By Naomi Hatch
Since the Snowflake School District’s primary tax rate for fiscal year 2013 increase, Superintendent Hollis Merrell asked Business Manager Mark Ollerton to make a presentation at the Sept. 13 board meeting to discuss what is taking place.
“Budget limits are established by formula driven by the number of kids we have in the district,” explained Ollerton, who said that the district’s budget limitation for maintenance and operations, unrestricted capital and soft capital is set by the state at $13,825,040.
“The way the district controls the tax rate is by spending less,” he said, giving the principles, which are: how much we budget affects the tax rate; budgets are established by enrollment and support levels legislated by the state government; schools can spend less than budgeted, with anything over four percent of the Revenue Control Limit (RCL) being returned to the state government. “The standard practice has been to spend 96 per-cent of our budget and carry over four percent,” said Ollerton.
Expenditures are funded by state equalization assistance, county equalization assistance, local property tax revenue and interest on cash balance, with 25.53 percent of the 2012 fiscal year revenue coming from local property tax, 4.63 percent from county equalization and 64.61 percent from state aid. “We’re considered a poor district because we’re so reliant on state aid,” he said. “If you are a district that depends on state aid and the qualifying tax rate (QTR) increases, the immediate effect is an increase in the amount of revenue that must be generated from the local property tax base.
“State aid is being reduced as a result of the QTR increasing. This has the potential to affect the tax rate negatively, depending on other factors,” said Ollerton.
Ten years ago the district’s assessed valuation was $10 million; this year it is $103 million. Snowflake had a huge boom in housing in the late 1990s through 2008, and the district’s assessed valuation grew with it. The highest valuation total was $106 million. Ollerton noted that assessed valuation runs about 18 months behind, so they are working off 2010 assessed valuations and now the district assessed valuation has started to factor the effects of the recession.
Ollerton explained that the primary tax rate provides revenue for the following levy funds: maintenance and operations, unrestricted capital, soft capital and adjacent ways. The governing board establishes the budget for adjacent ways, and the state and enrollment establish the budget limits for the other levy funds. The secon-dary tax rate covers overrides and bonds approved by voters. Currently the district has two voter approved bonds that are scheduled to be paid off by 2024.
“The board made a decision last year to give bond money back,” said Ollerton, noting that this will reduce the interest by $15,000 a year and $600,000 will come off the debt schedule in 2019.
Ollerton also said the qualifying tax rate increased 11 percent, which has the affect of passing the tax levy on to the local property tax payer from the state; the assessed valuation decreased, adding to the burden, which passed $308,851 of tax burden to the local tax payers. Cash goes to reduce the levy funds, and there was a decrease in cash to apply to the tax rate from the prior fiscal year.
Ollerton explained the following tax misconceptions:
* The higher the tax rate, the more money the district has to spend is false, because the district’s budget is set by formula that is legislatively controlled.
* The district keeps the cash revenue is false, because all cash in levy funds is used to reduce the tax rate.
“In fact, the district has a line of credit that it has used the past two years to cover expenditures because of the state’s financial strategies,” said Ollerton.
* The district sets the tax rate is yes and no, as the district has very little leeway, since expenditures are established by legislative controlled formulas; however, the governing board can establish an adjacent ways fund, and the voters can approve overrides and bonds.
“The bottom line is the tax rate is $5.72,” said Ollerton. “The total budget is less than previous years due to the declining enrollment.”
He said that now that the paper mill closure has been announced, if Catalyst doesn’t pay its tax bill, that will take $350,000 from the district. “When it takes place we don’t know,” he said.
By Naomi Hatch