Facilities

Ferndale Sinking Fund Executive Summary

What is a sinking fund?

A Sinking Fund millage is a limited property tax, considered a "pay-as-you-go" method for funding building maintenance and infrastructure projects. No debt or interest expense is incurred with a Sinking Fund. The tax is levied each year and the revenue generated from this levy is designated to building upgrades or repair. Sinking Fund expenses are audited by the Michigan Department of Treasury for compliance annually. The Sinking Fund revenues cannot be used for general fund expenditures (i.e., to keep schools open).

Why do we need a Sinking Fund if we just passed a bond in 2012?

Over the past decade, there have been severe cuts to the state's per pupil allocation, which is the primary source of funding for the district's ongoing operations. The original amount of work identified in 2012 was over $30 million but the law on bond funds prohibited going out for that amount. Without the Sinking Fund millage, major repairs would need to be paid for with operating funds that would otherwise be used to support educational needs of the district.

Since funds are already strained to meet educational needs, repairs may need to be postponed which may result in more expensive repair costs in the future. The District has identified several projects that fall under either the category of school safety or building and site repair/improvements (see below). With the passing of the Sinking Fund, the District could plan projects systematically which may help to avoid paying for costly emergency repairs and lower bonds in the future.

The District has identified $13,000,000 worth of projects over the next 15 years that are critical school safety or building and site repair/improvements (see below). With the passing of the Sinking Fund, the District could plan projects systematically which may help to avoid paying for costly emergency repairs and lower bonds in the future.

What is the difference between a sinking fund and a bond?

Most school construction and improvements are paid for with bonds, which is really borrowing money. We have to pay that money back with interest and fees, and have a special tax dedicated to paying off each bond. Because it's complicated, schools usually only use bonds for major projects every 10 to 20 years. That makes sense for new structures and additions, but not so much for things like roof replacement or heating system upgrades. The sinking fund allows schools to pay for these kinds of smaller renovations as we go, without having to borrow money or pay interest. It also means that we're not letting our schools deteriorate for ten or fifteen years while we wait for a new bond project.

What is the school district asking of residents?

We are asking for an increase of 1.3 mills ($1.30 per $1,000 of taxable value of your property -approximately 50% lower than your market value) for 15 years. This would raise about $850,000 per year for facility improvements or about $13,000,000 in fifteen years. Below is the impact on your property taxes.