Washington Evening Journal

Fairfield Ledger   Mt. Pleasant News
Neighbors Growing Together | Sep 24, 2018

Property tax rates

Dr. Mike Jorgensen

The Washington Community School District’s certified property tax rate for the 2013-2014 (FY 14) school year will be $14.64 per $1,000.  That is slightly less than what was approved during the April board meeting.  How does that compare to where we have been?   How does that compare to the state and surrounding school districts?   What has impacted this property tax rate over the last decade?  What is the future outlook for the property tax rate?   These are all questions that I hope to answer during the course of this article and I will attempt to look in the crystal ball to anticipate what will happen in the future.

Washington Property Tax Rate over the last decade
$14.64 represents the lowest property tax rate for the Washington CSD since 2008.  FY 2009 was the first time that the tax rate reached the $15.00 level and was as high as $17.46 in FY 11.  So over the last three years, tax payers in the community have seen a $2.82 drop in property tax rates.  

Impacts on Property Tax Rates
If you were to research the reasons for the rapid climb and fall of the tax rate over the last decade, it is easy to see the reasons.  In FY 2005, the district certified enrollment was up to 1801 students.  It declined to a low of 1705 in FY 10, a loss of 96 students.  We have rebounded in enrollment up to a budgeted enrollment figure of 1767 in FY 14.  We do expect an equal enrollment or possibly slight increase in the up coming year.  There is no question that enrollments impact property tax rate.  Districts receive a state allocation per student.  For FY 2014 it will be $6,121 per student.  If your enrollments are increasing then the district will have a positive figure in comparison to the previous year.   Many times, this is called “new money”.   If you have less students than the previous year it is possible that your state allocation will be less than the previous year.  When that happens, the district has a “budget guarantee” where the difference is made up in property taxes.   This “budget guarantee” can be a big impact on tax rates.   We have not been on the budget guarantee for the last four years.
The state allowable growth figure is also a big impact.  For FY 2014, the state is giving us a 2% allowable growth and 4% for 2015.  This is the amount of per pupil allocation increase.   So the $6,121 figure for FY 14 will increase by 4% to $6,366 for FY 15.  4% was a very standard figure in the early and mid 2000’s, but the state of Iowa economy hit the skids in 2009 and we went through years of 0 and 1% allowable growth.   The state also implemented a 10% across the board cut that was in place for 3 years.   This reduced money owed to schools by 10%.   So how do you make up the difference???   You have to increase cash by that 10% figure to make up the difference through property tax increases.  The result was an increase from $15.00 in FY 09 to $17.46 in FY 11.  
The Washington Community School was also struggling at that time as well.  Decrease in enrollments, overstaffing and negative spending put the district in a tailspin that resulted in an appearance before the School Budget Review Committee in FY 10 to present a plan to correct the situation.  Since that time, the district has been aggressively finding ways to cut cost and take advantage of state incentives, partnering with local districts and with the community college to increase district revenues.  While we have brought back some staff that had to be cut, we have done so slowly and have increased both the district’s unspent balance and cash balances.  
One of the biggest impacts on property tax rates is new construction funded by property taxes.   For Washington, this hasn’t been the case since the last bond issue to build the new Junior High was passed in 1960 and was paid off in 1980.   Most bond issues for construction are approved for a 20 year period of time.  As far as the impact, it varies from district to district and their valuations.  For the Washington Community School District, the cost of a bond issue would be approximately 20 cents per $1 million.

Comparing Property Tax Rates
A Washington CSD property tax rate of $14.64 will put the district pretty close to the middle as far as state wide.  The highest rate in the state of Iowa is owned by the Ballard Community School District at $23.053.  This district, which is located just south of Ames, has $3.325 debt service due to new construction.  Other districts with rates over $20 include Ankeny at $20.332 and a debt service of $2.55, North Polk at $20.00 and a debt service of $3.46, Southeast Polk at $21.659 and debt service of $2.69, WACO at $20.633 and a debt service of $2.40 and West Burlington at $20.814 and a debt service of $2.45.  There are a few districts with tax rates below $9.00 per $1,000.  These include Corwith-Wesley at $7.823, North Kossuth at $8.32, Okoboji at $7.537 and Spirit Lake at $8.847.  
Washington is consistent in terms of sitting in the middle of property tax rates in examining the surrounding districts as well.  Once again, Washington’s rate is $14.64.   South of Washington would be WACO at $20.633 and Fairfield at $14.34.  East of Washington would be the Highland District at $16.525.  Mid Prairie, $11.096 and Keota $11.685 are to the north and west along with Sigourney $14.396 and Pekin $11.403.  

The Future
As we know, several variables will affect the property tax rates including enrollments, the economy and new construction.  I would anticipate that the enrollment at Washington will remain stable or grow slowly over the next 5 years.  My concern will be FY 2019.  We will have two consecutive years where we will graduate more than 150 students, our two largest classes.  The ability to replace that many students is a question mark.  We have a very large kindergarten class anticipated this next year and that is 136 students, a figure well short of those projected graduating classes.  It is possible the district may have to go back on the budget guarantee for FY 2019 & 2020 if enrollments drop 30 or more students either year.  That is a distinct possibility.
Who knows what may happen with the economy.  At a 4% allowable growth figure, I would anticipate that the district will stabilize with a property tax rate in the mid $14 range for the next five years.  We all know that the economy is always a roller coaster ride and things can change quickly.  I am just a little concerned over the dollars committed for education reform and the state’s ability to back those dollars up in tough economic times.   It wouldn’t be the first time the state failed to follow-through with financial commitments.  Mid year across the board cuts are the worse thing to happen to school budgets and negatively affect property taxes.
As far as the third factor, new construction, I think this district is going to have to address this issue in the next 10 years.  We have a new high school and we have a newly remodeled Stewart Elementary.   Lincoln Elementary will need some attention, but can be done so at a $2 million level to be comparable with what was done at Stewart.  The middle school is another matter.   The 1918 building issue has not gone away, it has just been kicked down the road a bit due to some upgrades.   The district is going to have to commit to major dollars to renovate that facility, or build a new middle school.  A third option that might be considered in the future is to sharing middle school students with another district outside of Washington.  Option 1 or 2 will be a $10-$25 million discussion and one that will need to be held in the next decade.  The current impact is .20 per $1 million over a 20 year period of time.   As valuations increase, this figure will decrease but the cost of construction is another variable that is an unknown.  The district’s local option sales tax dollars are committed to the new high school through 2030, so the district has no other options to fund new construction other than property taxes.  With all that in mind, a long term property tax rate in the $17.00 range in possible with new construction, but the good news would be that we have already been that high in the recent past.  I just want to make sure that people realize that the 1918 building is still only a temporary solution in its current condition and to realize that a long range plan for its renovation or replacement will be necessary in the next 10 years.