.

OPINION: Despite High School Bond Debate, Debt By Itself is Not Dangerous

The BHS Board of Education upheld their fiduciary responsibility by making the right business decision.

 

Recently, Ms. Greenwell, when discussing the upcoming BHSD bond vote, stated “Debt is dangerous in an unstable economy and we should avoid it.”

This is an incorrect statement for many reasons.

Debt by itself is not dangerous. But when you take on more debt than you can financially handle, there is the rub.

So, what are the facts underlying the new BHSD High School bond?

This bond will be a general obligation bond guaranteed by the taxpayers. The payments that BHSD will make will be derived from the new millage we will be paying. It will not put the district in any additional financial risk. No general funds will be needed to make the bond payments. Not dangerous.

A check on the district’s borrowing power is a State rule that limits the amount of general obligation debt that schools can issue to 15% of the assessed value of all taxable property within the School District’s boundaries. When this bond is fully in place, the district’s debt to assessed value ratio will be 2%, significantly below the limit. Again, not dangerous.

From the taxpayers’ standpoint, we must be able to shoulder the cost of the millage on our tax bills. Not getting into the “is it a tax increase or not” discussion, this new tax will be only 3% of your annual property tax bill. Again, not dangerous.

Everyone takes on debt, whether it is your own personal house mortgage or a basic business loan or bond. Almost no business owner does not have a banker that works with them to leverage their equity. Avoiding debt when you are purchasing a large, long term asset is seenby most as being “too risk adverse” and detrimental to your long term financial health. Similar to stuffing all of your money under your mattress, avoiding investment and debt at all costs is
almost always a bad business decision.

Ms. Greenwell is entitled to make whatever financial decisions she wants with her own money. But the school board is bound to make conservative and prudent financial decisions based on the facts available at the time. In this case, they have upheld their fiduciary responsibility by making the right business decision.

Howard Baron,

Bloomfield Township

Mary April 27, 2012 at 01:47 AM
Brilliant analysis! I learned so much, and the fact that our debt to assessed value ratio is only 2% with the passage of the bond, and that it is so far below even what the state recommends - all has convinced me that it makes financial sense to vote YES! Thank you, Mr. Baron.
-Elizabeth- April 27, 2012 at 02:00 AM
Thank you for your well thought out and reasonable opinion.
Amy Cardin April 27, 2012 at 02:35 AM
Howard, thank you for this. I appreciate the countless hours you have spent analyzing and communicating the complex financial issues faced by our district.
Neal Charness April 27, 2012 at 02:59 AM
This pretty much dispels all the allegations made by people saying the bonds are too expensive, etc., etc. Thank you Howard for a rational dispassionate discussion. I can't see any argument with these facts except on philosophical non-financial or non-educational grounds.
Ken Jackson April 27, 2012 at 11:22 AM
Mr. Baron, Thank you for this.

Boards

More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »