CHICAGO - The Indianapolis Public Schools will likely decide next week whether to proceed with a long-delayed $278 million bond issue that would mark the first school-related financing that would require voter approval under a new Indiana law.

The debt would finance the third phase of the district's roughly $900 million, 10-year capital improvement plan launched in 2001. IPS has already issued roughly $450 million in bonds for the program. Plans last year to issue another $475 million were cancelled amid a growing taxpayer revolt over rising property taxes that eventually sparked a state-wide overhaul of the property tax system.

Since then, IPS has decided to trim its capital plan by about $30 million and cut in half the $475 million bond proposal, moving instead to push for a $278 million issue this year and another $165.5 million in 2015.

But in delaying the issue until this year, the district would now be required to put the bond proposal before voters. If it opts to move forward with the proposal, it would likely put the issue on the November ballot, said school officials.

The referendum is one of several new requirements for all new debt issuance across the state. IPS will also have to revise other aspects of the bond structure due to new requirements pertaining to maturity and debt service repayment.

"IPS has been willing to adjust its schedule to accommodate the realities of the property tax situation," superintendent Eugene White said in a statement on the new bond proposal. "The Phase 3 is not something new IPS is suddenly proposing. This is a reduced version of the plan presented in 2006, but considerably less expensive and with a lower tax impact."

The proposed bond issue would require a tax increase of roughly $104 a year per $100,000 of assessed home value, according to district officials. That's down from the original increase that would have meant a $185 increase per $100,000 of home value.

If it wins approval, IPS plans to issue the $278 million in three series over three years, according to its financial adviser, Colette Irwin-Knott with H.J. Umbaugh & Associates LLP.

Like many other city, county, and school officials, White lobbied heavily against aspects of the new property tax law, warning lawmakers that it would lead to a big drop in available and necessary dollars for public schools across Indiana.

Under the new law, referendums are now required on all government capital projects that cost more than $12 million, or more than 1% of the unit's total assessed value, as well as for all high school projects projected to cost more than $20 million, or for elementary and middle school projects that would cost more than $10 million.

The law also includes a 20-year cap on final maturities for almost all bonds - scuttling IPS' original plan to issue 25-year debt to cover the second half of their capital plan.

Debt service now must include regular and level principal and interest payments over the life of the bonds, and is also capped by new property tax limits that form the heart of the tax overhaul. Also called circuit-breakers, the caps will keep a homeowner's tax bill at no more than 1% of the assessed value of the house after 2010, rental property bills at 2% after 2010, and commercial bills at 3% after 2010.

Though IPS must now ask voters to approve any new debt, the drop that most homeowners will see in their bills beginning in November could bode well for the Indianapolis district, White predicted. State officials have said that homeowners can expect to see their property tax bills cut by about one-third by 2010.

Another bright spot for IPS is the state's decision to take over responsibility for all schools' general operating and transportation costs to mitigate the expected drop in local revenues.

Under its scaled-back Phase 3 proposal, IPS said it would renovate 32 schools rather than 56 as originally planned, and would need to issue up to $165 million more debt in 2015 to finance the final phase of the plan.

The district typically uses a lease-backed structure on its bond issues and sells its debt through the Indianapolis Public Schools Multi-School Building Corp.

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