The district is using wrap-around financing to create reduce the tax impact on residents for the facility plan. This is a common way for school districts and counties to provide predictable tax impact from a building bond. We've compiled a list of frequently asked questions about tax impact and debt structure to help educate our taxpayers. Click the button on the left to find your property tax impact with our tax calculator.
What is wrap-around financing?
Is this commonly used?
Can you compare wrap-around financing to something in my daily life?
So how much will my taxes go up if I vote for both bond questions on April 10?
Can you promise that my taxes won't go up any more?
If I vote against the referendum questions, will my taxes go down by $15 per month, like I have read elsewhere?
Why is this so confusing?
How can I find out more?
WHAT IS WRAP-AROUND FINANCING?
When a local unit of government issues bonds for a building project, property taxes are used to make the bond payments. Wrap-around financing is a technique used to create a predictable property tax increase that property owners can use to determine the impact on their monthly tax bill.
IS THIS COMMONLY USED?
Yes. Many school districts use wrap-around financing for new bond referenda. In addition, cities and counties, like Itasca County, will use this when a new bond is issued while previous bonds are still being paid off. A citizen committee looked carefully at options for ISD 318, and decided that wrap-around financing made sense for our bond questions.
CAN YOU COMPARE WRAP-AROUND FINANCING TO SOMETHING IN MY DAILY LIFE?
Let’s say you have seven years left on your first mortgage on your house, but you want a $30,000 loan (not including interest) to build an addition and garage. Your banker will offer you a ten-year second mortgage with a fixed payment of $320 per month. However, if that payment is too high for your current household budget while you are still paying off that first mortgage, your banker may offer to have you pay a much smaller amount on the second mortgage in the first seven years, and then a larger amount in the final three years when the first mortgage is paid off.
Current mortgage payment: $800 per month
Traditional Second mortgage payment: $320 per month
Wrap-around second mortgage payment: $80 per month for 7 years, then $880 per month for 3 years when the first mortgage is done
Your mortgage payment increases by 10%, and you continue to make these payments for 10 years.
SO HOW MUCH WILL MY TAXES GO UP IF I VOTE FOR BOTH BOND QUESTIONS ON APRIL 10?
If you own a $150,000 home, the two bond questions will cause your monthly taxes to go up by $8.30 next year, and the taxes for these school bonds will stay at that level for the next 19 years. Wrap-around financing gives you predictability.
CAN YOU PROMISE THAT MY TAXES WON'T GO UP ANY MORE?
No. Your total property taxes per month are determined by the Minnesota Legislature, Itasca County, your city or township and other taxing districts. And future voters might approve another school bond referendum. The only thing that the school district can say is: if you own a $150,000 home, the two bond questions on April 10th will cause your monthly taxes to go up by $8.30 next year, and the taxes for these school bonds will stay at that level for the next 19 years.
IF I VOTE AGAINST THE REFERENDUM QUESTIONS, WILL MY TAXES GO DOWN BY $15 PER MONTH, LIKE I HAVE READ ELSEWHERE?
No. Next year, the school district will continue to pay off existing bonds — those payments will be made until 2024. Meanwhile, the school district will still need to invest in more space, improved security and other projects in our elementary schools. Those problems aren’t going away, and if we don’t pass the April 10th referenda, we are very likely to find a different plan to issue new bonds for future projects — that will cause taxes to go up again to repay those bonds.
WHY IS THIS SO CONFUSING?
Property taxes are very confusing — unlike income taxes that are collected just by the state and federal governments, property taxes are collected by a lot of different places, and the formula used to compute property taxes is confusing. That’s one reason why school districts and counties use wrap-around financing — it helps make a complex tax system easier for voters to understand.
HOW CAN I FIND OUT MORE?
Contact the school district office via this form, or by calling 218-327-5723 or emailing firstname.lastname@example.org.