“Needs-Based” Operational/Maintenance Referendum
Elkhart Lake-Glenbeulah School District – November 6, 2018
Frequently Asked Questions – For Those Interested in Learning More
Voters approved a referendum in 2015 for $725,000 for four years. What was done with these funds?
The funds allowed the District to upgrade/replace the HVAC systems at the elementary and high schools. Phase I of the District’s HVAC plan has been completed. Phase II involves upgrading the remaining seven units at the high school as needed. Six of these rooftop units are scheduled to be replaced this summer. The final unit, which serves the locker room area, is still functioning well. Money was set aside annually from the referendum funds and put in a reserved account so the cost of these replacements will be covered when needed.
The final payment on the HVAC project loan will be made this spring, paying off the loan one year early. This honors the promise made to taxpayers when the referendum began, that at the end of the referendum, we would again be a debt-free district—one of approximately 62 of the 424 districts in the state. In other words, we are in better financial shape as pertains to debt than 85% of the state’s school districts.
In addition, the revenue flexibility provided by the referendum funds allowed the district to continue addressing items identified in our Safety, Technology and Facility Studies and to provide curricular enhancements for our students. While the majority of referendum funds were able to be used to address one-time expenditures in the first two years of the referendum, a minimal amount ($100,000) was needed for general operating costs in year 3. However, in 2018-19, the final year of the current referendum, this amount increases to approximately $400,000/$450,000 (over half of the referendum amount). This is not due to increased expenses as the District’s budget has remained basically flat and/or declined slightly since 2012-13, but rather as a direct result of a decrease in the allowable revenue the District can raise under the state’s revenue limit formula for 2018-19.
Overall, how is the ELG School District doing?
ELG is a very strong school district overall. Due to community support through past referendums, financial donations, etc. and careful financial planning on the part of the District, ELG continues to expand opportunities to meet student needs for their academic learning in a safe, well-maintained environment. When the state released their first “Report Cards” for both the entire District and individual schools in 2013, ELG was rated at “Exceeds Expectations” at all levels--one of only two districts in Sheboygan County to do so. This year, we are proud to report we earned this same rating again for the district and the high school, while the elementary/middle advanced to the “Significantly Exceeds Expectations” level. Our staff, students, administration, board and community have worked hard to grow ELG into being not only a viable school option, but one that is desirable.
What exactly are the purpose, the time span, and the dollar amount of the referendum?
The purpose is to allow the ELG District to exceed revenue limits for a five year period (beginning in the 2019-2020 school year) for operational and general maintenance expenses, as well as address three facility projects: renovation of the performing arts auditorium and the culinary arts classroom/lab stations; and updating the h.s. football/soccer field lighting, bleachers and handicap accessibility.
As to the dollar amount, this is a very difficult question to give a specific answer as this referendum is being structured in a manner different than our previous referendums. In the past, the District levied for specific referendum dollar amounts and as a result, would need to project the tax impact. The referendum amounts were known; the tax impact/mill rate was an estimate. Under the revenue limit formula, various factors enter into the calculation for this final mill rate/tax levy amount: increases/decreases to student population, changes at the legislative level to the per pupil amount, the equalized value of the properties within the District, etc. All these changes have an effect on the mill rate assessed to the taxpayer each year, resulting in fluctuations to the taxpayer for the school portion of their property tax bill.
In this referendum, the District is committed to maintaining an $8.21 tax rate, thus the referendum amount the District can assess will vary depending on any increase/decrease to the District’s equalized valuation. So it is just the opposite from the past—the tax impact is known, while the specific referendum amount that can be levied to arrive at this $8.21 level will vary each year depending on the same factors listed above. These amounts can range greatly depending on if the equalized values remain flat, increase 1%, 2%, 3%, etc. The District realizes this will make long-term planning a little more challenging, but felt a flat tax amount would better meet taxpayers’ budgetary planning, while still providing the District with the revenue flexibility needed to meet the purposes of the referendum.
What will this look like for a referendum question?
The state will not allow the District to put a referendum question on the ballot that states “The ELG School District will maintain an $8.21 mill rate for the five years spanning 2019-20 to 2023-24.” Dollar amounts must be given, even though they will be estimates based on projected student population counts and a 2% increase in property values. As estimated, the dollar amounts listed on the ballot would be the maximum amounts the District could levy for under the referendum. And ultimately, to maintain the $8.21 mill rate, the District may need to levy less. This would be the case if property values increase less than 2%. Under the state law, what cannot happen is for the District to levy an amount higher than what is listed in the question. This scenario could happen if property values increase more than 2%. In that case, the District would levy for the proposed dollar amount but the tax mill rate could end up being less than $8.21. Just as the Board of Education has honored the promises made on behalf of the District in the past referendums, they are committed to keeping the levy at a maximum of $8.21 over the five- year period as maintaining the District’s credibility with the community is extremely critical.
Click here for scenarios of how the variation in assessed equalized value will have an impact on the referendum amount.
What is the tax impact?
As the District is committing to maintaining the $8.21 mill rate over the period of the referendum, the tax impact from the $7.91 that was levied in 2017-18 school year would be an additional $.30 annually. This would cover the amount of the loan to do the three projects. This impact would be an increase of $30 per year per $100,000 in property value over the property taxes paid in 2017. For example, the increase on a $200,000 property would be $60 a year or $5 per month.
While the tax levy for 2018-19 is still unknown at this time, the projected tax mill rate is below the $7.91 level. In this case, property taxes would decrease for one year before increasing back to the $8.21 level for the next five years. At this time, the mill rate projection is between $7.40 and $7.60. The final amount is dependent on September’s third Friday pupil count and the final equalized valuation for the District—which is not known until mid-October. The District will pass the tax levy by November 1, 2018.
Click here for Referendum Mill Rate & Tax Levy Impact Charts
Wouldn’t my taxes go down if Elkhart Lake-Glenbeulah did not have their own school, but instead, consolidated with another district?
This issue was posed to Michel Clark from Robert W. Baird and Company. He stated he did not believe this to be the case. Whether the school District is located within or without a community, taxpayers are still going to pay school taxes to some district. This cannot be avoided. From the cases Baird has studied of this similar situation, their finding was that if a higher property-value district (such as ELG) joined a lower property-value district (such as Plymouth, Kiel, etc.), the higher property-value district would see an increase in taxes while the lower property-value district would realize a decrease. Also, taxpayers must remember that if our local school district would cease to exist and if we joined another district, not only would we assume part of that district’s operational costs, but we also assume part of their debt. At this time, ELG is the only debt-free district in the area; the districts surrounding us have substantial debt. For example, the districts which border ELG have long-term debt balances ranging from approximately $8,000,000 to $31,000,000.
Why is a referendum needed?
Funding for public schools in Wisconsin has been done in a unique manner since 1993, when the concept of Revenue Limits was put into place. The purpose behind the legislation had merit—it was an attempt to stop the unrestricted increase of property taxes. At that time, a district’s revenue was divided by the amount of students and a per pupil amount was determined. This amount was then used in the Revenue Limit calculation going forward. It is this calculation that is multiplied by the student count to determine how much revenue a school district can raise under the state formula. State aid is then subtracted from the total amount, with the remainder determining the tax levy for the school district. One problem behind the origination of this calculation was there was no equity in determining this initial amount—for some school districts the level was at the lower range, such as ELG, and for others, it was set at the higher end. It is for this reason our base revenue number per member is approximately $9,700 (below the state average) while other districts have a base revenue number that is close to $20,000 per member-- over $10,000 more per student. This puts the districts with a lower per pupil amount at a disadvantage.
While initially this base revenue amount was often adjusted for cost of living increases that has happened less in recent years and the base revenue amount has even decreased. For example, our current base revenue limit per member is $9,781. Ten years ago, in 2009-10, our base revenue limit per member was $9,746. Over the past 10 years, our rate per pupil has remained basically flat. However, this is only one factor in the revenue limit formula. This per pupil rate is multiplied by the number of students to arrive at the District’s base revenue limit. As the District has had a decrease of 90 students over the past 10 years, our base revenue limit has decreased by almost $800,000 from approximately $5,300,000 to $4,500,000. For the 2018-19 school year, our current referendum dollars will “backfill” this amount, but as this is the final year, it does not address this shortfall going forward.
If there are 90 less students over the past 10 years, shouldn’t the District be able to operate with less money?
Ninety students is a lot but when divided by 14 grade levels (don’t forget 4K and kindergarten), it averages to 5 to 6 students per grade level. Where numbers allow, the District has reduced staff, having one section instead of two at a grade level. However, as the student population changes, so do their needs. Due to special education needs, more special education aids and services are required under the students’ Individual Educational Plans. The District is always looking for ways to reduce costs and be fiscally responsible. For example: one of the second bus routes has been eliminated, but due to our large geographic area, if more were cut, students would be on the buses well over an hour each way; maintenance upgrades have helped reduce electricity and heating costs; current administration has taken on the special education leadership thus eliminating this position; fundraising has been done to support the cost of several projects such as the greenhouse, an all-inclusive playground, and various equipment upgrades. While fundraising has worked well for “special projects,” it cannot be relied upon to cover the District’s basic operational and maintenance expenses. The District is constantly looking for ways to contain expenses while continuing to provide exceptional educational experiences for our students and maintain an environment which not only attracts but retains quality staff. Both are critical for any school’s success and have been instrumental in ours. However, while the District contains cost when possible, there are also costs that continue to rise and new expenses occur, such as in the technology and special education areas.
Will this referendum solve all the District’s financial issues?
As school districts must operate under this revenue limit funding formula, the amount of value in a district has no bearing on the district’s ability to increase their revenue for tax-levying purposes. The only way for a district to exceed the revenue limit calculation by state law is to go to referendum. That is why ELGS has done so in the past and will need to continue to do so, unless there are changes to the funding formula or our student population grows. The state wants the individual taxpayer to determine if they are willing to approve a property tax increase to support their local school system. Our community has done so in the past, and as a District, we hope this continues. However, this commitment of our community to the school district is not taken lightly. It is for this reason, that the District has honored the promises made in each referendum and worked hard to be sure that not only were operational expenses met, but the maintenance projects were completed as promised (the roofing and HVAC) and at the end of each referendum period, ELGS once again is a debt-free district. While loans are taken out to cover the major maintenance projects, all others are done on a “pay as you go” basis—which has worked very well for our District’s financial picture and has also kept us on track for maintaining our facilities. This is again the plan under the proposed referendum. A 5-year loan will be taken out to cover the cost of the auditorium/culinary arts/athletic field projects. After meeting the district’s budget annual expenses (including the loan payment), any surplus funds will again be spent on addressing additional maintenance and technology needs on a “pay as you go” basis. This will be dependent on the amount of referendum funds available contingent on the District’s equalized valuation. (See enclosed charts for example budgets. Under the 2% Model Scenario, funds are also reserved to go into Fund Balance to offset future expenses and/or cover expenses for years when the equalized value may be flat or less than 1%.)
How was the amount/mill rate used for the referendum determined?
While the total amount of revenue the District was able to raise in 2017-18 was less than the previous three years, the District’s revenue amount allowed under the Revenue Limit Formula that year of $5,600,000 enabled the district to sustain the programs and staffing needed and also allowed for continued advancement when combined with funds received from other sources (state grants, federal funds, fees, etc.). It was for this reason the referendum was based on the tax levy mill rate ($7.91) from that year. After experiencing several years of decreasing revenue, the district reached the minimum financial level needed to sustain operations. This can be compared to a homeowner. Regardless of whether there is one person in a home or more, there are basic expenses—heat, lighting, car/transportation expenses, property insurance, etc. The district has adjusted staffing to address student enrollment variations and to meet current student needs. It has also made reductions in other areas. However, there is little left to cut without affecting our students’ educational experience, our District’s academic/co-curricular offerings, the quality of our staffing, or the continual upkeep/improvement of our facilities.
As districts have to operate under the parameters of a revenue limit formula, often there is very little control over how much funding a district can raise each year. A district has no control over the per pupil amount, and even when this remains stable or slightly increases, it is only one factor. The largest factor for smaller districts is when this amount is then multiplied by the student population, which is not known until after the third Friday in September as that is the “pupil count” date used in the formula. This can cause huge fluctuations to a budget. For example, as a gain or decrease in 10 students will make approximately $100,000 difference to the budget, which for a small district is huge. So while our District tries to live within a basically flat budget, planning can be difficult when your budget numbers vary annually based on the student count. In large part, this was why this referendum is structured to coordinate with a set mill rate, rather than a specific dollar amount. This minimizes the fluctuations of the tax impact to the taxpayer, and yet gives the District the needed revenue flexibility.
Click here for Budget Comparison Scenarios with and without referendum monies.
If the District’s overall assessed property value has increased, but the amount of revenue limit for the District has decreased or has been basically flat, why haven’t property taxes decreased?
There are two reasons for this. First, much of the growth, especially in the Village of Elkhart Lak, has occurred in Tax Incremental Districts (TID). The taxes generated from these areas are directed to covering the infrastructure and project costs. These properties do not go on the general tax roll until the TID closes—at which time there could be a substantial impact on the overall tax rate as the District’s value would greatly increase. Second, under the School Funding Formula, the amount of the revenue that can be raised is covered by State Aid and property taxes, so if there is a change in one area, it affects the other. This is the area where the District’s high property values do have a negative effect. While the higher values do not let us raise additional money, due to the fact that the state views ELGS as being a “property-rich” district, under the revenue limit formula, our district loses the maximum amount of state aid possible each year (15%). For example, since 2009-10 our state aid under the revenue limit formula has decreased from $1,031,855 to $253,955. This decrease of over $775,000 has been shifted to the tax levy. Under the formula, the District will continue to lose the maximum amount of 15% annually until it becomes a zero-aided District. If there is any “silver lining” to this scenario is that even with this shift of funding from the state to the local taxpayer, the District’s tax mill rate for its tax levy ranks in the bottom 20% of the districts in the state and the lowest of any district in the area at $7.91. This remains true even at the proposed referendum mill rate of $8.21
How does ELG’s school levy compare to other schools in our area?
When comparing tax bills with area communities, it is important to remember there are several different taxing entities included. The District can control the costs of only the school’s portion. ELG’s tax mill rate, which is used to calculate local property taxes, is the lowest in our area. As the final 2018-19 tax rate will not be set by area districts until late October, we will need to use the 2017-18 tax levy rates for comparison purposes. For example, the 2017-18 tax levy per $100,000 of property value for ELG and surrounding communities: ELG--$7.91 (increase to $8.21 under referendum proposal), Plymouth --$8.13 (increase to an estimated $9.02 due to referendum passed April 2018), New Holstein--$9.15, Howards Grove -- $9.34, State Average -- $9.77, Kiel $9.38 (increase to an estimated $9.93 due to referendum passed April 2018); Sheboygan Falls--$9.96, Kohler--$10.09, Sheboygan--$10.41, and Chilton--$10.46.
Based on the assumptions explained prior (using the dollar amounts at Equalized Value increase of 2%), the referendum question will read as such:
Shall the School District of Elkhart Lake-Glenbeulah, Sheboygan County, Wisconsin, be authorized to exceed the revenue limit specified in Section 121.91, Wisconsin Statutes, by $1,467,920 for the 2019-2020 school year, by $1,560,171 for the 2020-2021 school year, by $1,698,640 for the 2021-2022 school year, by $1,843,433 for the 2022-2023 school year, and by $2,175,909 for the 2023-2024 school year, for the non-recurring purposes consisting of operational and general maintenance expenses, including, but not limited to, renovating the high school performing arts auditorium, culinary arts classroom and lab stations and updating the high school football/soccer field?
A yes vote means you DO support the referendumand agree to allow the District to exceed the revenue limits for amounts not to exceed those listed in the question. (Reminder: Keeping the mill rate at $8.21 will determine the final referendum number annually). With this support, the District will be able to maintain current programs and services, undertake the three projects, as well as continuing to address future technology and maintenance needs as funds allow. Possible projects include: abating and replacing of remaining h.s. floors, renovating lower level bathrooms by elementary gym, updating fire alarm system in elem./m.s., installing new windows on the 4thgrade floor, replacing the elementary electric breaker panel, updating the h.s. hot water heater, updating the WiFi infrastructure and purchasing additional/replacement technology equipment.
A no vote means you DO NOT support the referendum. Under this scenario, the District will need to make significant cuts to programs and services, eliminate/postpone the completion of the three proposed projects, and delay technology replacements/upgrades and maintenance projects in an attempt to balance the budget.