LJWorld.com weblogs Town Talk
School district surprise causes largest property tax increase in recent memory to get a bit larger
People who hate property taxes have more to hate in Lawrence following Monday’s special school board meeting.
Most people who had been following the Lawrence school district and its financial affairs expected the board to be presented with a budget that raised the mill levy by 2.4 mills. That was the number that was touted by district officials throughout the campaign for an $87 million bond issue.
But when district officials finally revealed their recommended budget on Monday it showed a property tax increase of 3.503 mills. What happened? Did the district pull off a bait-and-switch? I wouldn’t go that far.
Instead, you could say that the district practiced good salesmanship. During the course of the campaign district officials highlighted what they thought would be helpful in pushing the bond issue to victory. The main financial point they pushed was: They were confident they would only have to raise property taxes by 2.4 mills to pay off the $87 million worth of bonds. They even pointed to their past record. In 2013 they had a $92.5 million bond issue, and they said it wouldn’t involve a tax increase. Sure enough, there wasn’t a tax increase with that bond issue.
What district officials didn’t really highlight this time is that while a 2.4 mill property tax increase may cover the bonds, there may be a need to raise property taxes in other parts of the district’s budget to cover other expenses unrelated to the bond issue.
Indeed, that’s what is set to happen. The school board accepted a recommended budget that raises the district’s local option budget by 2.8 mills. That was unexpected by many district residents. School district officials, though, say it has to be done if the district wants to take full advantage of the new school finance formula state legislators approved this year.
That is probably a fair enough statement. It also is fair to note that the school finance formula wasn’t done in May when voters were approving the bond issue, so the district didn’t know how much its local option budget might increase at that time.
But I think it also is fair to say that district leaders didn’t do much to warn voters that the 2.4 mill increase may only be part of the property tax increase puzzle. I think some district residents now feel like they’ve just bought a new car, thought they negotiated one price, and now have learned about all the fees that get added on. But as buyers, I guess we should always assume the undercarriage coating fee is going to bite us in the rear.
The 3.5 mill increase could have been higher. District officials are recommending a step to stave off an even larger mill levy increase. Instead of issuing bonds for the entire $87 million worth of projects this next budget year, the district is going to issue bonds for only about $43.5 million. It will issue bonds for the other $43.5 million in the following budget year. So, instead of raising the mill levy 2.4 mills to pay for the bonds, the district will raise the mill levy 1.2 mills this year to pay for the bonds, then tack on another 1.2 mill increase the following year to pay for the rest of them.
Without that step, the district’s mill levy would have soared by 4.7 mills. The adjustment, though, is not without long-term risks. District officials likely will be keeping their fingers crossed that interest rates don’t go up in the next year. Even a 1 percent increase in interest rates would add millions of dollars in interest expense that the district would have to pay over the life of the bonds. Interest rates are pretty low now, but it is anybody’s guess whether they will be a year from now.
That’s a problem for another day, though. In the meantime, local residents need to figure how much more they are going to be paying in taxes. As we have reported, when you combine tax rates for the city of Lawrence, Douglas County and the Lawrence school district, residents are facing their largest property tax increase in recent memory.
With the school board surprise from Monday, that increase is now larger. Lawrence residents now are looking at an increase of 6.66 mills. On a $200,000 home that is an increase of $153 a year in taxes. And that is assuming your home didn’t go up in value since last year. Property values did go up for most homeowners, so the actual tax increase will be a bit more for most.
Such a tax increase is what happens when all three governments decide to do their projects at once. The school decided this was the year for school facility improvements. The city decided this was the year for a new police headquarters. The county decided this was the year for more than $1 million worth of new mental health services.
Some taxpayers may decide it is the year for an aspirin.
The county finalizes its budget at a hearing tonight at the Douglas County Courthouse. The school district finalizes its budget at a meeting on Aug. 22.