District officials grapple with referendum question: Money needed for future operating costs

By Daniel E. McGonigle

General Manager

The Caledonia Argus

The Caledonia area school board is looking at ways of how best to proceed in order to remain operational.

Following the windfall of tax relief that is coming to the district by way of forgiveness of a portion of the maximum effort capital loan, district officials are left to review their current operations levy as it will leave the district short on cash.

There are several options available to the district, and at a special school board meeting which featured district officials as well as community stakeholders, the panel reviewed each option under the direction of Shelby McQuay who is with Ehler’s and Associates, the district’s public finance consultants.

McQuay spelled out several options for the board to consider.

Existing authorities:

The 2017 legislature authorized maximum effort loan aid to a handful of districts that refunded their maximum effort loan prior to Nov. 30, 2016.

Caledonia receives $1,271,495 each year for five years.

“We (Ehlers) recommend the funds be used for two purposes,” McQuay said. “One being direct reductions in tax levies payable in 2018-21 and a series of ‘defeasances’ to set aside funds to reduce tax levies payable in 2022-28.”

Preliminary estimates by Ehlers show this could reduce tax levies by $600,000 per year for the ten year period from 2018 through 2028.

Defeasance explained

“A defeasance is a mechanism to carry over cash to pay off principal and interest in a later maturity,” McQuay said. “The district would deposit a portion of aid into an escrow account, which would then make payments on bonds maturing in 2023 through 2029.”

Without a defeasance, taxpayers would have large savings for four years, and a spike in tax rates after those four years.

The district is still left with the need to raise additional revenue.

Option one is an operating referendum.

An operating referendum is an election ballot question that allows districts to generate additional general education revenue.

It is revenue from a combination of local property tax levies and some state aid.

The referendum revenue may be used for any operating capital expenses.

Current referendum provisions

A referendum must be authorized by the voters as a specified dollar amount per pupil.

The term can be up to 10 years and can be subject to annual inflationary adjustments.

Revenue is capped at $1,937 per adjusted pupil unit for fiscal year 2018.

So the district is considering a referendum to be held during the November general election.

The operating referendum revenue amount can qualify for state equalization aid which would mean an additional 18 percent as long as the district didn’t ask for more than a $390 increase.

In 2011, the voters of Caledonia Area Public Schools approved a five year (beginning in FY 2013) in an amount of $725.96.

In 2018, that estimated allowance drops to just $394.97 (per pupil unit).

Under authority of the state, school districts can convert up to $300 with “board approved authority” for up to five years.

However, even at current rates, that would leave the district about $96 short of their current operating levy.

School building bonds

The district could also go out and ask for scohol building bonds.

This, too, would require voter approval.

Some benefits would include: receiving the cash up front and they are issued for up to 30 years.

The state currently matches or gives back 40 percent of this to school districts.

So the best way to maximize the dollars available from the state would be to request up to a certain amount in levy referendum and bond for an additional amount.

“I am concerned that would get too confusing for our voters,” said superintendent Ben Barton.

After much discussion among Barton and school board officials, it was determined that the district would go forward with seeking a referendum.

Million dollar question

How much should the district request in funding?

The board wanted to know where their needs would be in another five years.

“One of our biggest expenses is our human capital,” said Barton. “We face a significant labor shortage and it costs a lot to maintain programming. We need to look not just at where we are today, but where we’ll be five years from now.”

Board chairman Kelley McGraw noted that “historically our teachers used to move to Caledonia and they lived here, and raised their families here. But now that’s not always the case. Many drive from Winona or La Crosse and we need to remain competitive to get them to make that drive to town for their jobs.”

So McQuay said she would run some numbers and review what would be needed in order to meet the future costs the district will face.

The district finance director, Barb Meyer, added, “my concern is always when the legislature changes as far as the unknowns. You can try to find a balance, but whatever changes with the legislature could have an impact on the numbers.”

The board plans to meet again on August 2 at 5 p.m., to try and come up with an amount and a message to bring back to voters.

“Taxpayers have seen significant tax relief, especially in the ag sector,” Barton said. “Whatever we do, I want people to know their taxes are going down.”