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Yellow Springs School Board

Yellow Springs High School/McKinney Middle School as it appeared in late September 2021. (Drone photo by Bryan Cady)

School board approves substitute levy

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The Board of Education held its regular monthly meeting Wednesday, May 22, during which the board unanimously approved a resolution of necessity to place a 10-year substitute levy before voters in November.

The substitute levy, if passed at the polls Nov. 5, would not constitute new revenue from local voters, but would combine and continue for 10 years annual revenue of $1,975,000 already collected by two emergency levies passed in 2015 and 2017, which are set to expire in 2025.

A similar levy, which would have continued collecting the revenue indefinitely, failed at the ballot in March.

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Before the board discussed the levy at the meeting, District Treasurer Jacob McGrath presented an updated five-year forecast for the school district. According to the forecast, district expenditures — 80% of which is allocated for personnel salaries and benefits — will begin to outpace revenue beginning in fiscal year 2025 as costs continue to rise. Like most Ohio school districts, the YS Exempted School District’s funding relies heavily on real estate tax revenue, which does not rise at the same rate as inflation, if it rises at all.

The district has cash reserves of around $7.9 million, which it will use to address the difference in revenues and expenditures in the coming years. However, according to McGrath’s presentation, without the passage of a substitute levy to replace the expiring emergency levies, the district’s cash reserve will be exhausted by fiscal year 2028.

On the table before the school board was a resolution of necessity for a five-year substitute levy to replace the expiring emergency levies. A substitute levy can be placed on the ballot for a limited term of up to 10 years, or for an indefinite period, McGrath said.

“What are the benefits of doing five years versus 10 years, then?” board member Dorothée Bouquet asked.

As the News has reported in the past, substitute levies collect a fixed sum of revenue annually from existing school district property owners irrespective of rising property values. But substitute levies are unique in that they have the potential to collect additional revenue for the school district when new properties are built without raising the tax rate for existing properties.

“Any new construction that happens after Jan. 1, 2024, those people will be taxed at the same rate as everybody else that existed in 2024,” McGrath said.

However, McGrath added, fixed-term substitute levies cannot be renewed at the ballots when they expire, but rather must be replaced by another substitute levy for the dollar amount collected in the previous tax year, which ignores any revenue growth from new construction that might come after that tax year.

According to the Ohio Department of Taxation: “The initial year of the second substitute levy must replace an existing year of the first substitute levy. The growth factor does not apply to the initial year of the second substitute levy but does apply for each subsequent year of the substituted levy.”

“So there is a compounding factor — the more times that you renew substitutes, the more growth potential is lost,” McGrath said.

Board member Amy Magnus suggested that, because district voters have yet to approve a substitute levy at the polls, a five-year levy may be “less risky” for the district, with the option to reconsider the terms of a second substitute levy sooner, and that perhaps a permanent substitute levy might be amenable to voters at that time. McGrath pointed out, however, that due to rising costs, the district will need to bring a new, additional levy before voters in 2030, even if a five-year substitute levy passes.

“That would mean substituting your substitute and asking for new money closer together,” McGrath said.

Board Vice President Rebecca Potter acknowledged that it was a “good move to not go for a permanent levy this time,” as local residents had expressed concern about the indefinite nature of the substitute levy that did not pass in March. Nevertheless, Potter said a 10-year levy might be the best bet.

“I think the five-year would allow maybe an earlier adjustment … but I understand that it causes a burden and perhaps a loss in revenue if we don’t go for the 10 years,” she said.

Board member Amy Bailey agreed, citing “voter fatigue” as a reason to move for a substitute levy with a longer term, and added that a 10-year levy could signal “more of a commitment to [the district’s] teachers.”

Board President Judith Hempfling moved to amend the resolution of necessity for a substitute levy from a five-year term to a 10-year term, which passed 4–1, with Magnus voting against. Once that amendment was made, all five members of the board voted to approve the resolution of necessity to place the 10-year substitute levy on the ballot in November.

In other school board news—

• Robby Wilson, of Conger Construction Group, the district’s construction manager at-risk, and district architect, Mike Ruetschle, gave an update on the ongoing facilities improvement project.

According to Wilson, the project is both on-budget and on-schedule so far, with the construction manager at-risk holding aside a portion of the bond issue in case of unforeseen costs — a common practice for large-scale construction projects. Any funds held aside for contingencies that are not used to address unforeseen costs will be returned to the district near the project’s end, to be used to address “wish list” items or be applied to other areas of the project.

The board also approved a guaranteed maximum price for asbestos abatement at Mills Lawn, which is scheduled to take place this summer as part of the facilities improvement project.

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