Dr. Jorgensen's Highland Highlights - October 29, 2018
Dr. Mike Jorgensen · October 29, 2018
On October 22nd, I attended a budget forecasting workshop in Cedar Rapids along with the Highland Business Manager. The conference was sponsored by the Iowa School Finance Corporation and Piper Jaffrey. The intent of the workshop is to project future budget needs based on enrollment trends, state aid and property valuations.
The news was much more positive than when we attended this workshop a year ago. If you recall, Highland had a big drop in enrollment a year ago and we came out of this forecasting workshop knowing that we needed to reduce $250,000 out of the budget to stay even. The district actually reduced about $300,000 in expenses prior to the 2018-2019 school year. The enrollment figure for resident enrollment was up this year and the district’s financial status is in better shape. While the district will need to be prudent in its expenditures, it appears the future is brighter than before. Home construction projections are to grow, which will increase resident enrollment and valuations in the district.
The news for property tax payers in the district is very positive. Four years ago, the district levy was over $16.30 per $1,000. For the current school year, the levy rate is $13.19. That is a drop of over $3.00 or about 19%. Projections show a continued decline in the property tax rate in the future. Why? What is causing this pull back in property tax rates?
There are three significant reasons why property taxes are falling in the Highland Community School District. The first was when the Riverside Casino and Resort came off the TIF for the county, which means they became part of the valuation in the district. Valuations are very important in determining tax rates. When the district completes the budget, a formula calculates the dollars the district is eligible to raise as a tax asking. That formula then spreads those tax dollars over the property values recorded throughout the district. Through the use of TIF, (Tax Increment Financing), municipalities typically divert future property tax revenue increases from a defined area or district toward an economic development project or public improvement project in the community. TIF subsidies are not appropriated directly from a tax entities budget, but the entity incurs loss through foregone tax revenue. Many cities and counties will use TIF incentives to invite new construction in the area. The casino was given a 10-year TIF. When the Casino became a part of the district’s valuation, it created a significant drop in property tax dollars needed from other sources to raise the funds needed. As a result the district’s property tax rate went from $16.30 to $14.78, then $14.19 and the current $13.19.
The current home building expansion that is going on in the district is the second reason why property taxes are falling. Several sub divisions and new homes being built in Riverside are increasing the valuation throughout the district, which is good news for property tax payers when it comes to school property tax. Increased valuations mean the spreading out of tax asking.
Some people believe that a school district has unlimited ability to increase property taxes without limitations. This just isn’t true. The school district really have about five numbers they really have any control of in the school budget. The school budget is formula driven. If school districts had more control, you wouldn’t see the massive consolidation and sharing that has happened throughout the state. When I started as a superintendent 20 years ago, there were over 600 school districts. We are just over half of that presently.
A school district must do a bond issue if they want to generate new property tax dollars for infrastructure/ construction projects. A 60% approval must be given in order to use property tax dollars. The district does have flexibility to bond using PPEL & Local Option Sales tax dollars through a board vote, but presently sales tax funds are scheduled to sunset and projects extending beyond 10 years are not currently available to bond against sales tax dollars. This brings us to the third reason why Highland’s property tax rate has fallen. The district refinanced a bond they had from a school bond issue for construction, which saved the district money and paid off the bond early. This also reduced the dollars needed, which means significant savings to property tax payers. The forecast is for another significant drop in our property tax asking for this next year. While it is too early to determine exactly what that rate will be because state aid for next year is still an unknown, it is safe to say that the rate will be lower.
