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May
30
2024
Yellow Springs School Board

Board of Education | Treasurer talks taxes, facilities

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At the April 13 regular meeting of the YS Board of Education, district Treasurer Jacob McGrath presented a detailed overview of the tax implications associated with updating the district’s school facilities.

At press time, the school board was still considering six potential facility upgrade options, with the costs of those plans ranging from about $36 million to about $68 million. McGrath’s presentation outlined how each of those plans would need to be funded and what each would mean in terms of tax liability.

According to McGrath, all of the plans currently being considered by the board would require funding through a combination of property tax and income tax.

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The district is limited by the state in the amount of money it can bring before voters for a bond issue based on its projected debt capacity; McGrath cited the district’s maximum bond amount for a facilities levy as being about $30.4 million.

For taxpayers, this bond amount would equate to approximately 9.13 mills of tax liability annually. McGrath estimated a 5% interest rate for the bond, and recommended a debt schedule of 37 years. He added that, though a longer bond issue payment term means more interest will be collected, it also means that voters will be “spreading out the cost to future generations” of people who will benefit from the facilities upgrades paid for by the bond.

McGrath said that, should the outlined bond issue pass at the polls, the district is aiming for a phased-in collection of the added millage. District taxpayers are currently paying 1.75 mills annually for a bond issue passed in 2000 to pay for facilities renovations and additions; phasing in the collection of a new levy would mean collecting funds for the new bond issue at 7.38 mills in combination with the 1.75 mills already being paid for a total of 9.13 mills until the expiration of the 2000 bond issue in 2027. At that point, the new bond issue’s tax rate would increase to collect the full 9.13 mills, keeping the tax rate steady across 37 years.

Four of the six facility upgrade options would, if selected, be undertaken in line with regulations set forth by the Ohio Facilities Construction Commission, or OFCC. Those plans would qualify for rebates from the OFCC for a portion of construction costs; early in his presentation, McGrath responded to an ongoing question from community members at past meetings about how such rebates can or would be used.

“This is something that’s been a hot-button issue,” McGrath said. “OFCC funds — when you get money back from the state — must go toward an OFCC project.”

Though McGrath has stated at past meetings that OFCC rebates could potentially be applied to uses beyond paying down construction debt at the discretion of the school board, he clarified a new understanding that this is not the case for a district with only one OFCC-funded project.

“If we only have one OFCC project, it’s financed by the bond, we’re going to pay that bond down,” McGrath said.

School board Vice President Dorothée Bouquet asked: “So it’s not up to the board?”

“It’s not up to the board,” McGrath responded.

Projected OFCC rebates range from $9.3 million to $11.8 million, depending on the plan, and it’s estimated that the district would receive a rebate eight to 10 years after beginning construction on an OFCC-approved project. Averaging the projected rebate range to $10 million, McGrath estimated that a 9.13-mill bond issue would drop by approximately 3.75 mills, lowering the tax burden for school district residents.

“That’s about a 40% reduction in bond millage,” McGrath said.

Because all of the facility upgrade options would cost more than the district’s maximum bond amount of $30.4 million, each plan will also necessitate an added school district income tax.

In Ohio, school district income tax is collected by the state, and must be levied in increments of 0.25%; a 0.25% income tax would amount to about $6.85 million over the 37-year term of a correlating bond issue.

Unlike bond issues, income tax levies that pass at the polls have no built-in expiration date and remain in place indefinitely. Each of the six potential facilities plans would require an income tax increase of 0.25%, at minimum, to 1.5%, at maximum.

Because of the 0.25% incremental requirement, the total revenue that would be collected for each option does not equal its estimated cost; in most cases, the income tax would provide a funding surplus. For one option, where a slight deficit would be reflected, McGrath said he assumes an increase in income tax revenue due to community growth over time would make up for the deficit.

See the sidebar above for the costs of each plan and associated bond issue millage and income tax increases for potential levies.

Calculating individual costs

Option A1K–6 at Mills Lawn (renovation); 7–12 at East Enon Road (demolition, renovation, addition)
• Estimated cost: $36.3 million; no OFCC rebate
• 37-year bond issue levy: 9.13 mills ($30.4 million)
• Ongoing income tax levy: 0.25% ($6.9 million collected over 37 years)
• Total revenue for 37-year term: $37.2 million

Option A2K–6 at Mills Lawn (renovation, addition); 7–12 at East Enon Road (demolition, renovation, addition)
• Estimated cost: $47.7 million; no OFCC rebate
• 37-year bond issue levy: 9.13 mills ($30.4 million)
• Ongoing income tax levy: 0.75% ($20.6 million collected over 37 years)
• Total revenue for 37-year term: $50.9 million

Option B1K–12 at East Enon Road (new building)
• Estimated cost: $58.1 million; estimated future OFCC rebate of $11.8 million
• 37-year bond issue levy: 9.13 mills ($30.4 million) before rebate
• Ongoing income tax levy: 1% ($27.4 million collected over 37 years)
•Total revenue for 37-year term: $57.8 million, not including rebate
• (This total reflects a deficit, but assumes an increase in income tax revenue over time)

Option B2K–12 at East Enon Road (demolition, renovation, addition)
• Estimated cost: $54.3 million; estimated future OFCC rebate of $11.1 million
• 37-year bond issue levy: 9.13 mills ($30.4 million) before rebate
• Ongoing income tax levy: 1% ($27.4 million collected over 37 years)
• Total revenue for 37-year term: $57.8 million, not including rebate

Option C1K–4 at Mills Lawn (renovation); 5–12 at East Enon Road (new building)
• Estimated cost: from $64.1 million to $67.6 million, depending on the scope of renovations; estimated future OFCC rebate of $9.9 million
• 37-year bond issue levy: 9.13 mills ($30.4 million) before rebate
• Ongoing income tax levy: 1.25% to 1.5% ($34.3 million to $41.1 million collected over 37 years)
• Total revenue for 37-year term: $64.6 million to $71.5 million, not including rebate

Option C3K–4 at Mills Lawn (renovation); 5–12 at East Enon Road (demolition, renovation, addition)
• Estimated cost: from $60.8 million to $64.3 million, depending on the scope of renovations; estimated future OFCC rebate of $9.3 million
• 37-year bond issue levy: 9.13 mills ($30.4 million) before rebate
• Ongoing income tax levy: 1.25% ($34.3 million collected over 37 years)
• Total revenue for 37-year term: $64.6 million, not including rebate

Since all of the plans being considered by the board would require a 9.13-mill bond issue, estimating what each of them would cost in terms of individual property taxes is straightforward.

A mill represents one-tenth of a cent, and nets a municipality $1 for every $1,000 of a property’s assessed value; the assessed value of a property is 35% of its appraised value. For a property with an appraised value of $100,000 (an assessed value of $35,000), 9.13 mills equals about $319.55 annually.

McGrath noted during the meeting that a property’s appraised value is not the same as its projected market value.

“You don’t want to think about what [your] home is going to sell for — you want to go to the county auditor’s website and see what [the auditor] appraises it at,” McGrath said.

To find both appraised and assessed values of a property on the Greene County Auditor’s website, go to bit.ly/41CWUVR.

Calculating the effect of an income tax increase is more complex, both because each of the facilities options would require a different added income tax and because school district income tax depends on how much of a household’s income is taxable according to the state of Ohio.

For example, the Yellow Springs school district’s current income tax rate is 1%, so a household with a taxable — not a gross — income of $100,000 currently pays $1,000 annually in school district income tax.

With the 2022 income tax filing deadline having just passed on April 18, many folks have their returns on hand. Taking a look at line 6 on the 2022 Ohio SD 100 form in the recent return will show how much was paid in 2022 for school district income tax at the current rate of 1%, which gives a starting point for understanding what an increase might look like.

Potential levy timelines

McGrath laid out a potential ballot timeline for an upcoming facilities levy, as well as for the renewal of several expiring levies.

As has been put forth at past meetings, McGrath suggested that a combination bond issue and income tax facilities levy be placed on the November 2023 ballot, along with a renewal of a 2018 permanent improvement levy, which is set to expire next year.

Looking ahead, he suggested that two emergency levies set to expire in 2025 be renewed in a combination substitution levy on the March 2024 ballot. Neither of the renewals would represent an increase in taxes.

Following McGrath’s presentation, school board member Amy Magnus suggested that the board consider a different timeline for upcoming levies, instead pushing the facilities bond issue to the March 2024 ballot and the substitute levy to the November 2024 ballot.

In conjunction with renewing the expiring permanent improvement levy this November, Magnus suggested placing a new five-year permanent improvement levy before voters; Magnus suggested a tax rate of 5 mills for the levy, but said the board would ultimately decide on the amount to be collected with such a levy if pursued.

Part of the reason for the proposed alternate levy timeline, Magnus said, would be to give the school board extra time to consider the facilities upgrade plans still on the table, and to make adjustments to estimated budgetary needs.

At the same time, Magnus said, placing a new permanent improvement levy on the ballot — the funds from which could be used to help pay for whatever facilities plan the board ultimately chooses — would allow the district to begin collecting some revenue as the board deliberates.

“I believe we can lower the difficulty for this first [levy] ask and set ourselves up for success,” Magnus said.

Further reporting on the April 13 meeting of the school board will appear in next week’s issue of the News, along with a report on the board’s next work session, which is set for Friday, April 21, 11 a.m., at Mills Lawn. The board aims to further narrow its list of facilities upgrade options at the work session.

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