Property value surge is good news for PW-S schools

The Port Washington-Saukville School District’s equalized property value is predicted to surge this year largely because of the Vantage Data Centers Lighthouse Campus, giving the district more flexibility in managing its more than $80 million referendum debt while perhaps providing some tax relief.

The district’s 2026 equalized property value is estimated to increase by 12.6%, according to equalized value estimates recently certified by the Wisconsin Department of Revenue, which will release final figures in October.

That increase is substantially higher than the state average of 7.5% and the 2% prediction the Port-Saukville School District used when planning to borrow $59.4 million approved by voters last year.

About half the 12.6% increase is attributable to the appreciation in value of existing property in the district.

The other half, however, is net new growth, in other words, new taxpayers that will now share the property tax burden.

“This is a combination of your existing property being worth more plus new taxpayers, new growth, new buildings, new neighborhoods, new investment in the community,” Brian Brewer, director of public finance for Baird, the district’s financial adviser, told the Port Washington-School Board last week before it authorized borrowing the final $10 million of the $59.4 million approved in last year’s referendum.

“Your net new growth is a little over 6% of the 12%, which is very strong,” he said. “Statewide, that number is generally around 1% to 2%, 3% in a growing community, but to have 6% of your 12% being net new taxpayers helps to spread out the levy over taxpaying residents.”

It is the net new growth that is significant for taxpayers, Supt. Michael McMahon noted.

“When the mil (tax) rate goes down, taxpayers don’t always feel it because if the value of their property increased, they could end up paying the same or more in taxes,” he said. “But when net new value goes up, those are new taxpayers chipping in.”

The equalized value of City of Port Washington property in the School District is predicted to increase 15.3%, with nearly 10% of that being net new growth, Brewer said.

The data center campus under construction on the north end of the city constitutes “a good chunk of that,” he said.

While the data center campus is a boon for the School District this year, it won’t continue to increase property values for the purposes that matter most to schools for many years to come because it is now in a tax incremental financing district.

The City of Port Washington delayed the creation of the district long enough for the value of nearly 2,000 acres that was annexed into the city and went from primarily farmland to a data center site to be applied to property values and tax rolls. But because the land is now in a TIF district, the increased value from improvements to the property — or so-called increment — will be used to pay for infrastructure improvements such as the extension of sewer and water service to the site rather than added to the tax rolls for an estimated period of 18 years, which means the School District and other taxing entities will have to wait nearly two decades to realize additional financial benefits from the project. When the infrastructure improvements are paid for, the full value of the $15 billion Lighthouse Campus will be added to the tax rolls. The initial surge in property values attributable to the data center campus, however, comes at a good time for the district. Although the district’s ability to spend on operations is limited by state levy limits, referendum debt service falls outside those limits, and the district’s increasing property value — and particularly its net new property value — as well as its financing plan put it in a position to pay off debt more quickly without increasing the burden on taxpayers and saving millions of dollars in interest costs.

Following the approval of last year’s $59.4 million referendum, the district borrowed $49 million, locking in the lion’s share of the money at a 4.59% interest rate for 20 years, providing stability and predictability over the life of the financing.

Last week, the School Board approved adding a short-term component to its financing strategy by borrowing the final $10 million for 10 years at an anticipated interest rate of  4.47%.

By paying off a part of the debt over 10 years rather than 20 — at what Brewer described as the shorter end of the interest rate curve — the district will save $70,000 to $80,000 annually that will be used to pay off the principal.

“Basically we’re keeping a portion of your total $59 million on the shorter end of the interest rate curve, allowing you to pay off debt faster,” he said. “This reduction in interest costs will pay off more principal so each year you’re paying it off a little faster.”

Also working in the district’s favor is the fact the $49 million it borrowed last year is earning interest, which can be used to complete the projects the money was borrowed for — the construction of a new Saukville Elementary School and maintenance projects at other schools — “or to prepay debt and lessen the future debt levy,” Brewer said.

In addition, the district’s AA- credit rating has been key in securing favorable interest rates. Brewer said the district will have S&P Global Ratings re-evaluate its credit rating this month ahead of the $10 million borrowing, adding that he expects it to remain the same.

The two-tiered borrowing approach gives the district an additional year — 21 total — to repay the debt, although the financing plan and an increase in property value that will provide more flexibility to pay off debt more quickly could result in it being paid off sooner to save millions of dollars in interest.

“With the things going on in your communities and paying down the debt and lowering interest costs, you’re going to be able to pay it off quicker and maybe not need any or all of that final year,” Brewer said.

And the impact on individual taxpayers is not likely to increase. Last year, the tax rate attributable to the 2025 referendum debt was 18 cents per $1,000 of equalized value. That is probably as high as it will go, Brewer said.

“I’m not going to say exactly what it’s going to be because there are variables, but ultimately it looks like 18 cents is the highest, and that’s already done,” he said.

The district’s total referendum debt includes about $25 million of the $49.4 million borrowed after the approval of a referendum in 2015.

“You’re in a great position for managing the overall debt portfolio of the district,” Brewer told the School Board.