While the Tooele County School District is proposing a 9.1 percent property tax increase to cover the loss of state capital outlay funds, other school districts in Utah that also had their capital outlay funding cut will not be raising taxes.
“We don’t rely on capital outlay funding, because it’s too unreliable,” said Ron Frandsen, business administrator for the Box Elder School District.
Box Elder School District received $2.2 million in capital outlay funds from the state in 2011 and $1.2 million in 2012, but is budgeting for only $100,000 in capital outlay funds this year.
“It is a conservative figure, but if it comes above that it will be great,” said Frandsen. “We dealt with the cut last year by cutting back on maintenance projects.”
Six school districts are proposing a tax increase for the 2013 year, according to the Utah Taxpayers Association. Of those, Tooele County School District leads the way with a 9.1 percent proposed increase. Other districts proposing tax increases include Park City at 8.9 percent, Grand County at 8.4 percent, Carbon County at 2.3 percent, Beaver County at 1.1 percent, and Logan at 0.8 percent.
Tooele County School District is the only district proposing a tax hike that receives a significant amount of state capital outlay funding, which is distributed using a formula that favors districts, like Tooele County, that have relatively low assessed property values per student. Last year the district budgeted for $1.8 million in state capital outlay revenue.
Box Elder School District had an enrollment of 11,273 students and a budget of $106 million in 2012. Tooele County School District had an enrollment of 13,675 students and a budget of $117 million in 2012. Tooele County School District has allocated state capital outlay funds to its capital projects fund, and used that money to service debt related to the building of Grantsville Elementary, Copper Canyon Elementary, and the Community Learning Center. Box Elder School District does not use its capital projects fund for debt service, according to Frandsen. It did issue $3 million in lease revenue bonds in 2011 to build a new school, but relied on a mechanism called “10 percent of basic funding” to cover its bond payments.
The 10 percent of basic funding mechanism is an option the state gives local districts to implement a tax that will yield 10 percent of what the state-mandated basic levy raises. Each year the state sets a basic property tax levy rate that is the same for all school districts. The district then receives the proceeds from the basic levy along with an allocation from state education funds to make up for the legislative-approved cost of the basic education program. Funds brought in by the 10 percent basic levy must be used for debt service, construction or remodeling of schools, school site acquisition, busses, equipment and supplies.
The 10 percent basic funding produces a more consistent revenue stream than the state’s capital outlay funding, according to Frandsen.
Tooele County School District is relying primarily on capital outlay funding to pay back a total of $32.5 million in lease revenue bonds issued by the district’s Municipal Building Authority. None of those bonds required a vote by taxpayers.
For the 2011-12 budget year, Tooele County School District received $1.3 million in capital outlay funds from the state but the district is expecting only $502,000 for 2012-13.
Cache County School District had its capital outlay funding from the state slashed from $1.1 million in 2011 to $520,000 in 2012. Still, that district has no plans to raise taxes this year.
“We had to cancel a lot of planned maintenance projects,” said Dale Hansen, Cache County School district business administrator.
Cache County School District raised its tax rate 6.6 percent over the certified tax rate in 2011, but that was before district officials knew about the state capital outlay cutback.
“The tax increase helped, but it was primarily for operating expenses,” said Hansen. “Not because of the drop in capital outlay funding.”
All Cache County School District debt has been accumulated via voter-approved general obligation bonds, according to Hansen.
Cache County, Tooele County and Box Elder School districts, along with Nebo and Alpine School districts, account for 80 percent of the total state allocation for capital outlay funding.
While the Cache, Box Elder and Tooele districts are dealing with a reduction in capital outlay funding, Nebo School District’s capital funding will remain the same in 2013 at $5.7 million and Alpine schools will get a 51 percent increase to $5.3 million.
The Legislature allocates a fixed amount for capital outlay funding each year. That money is divided up among 13 school districts that qualify for capital funding assistance because of a low tax base per student, according to Bruce Williams, associate state superintendent for business and operations.
By law, the Utah State Office of Education must use data from the previous two years when calculating capital outlay allocations.
During the previous two years, Alpine School District experienced a large decrease in assessed value of property while the Tooele County School District’s assessed value of property remained the same. The result was more of the capital outlay funding going to Alpine School District, leaving less money to be divided up among the other districts, including Tooele, according to Williams.
“If the economy improves and the assessed value in Alpine School District starts to go back up, the formula should shift back the other way, leaving more money to be distributed to the other districts that qualify,” said Williams.
Tooele County School District officials could not be reached for comment on this story.