Waiting for the state to pick up a portion of the school improvement project has its own financial costs. Bond yields have been at historic lows. Waiting has exposed Portland to higher borrowing costs over the life of the bonds. Just recently, the Federal Reserve raised interest rates, making any city borrowing more expensive.
Additional rate increases are expected. Construction costs will rise each year regardless of who pays, making any state contribution potentially smaller in scope. These two factors alone will add millions in additional costs to the same project in the future. Since the city’s aggregate debt service payments are declining, the impact of undertaking these school improvements makes sense today. The city does have other capital costs it needs to consider, but its public schools surely must be near the top of the list.