Benefits of Bonding
There are two critical areas in which revenue bonds serve as a major benefit to completing school infrastructure projects: project timing and construction cost savings.
Revenue bonds allow the school district to leverage future statewide penny revenues to complete projects today.
Several years ago, DMPS completed construction and renovation projects on a Pay-as-You-Go basis. While that is a fine slogan, it tied the district’s hands by limiting spending to only the annual statewide penny revenues received each year. This annual revenue constraint required the district to delay projects.
As illustrated in the graph below, the Bonding Program allows the District to complete Phases 1, 2, 3 & 4 construction projects up to six years faster than if they would have been financed through a Pay-as-You-Go approach. Projections indicate that through Pay-as-You-Go, Phase 4 would not have been completed until 2024; by using revenue bonds, Phase 4 is anticipated to be completed in 2018.
Construction Cost Savings
Each year a construction project is delayed, overall construction costs increase. Industry literature suggests construction costs have increased up to 7% just in the past year. However, to be conservative, this analysis assumes a 5% projected construction cost inflation rate for each year a project is delayed.
As illustrated in the graph below, total Phases 1, 2, 3 & 4 construction costs will be approximately $58,697,771 less when financed through revenue bonds.