Sathoff: FHS renovation loan wouldn’t hike tax levy
Fairfield Community School District can borrow $10 million, if approved by voters April 2, for proposed Fairfield High School renovations without raising property taxes.
“It should be possible to approve the high school project without increasing the school district’s total tax levy,” superintendent Art Sathoff told school board members Wednesday night.
The school district levy is part of property taxes residents pay annually. Property taxes also include payments to the city. county and hospital district. Rates are paid per $1,000 valuation of property with varying decreases for homes (residential property) and agricultural property.
“Because of good stewardship of the budget and steps the district has taken to improve the district’s cash reserve and spending authority, along with the completion of a levy for a past early retirement policy, the district feels it is in an excellent position to decrease the levy rate,” Sathoff wrote in a talking-points handout about the proposed high school project.
Iowa law specifies different purposes for different school district funds, making a general obligation bond necessary, said Sathoff.
“The district now has the flexibility to offset a 97-cents levy increase [to borrow $10 million] by reducing what is levied in other funds,” he said. “This would not have been possible three years ago — the district was so cash-poor.”
Matt Gillaspie, senior vice president at Piper Jaffray & Co., in Des Moines, outlined four scenarios to fund the proposed Fairfield High School renovations.
“Borrowing $10 million offers getting the best, lowest interest rates,” said Gillaspie. “By keeping the borrowing to $10 million or less allows the bonds to be designated as ‘bank qualified’ which generally reduces the interest rates assigned by 10-25 basis points.”
The district has projected total costs at $11,107.800, so the district will need to contribute the difference, or about $1.3 million.
Gillaspie recommended, and Sathoff and district business manager Kim Sheets agreed, the district can use its sales tax revenue and Physical Plant Equipment Levy to make up the $1.3 million.
“If you borrowed the total amount of the project from your sales tax revenue, by law you wouldn’t need to tell the community how it’s being used or need voter-approval,” said Gillaspie. “But you also wouldn’t have funds for buying buses or keeping up with long-range maintenance and improvements throughout the district.
“Bonding for the $10 million will require nearly a $1 increase in tax levies, but you can offset that by getting rid of tax levies in other funds,” he said.
Sathoff said Piper Jaffray’s analysis of the district’s finances and recommendations for funding the high school project, “removes one of the biggest objections — we can do this with no tax increase.
“And it addresses one of our biggest questions — how borrowing from sales taxes affect our finances,” said Sathoff.
Piper Jaffray’s 24-page packet to the school board Wednesday included a chart showing how a $1 increase per $1,000 property valuation — without any offset— would impact school district property taxes.
“Ten million is a big number and people get scared about property taxes going up,” said Gillaspie. “This chart shows how it would look if you were not going to decrease the levy rate in the Management Fund and Cash Reserve Levy.”
A home assessed at $60,000 applies a 52.8 percent residential property rollback, which reduces this home’s taxable value to $31,600. Subtracting Jefferson County’s Homestead Credit of $4,850, brings the taxable value lower, to $26,840. Multiplying an increased tax rate of $1 (the school district’s rounded amount of 97-cents) per $1,000 means the $60,000 assessed home would see an annual increase of $26.84 on property taxes, or a $2.24 increase per month.
Using the same residential property formula, a home assessed at $100,000 would have an annual increase of $47.97 or $4 per month in property taxes; a home assessed at $125,000 would have an annual property tax increase of $61.17 or $5.10 per month.
“This formula is used for all municipalities in Iowa,” said Gillaspie. “It applies to city property taxes, county property taxes, school districts – all of them. Of course, assessed values change each year. And the Homestead Credit varies by county.
“Assessed valuation is not market value, it is the value determined each year by the county assessor,” he said.
Commercial properties do not receive any rollbacks and pay 100 percent of assessed value at this time in Iowa.
Agricultural property is assessed per acre and receives a 59.93 percent rollback. Ag land assessed at a value of $900 per acre with a 59.93 percent rollback decreases to a taxable value of $539 per acre. An increased tax rate of $1 per acre increases the property tax by 54-cents per acre annually, or 4-cents per month.
“We included this just to show how property taxes look, but your district is planning to borrow $10 million in general bonds and $1.3 million in sales tax option funds, and can lower the district’s tax rate in other funds,” said Gillaspie. “For property tax payers in the Fairfield school district, the borrowing will not raise school property taxes.”
Sathoff told the school board it could choose a different borrowing path, it has the final voice in the decision, but this is one he recommends. Wednesday’s meeting was a work session, so no action was taken. The board next meets at 7 p.m. Jan. 21.
In other discussion, school board members brainstormed community members who could serve on committees to educate voters about the project and ballot issue.
“The district needs 25 percent of the number of voters from the last election, or rounding up, 800 signatures on petitions due to the county auditor’s by Feb. 15, to place this on a April 2 ballot,” said Sathoff.
The measure will need 60 percent approval of votes cast.