Opinion

A fair solution

The Sisters School Board is suffering an embarrassment of riches. It not only passed, in the May election, a $20.5-million bond issue to build a new high school. It subsequently learned that the district expects to earn $1.9 million in interest from investment of the bond proceeds before the bills have to be paid.

While that might produce cheers in some towns, in Sisters it produced a controversy that split the school board down the middle. Two members said: "Let's return the interest money to the taxpayers" by paying down the the bonds. Two others said: "Let's use the money to enhance the new high school." The fifth member has been seeking a compromise.

As someone who has written about school budgets, taxes and bonds for years, I was intrigued. I had never run into a directly comparable dispute. My interest was not just academic, though. When my wife and I moved to the Sisters area last year we became school district taxpayers.

In a former life, I published letters to the editor from scores of retirees complaining that they could not afford constantly increasing school taxes while their own incomes stayed flat. Our editorials used to offer these folks Clinton-style sympathy: We feel your pain. But now, their pain is mine. Even Bill will discover the difference.

In any case, the Sisters controversy over bond interest prompted a small research project. This is a brief report of the findings.

First, it is common among Oregon school districts to spend interest earnings from bond reinvestment on the projects for which the bonds were issued. I was assured of that by, among others, Ozzie Rose, longtime executive director of the Confederation of Oregon School Administrators.

Moreover, the pre-election debate in Sisters included no discussion of interest earnings. So the board could not be accused of violating a pledge regarding this money; it made no promises one way or the other.

Nonetheless, many people clearly feel that promises were made to bring the total project in at a cost of no more than $20.5 million -- the amount of the bond issue. That figure was cited frequently in pre-election news stories. And the March 12 board resolution sending the bond question to the May 15 ballot said in its second "whereas" "...the costs of the Project are estimated to be not more than $20,500,000."

Even The Bulletin, in October, editorially urged the Sisters board to give the money "back to the taxpayers" because: "The District sold its bond issue to the voters based on a $20.5 million design and it should stick with it." It will be interesting to see if the paper adopts the same stance regarding interest earned on the $47.8 million bond issue for which the Bend-La Pine School District won approval in November.

So, what can you make of this? Who's right, and who's wrong?

Unfortunately (because we all prefer clear-cut decisions), both sides are right in the sense that they are taking honorable positions and making defensible arguments. I come down in favor of the guy in the middle, School Board Member Jeff Smith, who proposed a compromise that has been adopted -- spending $1 million of the anticipated interest on the school project (pushing it to a potential $21.5 million).

The remaining $900,000 of interest money would be held in reserve in case of unanticipated need.

I think this is a fair solution because it splits the difference between opposing positions of virtually equal merit. And it possesses the less obvious virtue of holding quite a bit of money in reserve in case interest earnings turn out to be less than expected, which is entirely possible.

Incidentally, while the school board itself deserves no credit for this, it's gratifying that the first-year tax rate produced by the new bond issue ($1.39 per thousand) is less than the $1.49 projected in the pre-election literature. Most people won't know that because tax rates aren't printed on property tax statements any more. But it's true. And it should make you happy no matter which side you're on in the Great Bond Interest Debate of 2001.

Don Robinson retired last year as editorial page editor of The Register-Guard in Eugene. He is The Nugget's proofreader.