Fresno Unified taxpayers are now paying taxes on five separate bond measures that were approved starting in 1995 and totaled more than $1.2 billion in bonds sold to pay for school improvements.

But the cost to taxpayers has been considerably higher because of debt service costs, which includes interest and costs associated with refinancing. The estimated cost of debt service for those five bond measures when fully issued is approximately $2.3 billion, district spokeswoman Nikki Henry said Wednesday.

And if voters approve Measure H, the $500 million bond measure on the November ballot, the debt load for the six bond measures would climb to $3.6 billion.

The district will continue collecting taxes simultaneously for Measures A, K, Q, X, and M through 2027. Taxes on Measure A will expire that year, 32 years after voters approved it.

Fresno Unified taxpayers pay for bond measures through their property taxes that are collected by the Fresno County Tax Collector’s Office in December and again in April. The current bill for a Fresno Unified taxpayer contains 18 separate lines for FUSD taxes, of which eight are identified as REF or REFI, indicating bonds that have been refinanced.

Refinancing has saved taxpayers $170 million since 2010, Henry said.

The tax rate for each of the 18 lines adds up to $214.22 per $100,000 of assessed valuation. And that tax rate could soar to $239.22 per $100,000 of assessed valuation — or $717.66 for a home with an assessed valuation of $300,000 — if voters pass Measure H.

If that happens, Fresno Unified taxpayers will be footing the bill for six bond measures simultaneously until taxes on the oldest bond measure expires in 2027.

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How Bond Measures Work

Bond measures are a way for school and community college districts to raise money to pay for facilities improvements, including new buildings. In California, they require approval from 55% of voters to pass.

Municipal entities like school districts can issue general obligation bonds that rely on repayments through property tax revenues raised over a number of years. Such bonds typically provide income tax benefits for purchasers.

But the cost of the bonds themselves represent only a portion of the total costs borne by taxpayers. Any homeowner with a mortgage can relate. With today’s interest rates of 6.4%, a homeowner who borrows $240,000 to buy a $300,000 home will pay $702,436 — nearly three times the amount loaned — before the lender hands over the deed.

The same happens with bond measures, which can vary in cost depending on interest rates. And a district’s creditworthiness can determine whether it gets the best rates.

Fresno Unified recently announced that Moody’s Investors, one of the “big three” credit rating agencies, had affirmed the district’s Aa3 rating, Moody’s fourth-highest.

According to the district’s news release, the Moody’s report state that Fresno Unified’s “finances will stay sound despite projected spend downs, benefiting from prudent management, conservative budgeting practices and an adopted reserve policy.”

Different Types of Bonds

But the cost of the bonds can also depend on what type of bond they are. “Current interest bonds” pay interest semi-annually over a fixed term and tend to have a lower cost. “Capital appreciation bonds,” on the other hand, have a higher cost because of a built-in delay in the maturity date.

After the real estate market collapsed in 2008, many school districts were hard-pressed to raise revenues to cover their bond payments to investors. Revenues depend not only on the tax rate but also on assessed valuation. When property values plummeted, districts couldn’t compensate by raising tax rates — the cap is $60 per $100,000 of assessed valuation — so they opted to sell capital appreciation bonds, or CABs. The presumption by school districts was that by the time those bonds came due, property values would have rebounded. But CABs in effect pushed off indebtedness to future generations of taxpayers.

Their high costs — the debt service cost for some CABs was as much as 23 times the original bonds’ prices, making them the equivalent of “payday loans” — drew the scrutiny of California legislators. Assembly Bill 182, which passed in 2013, limited debt repayment costs for school districts to no more than 4 to 1 and limited the debt repayment timeline to no more than 25 years.

Fresno Unified’s CABs

Fresno Unified sold some bonds as CABs in Measures K, Q, and X, Henry said.

As an example, 15 Series G bonds sold in the Measure K authorization were registered in October 2011 as having a purchase price of $55,570,914.90 and a value at maturity of $293,335,000 — more than five times the original bond amount.

The maturity dates ranged from August 2021 through August 2041, according to the registration documents.

In addition to those Measure K bonds, the district sold $59.4 million in Measure Q bonds as CABs from 2011 through 2015 and $21.5 million of Measure X bonds as CABs in 2018, Henry said. “Fresno Unified has since taken advantage of favorable market conditions to refinance/restructure the CABs, generating taxpayer savings,” she said.

Such a restructuring happened earlier this year when the board approved a resolution to refinance older bonds. The supporting documentation provides some insight about the costs and benefits of refinancing. To refinance $53 million in bonds from Series E of Measure Q and for the “2015 General Obligation Refunding Bonds,” the district’s costs included a finance charge of $210,000, a “true interest cost” of 5.7%, proceeds to the district of $30.7 million, and total debt service to final maturity of $37 million.

The refunding was expected to produce estimated savings of $3 million and also allow the district to maintain its stable tax rate, the district said in an agenda report on the resolution.

At this point, the only bond measure with remaining bondng capacity is Measure M. Henry said about $60 million out of the $325 million bond measure remain unissued.

“The majority of M is tentatively planned to be spent by mid-year 2025/2026, but we have some deferred maintenance funds planned through mid-year 2026/2027, and just the Roosevelt project is scheduled out through mid-year 2027/2028. These are tentative timelines and are subject to change,” she said.

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The Overall Costs of Bonds

Fresno Unified’s two most-recent bond measures, X and M, and the proposed Measure H included estimates of total costs to taxpayers in tax rate statements attached to the ballot language. The total debt service for Measure X’s $225 million bonds was estimated at $558 million; for Measure M’s $325 million in general obligation bonds, the total debt service was estimated at $916 million.

For Measure H’s $500 million in general obligation bonds, the total debt service is estimated at $1.3 billion. Fresno Unified would collect a tax on Measure H through the 2065-66 fiscal year.

The longer time frame was chosen for several reasons and is subject to change, Henry said.

“This was based on conservative bond program assumptions, e.g. future assessed value growth of 3% annually (vs. the recent 10-year annualized rate of 4.8%, the 25-year of 3.8% and the 40-year of 3.65%), conservative interest rates of 5.25%-6.0% (vs. the current market of ~4%) and the final bond issuance in 2033 (with a financing term of 33 years),” she said. “Should assessed values grow higher than projected, interest rates remain low or bonds issued sooner than planned, the final term of tax would be shorter than conservatively projected.”

If voters approve it, Measure H would raise the district’s tax rate to $239.22, the highest among Fresno County school districts. Right now it’s second-highest at $214.22 per $100,000 valuation.

For the owner of a $300,000 home, the tax would go up from $641.58 to $716.58 annually, or about $6.25 per month. That’s on top of the other taxes that are also collected for the county, State Center Community College District, and any special taxing districts.