Lawrence school board member Marlene Merrill had one thing come to her mind weeks ago when she first saw a scenario for higher property taxes in the district.

“I think all of us were a little shocked at when we started looking at a 5-mill increase,” Merrill said.

As the school board prepares to meet Monday as another step in its budget process for 2010-2011, Merrill and other board members say taxpayers will likely face a property tax increase.

But they hope the jump will be less than 5 mills, and likely closer to a 3-mill increase. Administrators say the increase stems mainly from an expected slight decline in property valuation.

That means it will take more mills to raise the same amount of dollars as the previous year.

The main decision board members will make Monday involves setting the property tax levy for capital outlay and building projects, which is money that by law can’t be spent on general operations like teacher salaries.

In the scenario for a 5.3-mill increase, administrators built in an extra 2 mills for the capital projects, but board members have the most flexibility here. They could fund it at last year’s level, meaning the district’s overall mill levy would increase by 3.3 mills instead of 5.3 mills.

A mill is $1 in property tax for every $1,000 in assessed valuation. If board members passed a 5.3-mill property tax increase with a 1 percent decline in property valuation in the district, it would increase a $200,000 home’s property taxes by $122 a year — to $1,408.

A 3.3-mill increase would cost the owner of a $200,000 home an extra $76 a year instead, making total taxes $1,362, according to the same projections.

Wiggle room

Merrill hopes board members can come closer to a 3.3-mill increase, but she wants to make sure the district can handle it with capital projects.

“We don’t want to be in a position of not being able to fix something if there’s an emergency,” she said.

Chief operations officer Frank Harwood said if board members take away the 2-mill increase from the capital outlay fund, the district will be able to fund projects already under way. The district also should have ample reserves in case of emergencies, like a boiler going out at one of the high schools.

“Unless something just so unforeseen happens, we’ll have cash flow on hand to take care of something bad that happens,” Harwood said.

But the board then wouldn’t have money to tackle any new projects, he said.

Most of the district’s capital needs are in elementary schools. A community task force is studying the district’s elementary schools through next winter.

If that group comes out with any recommendations for elementary buildings for 2011-2012, Harwood said not increasing the capital outlay mill levy for 2010-2011 means the district likely couldn’t start any construction next summer.

But several board members have mentioned taking a different course — in years down the road, asking the public to approve a bond issue to fund elementary improvements instead. Their hope is the district by then will have paid off the 2005 secondary school bonds issued.

“I think that’s a cautious, strategically tolerable financing situation,” board member Mary Loveland said.

The rest of the picture

Other than the capital outlay levy, lower property valuations are driving the remaining 3.3-mill increase.

The district has a higher payment next year on principal for the 2005 bond issue, but those payments were scheduled anticipating future property values to increase, not decrease.

Administrators also project an enrollment increase at Lawrence Virtual School and among students who receive free- and reduced-price lunches. This drives up what the district will get in its general fund from the state, but voters have also authorized the district to levy 31 percent of that general fund in local property taxes, known as the local option budget, or LOB.

Now it will take more money to get to that 31 percent.

Critics say a property tax increase is ill-timed because the economy has not turned around, and they say taxpayers will get hit even harder — Douglas County Commission is considering a property tax increase of up to 15.9 percent.

But some board members say the district already cut $4.6 million for next year because of a drop in state funding.

“That’s all the agony we went through last winter,” Loveland said.

The board will set its maximum budget authority for the mill levies at the meeting at 7 p.m. Monday at district headquarters, 110 McDonald Drive. A hearing on the district’s mill levy is scheduled for Aug. 9.