BISD could issue tax ‘refund’ for island residents

Published 1:30 am Thursday, March 5, 2026

Taxpayers on Bainbridge Island could receive a $1.3 million break as soon as June 1 — though not all at once.

At a special session Feb. 26, leaders at the Bainbridge Island School District heard a presentation from its financial consulting team about the pros and cons of refinancing two longstanding bonds, in an effort to both increase the district’s debt service savings and lower costs for property owners.

Favorable market conditions provided, the district could stretch out the remaining costs to contributing property owners from both its 2014 and 2016 bonds to save about $181,000 and $1.1 million, respectively, until the bonds mature in 2033 and 2035 — a roundabout way of “refunding” taxpayers for the amount they agreed to pay ten years ago.

“When you limit the total amount annually that will be saved, spread out amongst the tax base, it’s important that the community understand that there’s no windfalls of cash in the future,” said BISD facilities director Dane Fenwick.

Bainbridge Island has one of the highest levels of voter support for educational funding in the state, explained Cory Plager, managing director at educational finance firm DA Davidson. It’s also one of the most affluent: DA Davidson estimated that in 2026, the tax base on the island is about $13.6 billion, between commerce and property values.

However, the school district’s tax rate has not kept up with inflation, he noted, and if the board takes no action between now and 2029, tax revenue will fall.

“The tax rate has slowly declined over time, and that is because your community’s been expanding; there’s new construction, new taxpayers, and you haven’t been raising taxes as fast as the community has grown. But your rates have been stable the last four years,” said Plager. “It looks like your tax rates will go down about five cents per thousand, starting for this tax year, and those tax bills will start to be sent out soon.”

David Trageser, another managing director at DA Davidson, explained that refinancing during an uncertain economic climate can be difficult. Typically, school districts opt not to refinance if interest rates are too high or if the outcome of refinancing would not accrue enough savings for taxpayers to make the process’ time and effort worthwhile.

“Some members of the board may remember that we were here two and a half years ago, considering a bond refunding. It was market sensitive, and this one is market sensitive as well, and it got put on the back burner. We don’t do that often. And so, if we can’t beat the savings goal, that’ll be the same place here,” said Trageser.

Bonds and levies are fundamental streams of funding for school districts that draw on contributions from local residents via property taxes, with voter approval. A common mnemonic in the educational world, “levies are for learning, bonds are for building,” summarizes each measure’s purpose — though capital levies can also be used for infrastructure projects. Levies are typically shorter-term measures that pay for programs as tax dollars roll in, whereas school districts use bonds to recuperate the cost of a project that was paid for up front, plus interest.

Because bonds represent an investment into a project by taxpayers on behalf of a school district, each district has a “bond rating,” not dissimilar to a credit score, evaluated and given by loan and risk assessment firm Moody’s. BISD was recently knocked down a peg — from AA2 to AA3, due to its recent financial crisis and resulting low fund balance. AA3 is still considered “high grade” by Moody’s, S&P and Fitch.

“When we talk about the downgrade in August, we’re going through a massive wave of downgrades across the state, so you’re not alone in this challenge,” said Plager, assuring BISD leadership. “We’re noticing that as there are declines in enrollment, and the challenge with inflation…costs of labor and materials increase.”

Moody’s August report said that two factors could lead BISD to receive the next downgrade, Trageser explained: one, if BISD shows an inability to outperform current multi-year projections and rebuild its fund balance, and two, if the ongoing decline in enrollment steepens, and it is not met with sufficient budget adjustments. Nearly 40% of Moody’s bond rating score comes down to a school district’s finances and enrollment, Plager said.

However, Trageser added, passing the supplemental levy was a big positive influence, from a bond rating perspective.

BISD superintendent Amii Thompson noted that the metrics Moody’s uses to create ratings, while standardized, may not tell the whole story for districts in Washington.

“We are compared nationally to a lot of states where a 15% fund balance is the norm, and that’s just certainly not the norm in Washington state,” said Thompson. “So much of it is beyond our control, and that’s probably why there have been 30 downgrades in the state of Washington, because it’s a national organization, and that’s not comparable.”

If the school board decides to refinance, the team at DA Davidson and BISD’s legal team would work together to set the parameters of the measure, a savings target, new dates and an interest rate. The deadline to refinance is June 1.