By JAN LARSON McLAUGHLIN
BG Independent News
One week after losing its elementary bond issue, the Bowling Green Board of Education was back at the drawing board – not for buildings but for basic operating expenses.
The board voted unanimously Tuesday to put two renewal levies on the ballot in March. Voters have approved these levies in the past. But this time around, they will be tried as continuing levies rather than for five years.
The logic is that voter fatigue occurs when the same levies keep going back for approval. Plus it’s not as if the district will stop needing those existing funds.
“A renewal means the community is continuing to give you what they are already giving,” explained the district’s financial consultant, David Conley. “But a renewal does nothing more to advance the school district at all.”
Bowling Green City Schools has not gotten any new tax money since 2010. Voters defeated an income tax attempt in 2012.
“I have never seen a school district have no increase in expenses in a decade,” Conley said.
The district’s annual expenses were $30 million in 2009 – and remained the same through 2018.
“This is akin to holding your breath,” Conley said. “At some point, you’re going to have to start breathing again.”
Here’s a refresher on the levies coming due for the school district:
- 4.2-mill current expense levy, generating about $2.4 million a year, which expires in 2020.
- 1.6-mill emergency levy, generating about $1 million a year, which also expires in 2020.
- 0.5 percent income tax, generating about $3.2 million a year, expiring in 2022.
Those add up to $6.8 million a year. Failure to renew those would be disastrous for the district, Conley said. With that in mind, the board agreed to turn the two that expire in 2020 into continuing levies in March.
To get an issue on the March ballot, the board must file it with the Wood County Board of Elections by Dec. 18. And before then, the board must hold two meetings and ask the county auditor to certify the necessary millage.
There are upsides to turning the five-year levies into continuing levies.
First, the district could reduce the number of times it has to ask voters for the same money. Without changing the taxing structure, the district may face 20 ballots over the next 25 years, Conley said.
Second, having continuing levy support would help the district’s five-year forecast. Since that income would then be guaranteed, the district could get by with lower reserves. Right now, without continuing levy support, the district should not allow its balance to go below $8 million, Conley said.
Third, having continuing levies would allow for more precise long-term planning.
Other benefits to the district of continuing levies include higher bond ratings, preservation of rollbacks for taxpayers, and the ability to capture tax revenue on new development in the district.
But there are downsides.
First, some voters like the district having to come back every five years for their approval – even though it’s not new money.
Second, the existing emergency levy can’t become “continuing” unless it becomes a “substitute” levy. The rollback for taxpayers would be preserved, but the required ballot wording is very confusing – even for people who work with school finances for a living, like Conley.
“I’m concerned about educating our community that it’s no new taxes,” board member Bill Clifford said.
And if the voters rejected the levies based on their continuing status, the board would not be able to renew them – and rollback benefits would be lost for taxpayers.
The board was in agreement that keeping the rollback benefits for taxpayers is important. In 2013, the state decided to stop paying the 12.5 percent rollback on school levies – leaving the entire bill for taxpayers to foot.
The state will continue paying that percentage on any levy amounts approved prior to 2013. So if the millage is kept the same, and voters approve a renewal, they will still benefit from the rollback.
Conley also addressed the issue of the district’s general fund balance – which has been criticized by some citizens asking why the district sought so much for a new building, when the balance sits at about $15 million.
That large of a general fund balance is necessary, Conley explained.
The state requires that type of balance. If the district failed to renew a levy, or a recession hits, that balance could quickly be wiped out.
“You guys would be toast,” Conley said earlier this year. “You would start to hemorrhage pretty significantly. If you want to be financially smart, you not only need to pay your expenses, you need a reserve.”
However, the district could survive with a much smaller safety net if it changed to a less risky tax structure – and passing continuing levies is one way to do that.
“So the bottom line is, we have money we can’t use unless we do something about it,” board member Norm Geer said. “There’s no reason for us to have $6.8 million for a safety net.”
Freeing up those funds would mean more could be used on such expenses as maintenance, programming, or hiring people to perform jobs that people are currently doubling up on. Conley talked about the risks of deferred maintenance – with buildings and employees.
“All the sudden they break down,” he said of buildings, which pipeline tax revenue has now been dedicated toward. “The same thing happens to people.”
Other issues of note, according to Conley, include the fact that the school district’s three levies coming due are equally split between income and property taxes. Unlike property taxes, income taxes are only paid by residents, not by businesses. So shifting over to more income taxes would be more expensive for average homeowners, since they would have to pick up the costs for businesses – including pipelines.
Board member Paul Walker asked Treasurer Cathy Schuller to come up with a five-year budget based on the district passing continuing levies in March. Schuller said she could have that budget forecast for next Tuesday’s board meeting.
