Category: Schools

School Districts Seek $1.2 Billion Amid Declining Enrollment

School Districts Seek $1.2 Billion Amid Declining Enrollment

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At a time when the economic environment is forcing families to budget for gasoline and groceries while property taxes keep climbing, school districts would do well to focus on projects directly related to the education of children.

On November 7, 2023, 34 school districts will ask voters to approve bond questions totaling more than $1.2 billion across 50 counties in Iowa. Many districts claim the new debt will be revenue neutral from a taxpayer perspective, or only increase the property tax a little, but most Iowans want their taxes to go down, not stay the same or increase.

Half of these districts, 17, have overseen property tax increases of more than 40% in the last decade. At the same time, 15 of the 34 districts have experienced declines in enrollment over the same period. Only 10 have seen enrollment increase by double digits, mostly in the Des Moines metro area in Dallas and Polk Counties.

While some of the proposed projects are likely necessary in districts with increasing enrollment and/or aging facilities, many are not so obviously a wise decision for taxpayers given the current economic environment. For example, it is understandable that Adel-Desoto-Minburn Community School District (CSD) is proposing a bond to build a new high school and renovate its middle school, given an enrollment increase of nearly 44%. The same goes for Van Meter CSD, where enrollment has increased nearly 55%, potentially justifying $18 million to build new classroom additions and expanded parking.

In contrast, the Beaman-Conrad-Liscomb-Union-Whitten (BCLUW) School District has seen an enrollment decline exceeding 20% over the last decade, yet is asking voters to fund additions to the elementary and high school buildings. Easton Valley CSD wants to build a new athletic fieldhouse despite a 10-year decline of over 16%.

Some districts are returning to voters asking for more money mere months after a March 7 election that included bond questions. The Irwin-Kirkman-Manilla-Manning (IKM-Manning) CSD won a bond approval in March but now is back for more despite a 5.8% enrollment decrease over the last decade. Others, including Durant CSD, North Tama CSD, West Sioux CSD, and Clarinda CSD, lost their bond requests but are trying the same questions again, as detailed in the following table.

The nature of each project is also important to consider. Especially in an economic environment forcing families to budget for gasoline and groceries while property taxes keep climbing, school districts would do well to focus on projects directly related to the education of children. While sports are a valuable component of children’s educational experience, their value is worth examining when measured against adequate classroom space or essentials like functioning HVAC, electrical, and plumbing systems.

Nonetheless, 14 of the bond questions entail building or enhancing athletic facilities. These projects range from new baseball and softball complexes to tennis and pickleball courts to expansion of wrestling practice rooms. New facilities are on the ballot for an indoor batting/hitting area, a swimming pool, and a new concession/ticket booth, among others. These may be nice amenities to have, but at a time of high interest rates and declining enrollment are they reasonable to put on the back of the taxpayers?

For worthwhile projects, communities can always look to other sources of funding than bonds. Not only do they have property taxes to pay for infrastructure, but they also receive a penny of every dollar subject to the sales tax through the Secure and Advanced Vision for Education (SAVE) fund. In fiscal year 2022, total SAVE expenditures across the state amounted to more than $880 million. These sources are in addition to Physical Plant and Equipment Levies (PPELs) school boards impose.

As the facts highlighted above illustrate, voters in these districts must educate themselves. School finance is difficult even for those who work in the public policy world, which is why the Iowans for Tax Relief Local webpage has been enhanced with new information to help voters make informed decisions when it comes to local government spending.

Visit itrlocal.org to explore your community’s spending, debt, and property tax collections.

November 7 Election Bond Questions Exceed $1.7 Billion

November 7 Election Bond Questions Exceed $1.7 Billion

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75 percent of Iowans will see a bond question on their November 7th ballot.

The November 7, 2023, election ballots in 50 Iowa counties will have bond questions that total $1.72 billion in potential new spending statewide. A majority of the state’s people, 75%, live in counties with bond referenda next month, and these residents face their local governments saddling them with new debt. In fact, some November 7 ballots will include additional questions related to property tax increases specifically tied to the proposed debt.

The bond questions cover all variety of local governments: Six are for counties; four are for cities; and the remaining 35 are for public school districts. The largest request is Polk County’s proposal to build a new terminal at the Des Moines International Airport for $350 million. The smallest is the City of State Center’s proposal to build a municipal fire station and emergency medical service (EMS) building for $1,500,000.

School Districts Asking for Bonds… Again

For some school districts, next month’s bond questions are their second this year. A March 7 election also included bond questions, and voters in the Durant Community School District (CSD), North Tama CSD, West Sioux CSD, and Clarinda CSD all said “no.” Nonetheless, these school districts have decided to bring the same questions up for a second-chance vote, some with more money added. In the case of the Irwin-Kirkman-Manilla-Manning (IKM-Manning) CSD, voters approved a bond in March, but the district is back asking for more money anyway, despite its declining enrollment.

Effect of a New Property Tax Law

Earlier this year, a wide-ranging package of property tax reforms passed through the Iowa State Capitol (HF 718) with overwhelming bipartisan support in both legislative chambers. One of the major provisions of the legislation is the restriction of bond elections to November each year. The intent was to increase voter turnout for issues that have a direct effect on property taxes.

Another new requirement in the legislation is direct notification about bond elections. The commissioner of elections or auditor for each county conducting a bond election must mail every registered voter a notice that includes the full text of the public measure to be voted on not less than 10 days or more than 20 days prior to election day.

Voter Education

To ensure efficient, accountable government, voters in these districts must educate themselves about public projects and spending in their communities. Public finance is difficult even for those who work in the public policy world, which is why Iowans for Tax Relief has revamped and expanded its ITR Local webpage with information to help you make an informed decision this November.

Visit itrlocal.org and explore your community’s spending, debt, and property tax collections.

Iowa Government Debt Increase Largest in Nearly a Decade

Iowa Government Debt Increase Largest in Nearly a Decade

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At a time when property valuations are increasing and Iowans are struggling financially from inflation, local communities must focus on paying their debt off, not finding new spending projects.

Iowa governments took on nearly 7% more debt — almost $1.3 billion — in fiscal year 2022 (FY22). The current Outstanding Obligations Report from the state treasurer shows this to be the largest increase since FY14. Iowa’s state and local governments now collectively owe $20.2 billion, which is roughly $6,320 per resident.

Especially with interest rates rising, property taxpayers should be asking their local officials — from cities, counties, and school districts — whether this is the right time to increase debt spending. Local leaders often tout spending projects as paths to prosperity for their cities and school districts, but this is simply a political assertion. Debt costs money. As interest payments, bond ratings, attorney fees, and more pile up, a pay-as-you-go approach is preferable over taking on debt whenever possible.

Among all levels of Iowa government with outstanding debt, cities currently hold the most. In FY22, cities had $7.5 billion in outstanding debt obligations, requiring $663 million in annual debt-service payments, or 7.7% of total budgeted city expenses.

Breaking down the total outstanding debt statewide by purpose, more than half of FY22 debt went toward public buildings/schools (36%) and utilities/sewer systems (24%). Smaller amounts funded transportation, housing and urban development, health care, and public safety.

Another important way to assess government debt is by the types of debt that have been issued. General obligation (GO) bonds, which voters are accustomed to seeing on the ballot, are the most familiar. This type of debt is backed by the full faith and credit of the government responsible for the bond, which typically translates into the lowest interest rates because governments can always raise taxes to pay bondholders. By voting on and approving such debt, residents have agreed to take the risk upon themselves.

Another common type of government debt is the revenue bond. This type of debt is supported by a specific revenue source, such as income from a utility (water/sewer), enterprise revenue (landfills/ garbage facilities), or a local option sales tax. In theory, the issuing government body may not be responsible for the debt if the revenue doesn’t appear, so the interest is typically higher than for GO bonds. However, defaulting on such bonds can affect the government’s bond rating and make borrowing without voter approval more expensive in the future, so officials have incentive to make bondholders whole no matter what happens.

Overall, Iowa’s debt is 46% general obligation bonds, 50% revenue bonds, 3% loans, and 1% lease-purchase agreements.

Iowa’s state constitution limits the debt of each political subdivision to 5% of the value of the taxable property within it, but this limit only applies to debt payable from property taxes, typically GO bonds. Revenue bonds or other types of debt paid from sources other than property taxes have no legal limit.

To some extent, the higher-than-normal debt in FY22 can be attributed to a carryover from the pandemic and the federal stimulus money sent to local governments, which flooded cities, counties, and school districts with cash. The combination of surging cash and record low interest rates encouraged cities to pursue infrastructure projects and refinance previously held debt.

In the new high-interest-rate environment, these activities need to change. Debt places a burden on taxpayers and can crowd other priorities out of local budgets. At a time when property valuations are increasing and Iowans are struggling financially from inflation, local communities must focus on paying their debt off, not finding new spending projects. A temporary increase for a good reason is understandable, but constant high levels of debt put the taxpayer on the hook for growing interest payments in the future.

The following table shows the top cities, counties, and school districts across the state of Iowa when it comes to debt levels. If you are interested in digging into the debt held by your local governments, visit ITR Local and review the countycity, and school district debt pages.

© 2023 Iowans for Tax Relief and ITR Foundation