Center. Their total Education-Related Property Taxes are in the final column.
Each rate in Table 3 is the cost per thousand dollars of assessed property value. The Annual Proposed Bond Rate is based on the principal and interest due to investors that year, and the Total Assessed Value of All Property in the District. The Total Annual Education Levy Rate is calculated by adding the state and local levy rates plus any bond rates.
The 2023 bond rate of $1.66 per thousand dollars of assessed value is based on having sold all $112 million in bonds and the estimated Total Assessed Value of All Property in the District increasing by 1% per year from 2020-2023.
One of the goals of the District is to maintain a fairly stable bond tax rate over time. Between 2020 and 2022, the total bond rate (existing 2006 bond + proposed bond rate) is designed to stay steady at 1.66, then remain at 1.66 after the 2006 bond is paid off in 2023.
1 – By State Law, the Local Levy Rate is either $2,500 per student or $1.50 per $1,000 of Total Assessed Value of All the Property in the District, whichever is less. This levy used to be called an M&O Levy (Maintenance and Operations), but because it is used to maintain education programs not repair buildings it has been renamed “Enrichment Levy.”
2 – The State Basic Education Levy Rate is determined by the Washington State Legislature.
How is the Annual Bond Rate Calculated?
Your portion of the annual bond cost is determined by the annual Bond Rate. This rate is determined by how much the District must pay bond investors that year and the Total Assessed Value of ALL the property in the District. When the annual Total Assessed Value of the All Property in the District increases, the annual Bond Rate decreases.
For Example:
If the annual principal and interest due to investors was $10 million and the Total Assessed Value of All the Property in the District that year was $10 billion, the bond rate would be $1.00 per thousand dollars of assessed value ($10,000,000,000/1000 x $1.00 = $10,000,000).
If the Total Assessed Value of All the Property was $20 billion, the bond rate would be $0.50 ($20,000,000,000/1000 x $0.50 = $10,000,000).
Both bond rates would bring in the required $10 million due to investors.
If My Property Assessment Increases, Will My Bond Payment Increase?
An increase in the assessed value of your property doesn’t mean your portion of the annual bond payment will increase.
Once the bonds are sold, all the property owners in the Ferndale School District will pay a portion of the principal and interest due to investors each year based on the annual Bond Rate. The annual Bond Rate is determined by the amount due investors and the value of ALL the property in the District.
For example, most of the property owners in the Ferndale School District had their assessed values increase for the 2019 tax year, but the estimated bond rate went down, from $1.33 per thousand dollars in 2018 to $0.92 for 2019. So, a $300,000 home in 2018 would have an annual bond cost of $399 (300 x $1.33), but if that home increased in value to $350,000 in 2019, the annual bond cost would be $322 (350 x $0.92).
How Much Interest Do We Have to Pay the Municipal Bond Investors?
The bond levy rates on this page are very conservative estimates based on current market conditions, but we won’t know the actual interest rates until the District markets the municipal bonds to investors. For planning purposes, the estimated interest rates and timeline for selling bonds are noted below:
$37.35 million in bonds on June 1, 2019 at 4.98% interest for 19.5 years
$37.35 million in bonds on December 1, 2020 at 5.16% interest for 20 years
$37.35 million in bonds on December 1, 2021 at 5.42% interest for 20 years
For a total of $112 million in municipal bonds
One of the goals of the District is to maintain a fairly stable bond tax rate over time, which is why they aren’t selling the bonds all at once. In the table below, the total bond rate (existing 2006 bond + proposed bond rate) is designed to stay steady at 1.66 between 2020 and 2022, then remain at 1.66 after the 2006 bond is paid off in 2023.
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