Dr. Jorgensen's Highland Highlights - June 17, 2019
June 18, 2019
It has been stated that the Highland Community School District will be able to maintain the current tax rate for taxpayers in the district, for the next eight years even if the $3.7 million dollar bond issue were to pass. That is a bold and very unique statement. How is that possible and why can that statement be made with confidence?
Property taxes for a school district are determined by formula with only a few items actually being under control of the school district. For example, the majority of the general fund for a school district is based on a variety of formulated numbers from the state of Iowa based on enrollments, valuations of property and special programming like Special Education, English Language Learners and Talented and Gifted. The majority of dollars generated (usually around 80%) in the General Fund go towards salaries and benefits of employees. The district is not able to increase these funds and must budget accordingly.
Physical Plant and Equipment Levy (PPEL) is another property tax also based on a formula. This levy is voted upon every 10 years. It cannot be used for salaries, but rather can be used for new construction, purchase of busses, boiler repairs, purchase of technology and other large expenses such as real property. A school district is allowed up to $1.34 to be levied per $1,000 and the Board is allowed to levy an additional .33 cents without a vote. Highland currently levies $1.00 and the Board .33 cents.
The Management Fund is a unique property tax fund and one of the few where the Board has discretion over how much can be levied. It a fund that most school districts use to help keep property taxes from fluctuating big swings. It can be used for property and casualty insurance, legal settlements and early retirement benefits. The Highland School District has proactively used this fund to begin saving for a significant Early Retirement offering in the next couple of years. Early Retirements are used to help control salary expenses associated with the General Fund. This will be the account that will be key in maintaining the property taxes over the next eight years if the bond issue were to pass.
Being proactive in the use of this account, the district has built up a balance to cover their needs, potentially for more than a year or two in the Management account. This gives the district the flexibility to not need to levy as much or potentially not at all as they have in the past, thus assisting in controlling the tax rate. It is projected and anticipated that district valuations will continue to grow over the next few years. New construction supports this assumption. However, if there would be a big drop in enrollment or valuations were to not increase at the rate that is assumed, the district will be able to manipulate the Management levy to maintain the property taxes as promised. This is only possible in a scenario where there is significant growth in valuations for the district and this is unique. $3.7 million is a very small bond issue and the payoff would be in eight or nine years. The numbers have been confirmed by Piper-Jeffray, who handle bonding for the majority of districts in the state of Iowa.
