By JAN LARSON McLAUGHLIN
BG Independent News
The finance task force for BG City Schools stepped into the touchy subject of how local taxpayers can best pick up their share of the tab for new or renovated buildings.
The temperature of the discussion Monday evening spiked a bit when the topic moved from applying for state funding to paying for the local portion.
The group seemed to come to the consensus that there would be no harm starting the process to get state funding. But it appears that finding middle ground on how to fund the local share will be more difficult to achieve.
Consultant David Conley, from Rockmill Financial, listed the options for funding on the local end:
- Property taxes.
- Income taxes.
- County sales tax.
- Municipal tax.
The district currently collects 0.5 percent traditional income tax, which brings in about $3.4 million a year. The same percentage in earned income tax would collect about $2.4 million a year.
For the sake of calculating how much it would cost district residents in property or income taxes, Conley asked the task force members to select some base numbers for the average annual income and the average home value in the school district.
Based on numbers from the U.S. Census Bureau and current tax collections, the group narrowed in on $50,300 for annual income, and $161,300 for the home value.
The group also viewed statistics showing that 19 percent of district residents receive Social Security, 17 percent get retirement income, and 11 percent are on public assistance.
So the question becomes – what type of tax is affordable for the most people in the district?
Wade Gottschalk, a member of the tax force, suggested that relying on income tax can be risky since those numbers can dip when the economy sees a decline.
“It is risky,” Conley agreed. He showed several years of the district’s income tax revenue that showed decreases after the recession in 2008.
Property tax revenue is different because the county auditor collects however much is needed to make the bond payments, Conley said.
“So you don’t have the same risks,” he said.
Conley wanted a consensus on the average income and home values so he could make calculations on how much it would cost local residents depending on the type of tax the district chooses to use. Exact calculations can’t be made until the facilities task force presents its recommendations to the finance task force.
Task force member Rich Chamberlain accused Conley of ignoring the impact on agricultural land owners.
“All this is is a sales pitch,” to get taxes passed for the district, Chamberlain said.
Conley said if given the value of agricultural land in the district, he would factor it into the formula.
Grant Chamberlain asked if Conley was “insulting our intelligence.” He said if the owners of farmland are not considered “you’re going to have the same uproar” as last time when the the bond issue failed solidly in the rural areas.
Conley replied he was just trying to get through to them that basic property values need to be determined to calculate how much millage it will take to support a project.
The first part of the meeting reviewed some of the information presented at a previous meeting on the Ohio Facilities Construction Commission.
“The state’s assistance is important,” Conley said.
However, right now the state funding is on hold.
“As of today, the state is not making any determinations how much funding is available,” Conley said. “It’s in a state of limbo until at least February.”
The OFCC is at the mercy of the state budget process.
“It’s pretty unlikely the state funding will be cut,” Conley said. “But I’m not optimistic about seeing some acceleration to get schools served.”
So in the meantime, “the state’s not making any commitments to do anything.”
The state has helped build about 1,200 school buildings, spending about $12 billion since 1997. But like every state funding program, it’s up to the General Assembly to fund it.
If Ohio were to encounter another economic downturn, the state could yank the funding, Conley said. Since the poorest school districts have already been helped, the OFCC program is more susceptible than it was a decade ago, he said.
And that makes some task force members a little nervous.
“It’s not a guarantee. It’s a desire, it’s a wish that can change,” Conley said.
Bowling Green is currently ranked 506 out of 609 school districts on the OFCC building list. It has been estimated that it would take 10 to 15 years before the district would rise to the top for funding. Based on current calculations, the state would pay 17 percent of the construction costs.
The one OFCC program that might benefit Bowling Green City Schools is the Expedited Local Partnership Program, which would give the district credit for money spent on buildings.
When the state has the money, it would pay the district to pay off the bonds.
“This is the only one that would be a realistic option,” Conley said of the ELPP option.
Task force member Bud Henschen suggested that the district “force the issue” with the school board to apply for the funding.
“I can’t see setting back and doing nothing,” he said.
But Conley said the district can’t apply until the facilities task force concludes its study and the finance task force decides on funding. However, he said the district could ask the state to update the district’s enrollment projections and facilities’ assessments, so that step is completed.
A couple task force members suggested that the district get the assessed property valuations updated before the value of the Rover pipeline tax revenue is added in. But Conley pointed out that he is working with several school districts now that are waiting for pipeline tax revenue.
“Let me say one word, ‘casinos,’” Conley said, talking about the financial help promised that never materialized from casino taxes.
Some districts are waiting to use pipeline dollars for buildings.
“That’s a very risky assumption,” Conley said.
Task force member Richard Strow noted the increase in the portion the state would pick up for Bowling Green from 13 percent in 2015 to 17 percent now.
“We need to lock in that percentage yesterday,” he said.
However, Conley cautioned that Bowling Green’s state percentage may go up – but the district will be locked in at the rate when it enters the ELPP program.
“It’s always a moving target,” Conley said of that percentage.
If the district goes with OFCC funding, it would have to follow state building guidelines. But Conley said most school architects use the state guidelines anyway. Some of his clients think they can do projects less expensively without the OFCC, but that has proven unlikely.
“I’ve never seen it pan out that way,” Conley said.
And if the district wants building features that are beyond the state’s standards, the district can pay the additional cost, he said.
Many task force members mentioned the growing construction costs that will only make the buildings more expensive if the district waits to act.
Rich Chamberlain said if the district had started the process in 2015, it wouldn’t have to meet the new requirement of constructing storm shelters. Conley said that future standards may require schools to be “built like Fort Knox” since more schools experience shootings than tornadoes.
Construction costs are going up about 7 percent a year, with steel costs rising as much as 11 percent. Interest rates will add a great deal to the projects. And tariffs are adding as much as 19 percent to housing construction costs, according to task force member and Realtor Sandy Rowland.
“At some point, we really have to ask ourselves, when are we going to pull the trigger,” Conley said. “It won’t be getting less expensive to build.”
The discussion on how to fund the local portion of the school building costs will continue at the next financial task force meeting on Jan. 22, at 7 p.m.
The meeting was streamed live on Facebook at “@BGFINANCIALTF”.
