RO Board sets maximum property tax levy

The Red Oak School Board has finalized its certified budget maximum property tax rate.
At the school board meeting Feb. 18, superintendent Ron Lorenz advised the board that school districts are required to establish their maximum property tax dollar levy by March 5, and the maximum amount is the highest that the district can levy as a school district.
“It is not the final amount. It’s merely the biggest number that we can ever go to. I fully expect that our final number will be less than this. There are still unknowns that we’re waiting for the legislature to give us. So $15.56 per thousand dollars valuation is our maximum,” Lorenz said. “That is nine cents more than it is this year. This year, we’re at $15.47. Again, I want to emphasize that’s not the final rate. This is a kind of a procedural requirement because we have to report the maximum levy amounts to the Iowa Department of Management, that amount is reported, then sent back to our county auditors, who send direct mailings to all of our taxpayers so they get that statement in the mail. We also have to post it on our website.”
With that maximum amount set, Lorenz said it would as a basis for the district’s subsequent discussions.
“We’re going to have an initial certified budget hearing at the end of March, and then we will have another hearing prior to the adoption of our final certified amount. We’re going to know a lot more in late March and April about where things stand,” advised Lorenz.
The Iowa House and Senate reached a compromise setting Supplemental State Aid at 2% and it was sent to the governor’s desk for a signature. The maximum, Lorenz said, was based on no SSA.
“We went with that because we were told early in the process that it could be anywhere from 0 to 3, probably 0 to 2. So that is a worst-case scenario. We settled on $15.56 just to hedge against any unforeseen circumstances. If the 2% is signed by the governor, the district’s projected total levy rate would be either $15.32 or $15.24 based on the parameters that we have built in. So although the $15.56 we’re proposing is a maximum, it’s not likely to hit that,” commented Lorenz.
With SSA rates likely to be approved at 2%, it means a reduction in the levy rate. Lorenz explained to the board how it was possible.
“We’ve been talking about the fact that our authority is really diminished because of enrollment. We’re struggling with all these things. That’s exactly why our authority went down. Our property values have increased 6.5%, which means the taxes are coming from a bigger pot. The other big thing that’s driving that issue is that we have seen a 59% reduction in the regular program adjustment. Because we experienced such a sharp decline in enrollment last year, we were subject to the state budget guarantee, and that comes with an adjustment that allows us to count the previous year’s enrollment. We’re in the hangover year of the budget guarantee. Now we’re counting our enrollment, or the number of kids that we can tax against, based upon last year’s decline, so we’re really feeling the brunt of that enrollment loss. That’s why as the SSA number goes up, the total levy rate goes down because we’re simply not able to levy as much. We don’t have as many kids to levy on behalf of,” explained Lorenz.
Lorenz also advised the board they are planning on levying the maximal allowable cash reserve levy of $441,513.
“That’s a number that’s prescribed by the state. The board doesn’t necessarily have to levy that much, but we’re allowed to, so that’s the number that we use. We proposed a management levy of $700,000.  We know that we haven’t levied much there because we were trying to control the tax rate. As a result, the management fund has been depleted. We’re actually operating in a deficit there,” Lorenz advised. “We’ve heard from Matt Gillaspie saying we need to start levying that more. So we put a number of $700,000 in there. Heidi Harris had a conversation with Matt recently, and he says we still need to levy more because things are happening, costs are rising. We may be seeing legislation that could limit our levying in the future based upon our prior year levy rates or expenditures. He’s suggesting we may want to go up to a million in that levy rate.”
Lorenz said the board can also shift around $141,000 from the cash reserve levy and reallocate that to management levy, as well as exercise their income surtax.
“In the past, we have included a 1% income surtax in that chart. We currently have a 5% income surtax. That is relatively low for our area. I have a comparison of other districts and what they are levying, and there are a lot of districts that are at the maximum, most districts are in that 7-8% income surtax. The reason that they do that is because the income surtax spreads the tax burden to all people, not just property holders, so that’s something that the board has the authority to do. For every increase of income surtax, you decrease the levy rate by 11 cents per thousand.”
For every $50,000 the district will levy in addition to what it has right now, it will increase the rate by 10 cents, but Lorenz said the district could essentially have a corresponding decrease, or at least hold neutral, by increasing the income surtax.
Upping the management levy as Gillaspie suggested, Lorenz said, was very important for the future.
“We have rising insurance costs. We’ve already experienced those things going up. Unemployment claims, legal fees, and other risk-related experiences are possible, not to mention hedging against that potential legislative activity that could limit our ability to do so. I’d still like to levy something in cash reserve, because I’m kind of looking down the road. We want to make sure we maintain or even build that as we start experiencing or we continue to experience declining enrollment,” Lorenz said.
While there was still more to discuss, Lorenz said he was merely focused on setting the maximum property tax rate.
“That’s all the board has to do now. If the board wants some clarity over the next few weeks, we can provide that. I would say if you’re going to raise the management levy, we have to find another way to hold it down, also the instructional support levy,” Lorenz said
Lorenz added there has been talk in years past about providing districts flexibility to use management funds for recruitment and retention of teachers, While no further progress has been made, those have been conversations.
“We use it primarily for our high-risk storm protection pool, and natural gas. That’s crucial. We need $300,000 or $400,000 in management just for our natural gas. We use it every year, and we’ve spent it down to the point we don’t have anything. We absolutely have to levy something and in our mind $700,000 is where we believe we’ve got to be. We know insurance is going up, and while we’ve had a mild winter that’s reduced our heating costs, if we have a cold winter, that’s going to increase too,” stated Lorenz.
The board agreed to the set the maximum property tax rate at $15.56 per thousand dollars valuation as presented.