School board agrees to thaw property tax freeze

School board agrees to thaw property tax freeze by David Lias The Vermillion School Board unanimously agreed Monday to opt-out of the state property tax freeze in the amount of $600,000 for a five year period.

They also agreed, unanimously, to not force the patrons in the school district to bring the matter to a public vote.

The board itself referred the issue. Citizens will vote on whether to uphold the opt-out decision in a Sept. 23 election. A simple majority vote will decide if the measure succeeds or fails.

Should the board's opt-out decision be upheld, property taxes in the Vermillion School District would increase effective in 2003, and be payable in 2004.

The opt-out would end with taxes payable to the school district in the calendar year 2008.

"I find this amount just a little bit uncomfortable," said Michael Granaas, board member, "in terms of where we will be five years from now, whether we will actually have any money, whether we will actually be able to hold expenses to three percent (annually).

"But, I also know we need to get it passed, or else," he said. It is estimated that the real estate taxes on a $100,000 home in the school district would increase by approximately $153.

An owner of agricultural property valued at $100,000 would pay $95 more in taxes per year. The taxes on a piece of commercial property in the school district would rise by approximately $328.

"I think through the various discussions through the school year, which culminated in the discussions that we had last Wednesday, I do feel the board is ready to opt-out," said Tom Craig, board president. "I feel like the board feels like it1s necessary to let the community tell us what they want to do.

"We've done as much as we can; the budget is not balanced so it's either going to be balanced through additional taxes raised by an opt-out, or we're going to have to make cuts," he said. "At this point, I don1t believe the board is inclined to make any more cuts."

Craig noted that the board held a public meeting last Wednesday to help citizens understand the financial plight facing the school district. One focus of discussion at that meeting dealt with trying to determine what dollar amount the opt-out should be.

It's estimated that a $500,000 opt-out, for example, would help the school district maintain its current programs for five years. At the end of that time period, however, the district1s fund balance may be depleted.

That would force the school board to go back to voters for a second opt-out, Craig said last week," except we'll be in worse shape than we are now."

Craig and other board members agreed that a $600,000 opt-out would put the district in better financial shape, without putting much more strain on taxpayers than the $500,000 proposal.

"It seems like everybody feels like the figure should be something that we can reasonably hope that the community can support," Craig said. "We don1t want to be greedy; we don't want to make additional cuts."

Craig said his support of a $600,000 opt-out is based on public feedback, the district's budget projections, and an estimate of a 3 percent increase in expenses each year.

"I think it's the board's desire and there's some support among some people in the community to have somewhat of a fund balance left at the end of the opt-out," he said. "I think with a $500,000 scenario, if we were careful, we probably could make it through the five years, but we would be at a zero fund balance.2

The board's projections are based on enrollment numbers that level off at 1,320 students. Enrollments historically have been slowly decreasing, meaning the Vermillion School District receives fewer and fewer dollars from Pierre.

"If that projection is not true, (and enrollment decreases more) then we will be short more money," Craig said. "But the projections are also based upon an assumption that we would not get any more one-time monies from the state.

"I'm not sure that1s a fair assumption," he said "I think that with the attitude that we have in Pierre, I really think that Gov. Rounds is committed to helping us get additional money."

A $600,000 opt-out, Craig said, would allow the Vermillion School District to maintain its current educational system, and have a fund balance of approximately $500,000 at the end of five years.

"That's certainly not excessive; the board, I think, would prefer to have a fund balance more close to $1.2 million, but right now I don't think we can afford to do that."

Craig said he hasn't heard a loud public outcry from citizens as the school board has cut programs in recent years to operate with a dwindling budget. "I take that to mean that they probably wouldn1t support an opt-out for a larger number so that we could start putting programs back into the system," Craig said.

The school district is projecting that without an opt-out, it will begin swimming in red ink in the 2004-05 school year to the tune of approximately $900,000.

The negative balance would continue each year after that. By the 2007-08 school year, the school district would be facing a $4.5 million deficit. That total is more than half of district's entire budget. "We were very fortunate last year to be able to get through one more year without opting-out, but I think it's important that part of the reason we were able to do that is because the teachers and the administrators in the school district received no raise last year," Craig said.

Board member Mark Bottolfson noted that if state education funding should increase after an opt-out is approved by voters, "the opt-out would stay in effect but we would be allowed to lower the general fund levy to bring the revenue down," he said. "I'm not saying that would happen. We don't have any excess, and it would be nice to have more of a fund balance, but that is also an option."

"We project to come in at the end of this month with about an $800,000 fund balance," Nick Merrigan, school board member, said, "which is down from a high of $2.8 million. In the last three years, we've moved about $1 million; we1ve either cut or shifted some expenses to capital outlay or special ed (funds)."

Merrigan said that with a $600,000 opt-out next year, the fund balance would drop to approximately $400,000.

"That's why at this $800,000 level, we really have to get this (the opt-out) done this year," he said. "If we don't, next year our fund balance is just about zero."

Mike O'Connor told board members that, despite the bleak financial picture in the district, it may still be difficult to encourage people to support an increase in their property taxes.

"There are a lot of people who are very nervous right now," he said. "They are trying to balance their budgets, and they are cutting back. If that1s the case, then I think the way you present this is going to make a huge difference."

O'Connor suggested the board examine the possibility of saving money by calling on retired educators to help teach classes in the district.

The board may also need to change the way extra-curricular activities are funded, he said, so that participants, not taxpayers, provide more revenue to support them.

Board members told O'Connor that the South Dakota Attorney General's office has ruled that school districts can't charge students to participate in extra-curricular activities. Students and their families involved in those activities can hold fundraisers to help pay�part of the costs.

But fundraising activities often repeatedly target the community's retail establishments. "The businesses are going to get hit one way or the other," Merrigan said. "They are either going to get hit in their taxes, or they are going to get hit with requests for donations."

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