Thursday, May 31, 2012

Levy options.

There seems to be quite a bit of confusion surrounding the various levy options under consideration by the Worthington School District administration and the Board of Education. This post is an attempt to demystify the options.

Before doing so, some background might be helpful. There are two distinct sets of "needs" that are going to be included in any funding request eventually. These two needs have two distinct checking accounts and a law that says that you can't commingle the funds. Let's first identify the needs.

First is the need for additional operating money. The vast majority of operating funds go to pay employee salaries and benefits, but these funds are also used to pay other day to day operating costs like electricity, natural gas, diesel fuel, paper and some larger ticket items like the tuition that Worthington pays to charter schools or community schools to educate kids in our community. To see where the money is being spent today, click here.

Second is the need for additional capital improvement money. This money is typically called "bond money" and can be used to pay for items (things) that will be in use for more than 5 years like technology, buses, roofs, painting, repaving, lockers, alarm systems and so forth. By law, this money cannot be used to pay for salaries and benefits. The administration has recommended that we borrow 40 million dollars over a period of 15-18 years. The 40 million dollar figure comes from the maximum amount that can be borrowed without increasing the current 3.8 mill burden on residents for capital improvements. Note that if we didn't borrow this money, the 3.8 mill burden would be 3.0 mills next year and eventually, as previous bonds are paid off, go to zero. I mention this because the levy campaigns like to highlight (correctly) that the bond component is "no additional millage", however, that doesn't mean that it's free, it means that the property tax decreases that would otherwise occur as principal is paid off won't occur. A writeup of what the district wants to spend  $40,000,000 on can be found here.

The question, and the confusion, come about because the law allows you to ask for both of these things with a single ballot question or with two ballot questions. Further complicating the issue is the fact that the law allows for the phasing in of operating money over a period of time (This is known as the incremental levy) but you cannot combine this with a bond request on a single ballot.

As a result, on June 5, 2012, the Board and the administration will meet to consider the following options.

1) An operating levy in combination with a bond levy on a single ballot question.

This option allows the administration to combine both requests in a single ballot question. Voters can either vote YES to both requests or NO to both requests and you only get one vote. The bond component will be 40 million dollars. The operating component is still unknown. The Treasurer has recommended 6.9 mills, or about $494/year on the average Worthington home of $234,000 dollars. You can calculate the amount for your own home here

2) An incremental levy and a bond issue on two ballot questions.

Many residents have contacted us asking for a phased in levy similar to what we did in 2009. The incremental levy in 2009 was 3.9 mills for 2010, 5.4 mills for 2011 and 6.9 mills for 2012 and each year thereafter. The Treasurer has indicated that an incremental levy of 4.9 mills in 2013, 5.9 mills in 2014 and 6.9 mills in 2015 would meet the operating needs of the district. The law does not permit you to combine these two issues on a single ballot question, therefore, two ballot questions would be required. Voters could vote YES on neither issue, one issue or the other issue, or both issues. You can calculate the tax for your own home, by year, here.

3) A "promised incremental levy (PIL)" and a bond issue on a single ballot question.

Some administrators, including the treasurer, do not believe the district should offer the opportunity to vote on each of the two needs separately. They are concerned that you might vote for one issue or the other issue and not both issues, but they also recognize that in this economy, phasing in the levy is also desirable. Again, the law does not allow the combination of an incremental levy and a bond issue on a single ballot. To get around this, we could offer a "Promised Incremental Levy" which takes advantage of the fact that the school district does not have to collect all of the millage it is allowed to collect. In fact, Worthington Schools has been doing this for 5 years now, collecting less millage than we are otherwise entitled. The Promised Incremental Levy would simply tell the community that in 2013, we would collect only a fraction, perhaps 70% of the 6.9 mills that would appear on the ballot. The next year, 2014, we would collect perhaps 85% and the final year and each year thereafter, we would collect the entire 100% of the 6.9 mills. Note that the increments still need to be discussed - the above is just for illustration. The PIL and the Bond issue could be combined in a single ballot question as in Option #1. One concern with the PIL is whether the community would believe that the Board and the Administration would keep this promise. Once again, Worthington has been collecting less millage than we are entitled to for 5 years now. In addition, the Treasurer said in a community conversation that he would resign before breaking the promise. Frankly, there is no way that the Board or any of its members, or our Superintendent or Treasurer would renege on a promise like this.

4) Run an Incremental Levy in November of 2012 and a Bond Levy in 2013.

The desire to run both the operating levy and the bond levy in November is a function of the difficulty of the campaign and the time and resources required, not the needs of the district. Nothing bad is going to happen if the bond money is not approved until the next election in May of 2013. I can certainly understand why the residents who volunteer for levy campaigns don't want to do this twice, however, it is an option and should be considered.

It is possible to run an incremental levy in November of 2012 (Option 2) and a bond issue in May of 2013. Obviously, voters could approve neither issue, one issue or both issues. The treasurer will point out that a bond issue in May of 2013 would not be "No additional millage" and he is correct, but only because the millage you are already paying for bonds is scheduled to decrease by around 0.8 mills. A bond issue passed in May of 2013 would restore the millage you are paying for capital improvements to 3.8 mills, just as if you passed the issue in 2012. There is no economic difference. Please note that the district does have a considerable cash reserve to handle any emergencies that may come up. In fact, there is about 7 million dollars that is earmarked for contingencies and/or emergencies.

So those are the four options. Please note that the amounts (6.9 mills operating, 40 million dollars bond) are the treasurer's recommendation. They may or may not be the final numbers. My thoughts on that in a future blog post.