Understanding the tax impact of WFB's referendum

Posted: Oct. 23, 2009

Recent confusion among taxpayers about the cost of improvements for Whitefish Bay School buildings appears to stem from a vote-no group’s claim that the district’s estimate of the tax impact ($250 increase on a $350,000 house) understates the cost.

 

“The fact is the school district’s figure includes everything – bond interest, principal and an estimated reduction in aid from the state,” according to Meredie Scrivner, a member of the grass roots campaign group, Yes Yes Nov. 3, which is working to support the referendum proposal.

 

The referendum has two questions. The first authorizes up to $9 million in maintenance, repair and toilet room remodeling work as well as security improvements at the four schools. Because borrowing $9 million would replace existing debt that is being retired, it would not affect the level of taxes or state aid.

 

A second question seeks approval of up to $13.6 million in improvements, including additions at the grade schools and the high school. This would require the tax increase outlined by the district. All of the additional money goes to capital improvements, and cannot be used to hire new employees or give raises to existing employees.

 

Why should state aid be affected if the referendum passes? Observers say it is a reality of the state’s complicated funding formula.

 

“And it is a law that we have to live with,” says Scrivner, who spearheaded the last successful school bond referendum campaign in 1994 to approve construction funds for the middle school. Scrivner’s husband, Tom, is a past president and former member of the school board. “It’s a given that, as expenses rise, the state reduces its support.”

 

Among the additional expenses that the state looks at are the costs of borrowing, even when districts such as Whitefish Bay are making capital expenditures to protect and improve their buildings.

 

The aid reduction estimate is based on two other uncertain projections: (1) the highest possible interest rate the district would have to pay and (2) construction bids that do not factor in the current slack in demand. In the unlikely event that neither produces a more favorable cost outcome, the aid reduction would still not exceed $251,600 next year.

 

“There is no way to accurately project the cost of state aid loss over a 20 year span since the rate that the state pays and the district’s place in the formula changes every year,” according to Shawn Yde, business manager of the district.

 

Even so, the “No” organization, Concerned Whitefish Bay Voters, estimates in its literature that $5 million in state aid will be lost if the referendum passes.

 

Scrivner calls that misleading.

 

“This aid loss number was calculated on the assumption of a 5.5% interest rate and $22.5 million in construction costs,” she said. “Recent construction bids have been coming in below estimate, according to our architects, and there is a very real possibility the district will get an interest rate well below 5.5%. A nearby suburb recently refinanced debt with general obligation bonds at under 2.5%.

 

“It’s also possible we could receive zero-interest bonds from the federal stimulus plan. Either of these positive developments would significantly reduce the aid loss and the cost per household for the duration of the loan.”

 

Does that mean that lower bids and a lower interest rate have the reverse affect on state aid? Yes, says the district.

 

“As your expense declines, so does the reduction in aid,” according to Yde. For every dollar a district in Whitefish Bay’s category doesn’t increase spending over the prior year’s budget, 37 cents in its current level of state aid is preserved.

 

Scrivner says that the improving state of the economy is also not being factored into a $5 million cost projection over 20 years, either.

 

“When the economy improves, our aid from the state should increase, assuming the continued use of the current formula,” according to Scrivner. The state under its school finance laws is expected to pay two-thirds of the total cost of educating primary and secondary students in Wisconsin. In the recent state budget, the economic downturn forced the state to cut back its commitment for the year to 62%.

 

“If the economy improves, the state will receive increased revenues from individuals and businesses. That will allow the state to fully fund its commitment to schools, and the property tax burden will be decreased.”

 

Scrivner said she thought the real questions for each voter were these:

 

• Would our children and our community benefit from these projects?

• Am I willing and able to pay my share for the good of the whole?

• Will my property value increase if our schools are the best they can be?

• With improved facilities, will our schools attract new families and homebuyers?

• Can we pull together, even in challenged economic times, to take advantage of the opportunity presented to us now?

• Is each facet of school life, whether it be academics, music, sports, or lunch, made better when other facets are the strongest they can be?

• Will I do my part to continue the school-community partnership that has long been the foundation of life in Whitefish Bay?

 

“It seems to me the answer to all these questions should be a resounding Yes Yes!”