Property values put schools to test

Topeka Capital-Journal, The, Jul 13, 2008 by Barbara Hollingsworth

By Barbara Hollingsworth

THE CAPITAL-JOURNAL

The number seemed unreal: $614.

For a school district used to its property tax base -- or assessed valuation -- growing by millions of dollars each year, the figure stuck out to Shirley Martin, assistant to the superintendent for business in Shawnee Heights Unified School District 450. After all, $614 looks more like a rent payment or credit card bill, not a climb in assessed valuation.

Shocked? Sure.

"That's next to nothing," Martin said.

For many school districts getting ready to craft budgets, recent assessed valuation estimates have been troubling. Numbers won't be final until this fall, but as is, Shawnee Heights barely squeaked ahead. For the second straight year, Topeka USD 501 lost ground. Other districts primarily located in Shawnee County saw their valuations increase, but for most, gains were at lower rates than they are accustomed.

Dale Dennis, Kansas's long-serving deputy education commissioner, said he has never seen such a mixed bag of news throughout the state.

"It's all over the place really," he said. "I talked to a district in Johnson County. They're up, but a lot less than normal, and I've got some districts up in the northeast part where they ran a pipeline across there, and it's up significantly."

With school budgets due in August, the losses are casting a cloud over some school districts. What it means is that school districts - - pumped up with extra state funding in recent years after the Kansas Supreme Court said the state wasn't adequately funding public education -- will have to consider raising taxes or not taking advantage of some additional funding this school year. Perhaps a bit of both. Neither is palpable with taxpayers facing the same rising fuel, food and health insurance costs that are hitting school districts.

Much of the extra money mandated by the high court was targeted for students at risk of failing. Also, a lot of went to increased pay for teachers.

At Thursday's school board meeting in USD 501, board member Ned Nusbaum started out strong in saying he couldn't support a tax increase. Everyone is strained, he said.

"This community cannot afford a millage increase," Nusbaum said.

But by the end of the meeting, he said at least some increase may be difficult to avoid.

Among the difficult-to-avoid increases, the district in recent years refinanced bond projects to pay them off early. When planning the refinancings, USD 501 anticipated at least some yearly growth in assessed valuation. After all, even the longest-tenured staff members at the district can't remember consecutive years of declining assessed valuations, if they can even remember one year.

But with valuations dropping, the district will need to raise about 0.6 of a mill to make its payments on bonds, which originally helped finance construction.

"I don't see a whole lot of wiggle room," said board member Doug Glenn.

There are at least two culprits for the financial hit, said Mike Jones, general director of fiscal services in USD 501.

For one, he said, some nervous home sellers may be more likely to accept lower offers on their houses, which can then drive down property valuations. Secondly, the Legislature has removed millions from the property tax base with business tax exemptions.

In 2006, lawmakers exempted business machinery and equipment taxes on any purchases made after July 1, 2006. The idea was to spur economic development, which many say has occurred.

The other effect was narrowing the tax base, pulling away about $2.9 million in tax revenue from Shawnee County alone last year. Government entities are being weaned off the losses. This year, they will get 70 percent of what they otherwise would have received. Next year, it will be 50 percent. A couple of years down the line, nothing.

Throughout the state, Dennis said that districts heavily reliant on real estate are most likely to have seen decreases. Those with natural resources, such as oil and natural gas, are doing better.

"It's the economy," Dennis said.

Jones knows the numbers could change for better or worse before final assessed valuations are calculated this fall. Creating budgets, he said, is always tricky when you have to estimate numbers of students and other unknowns.

"It's like trying to build a house on Jello, there are so many factors out there," Jones said.

While Auburn-Washburn USD 437 has its numbers, officials are still figuring out what they will mean, said superintendent Brenda Dietrich.

Accustomed to growth of 4 percent to 8 percent a year, the district grew just 2 percent. That is less than the district figured it would grow when estimating the yearly impact for taxpayers of the $68 million bond issue approved last year. Dietrich expects that a staggered sale of bonds will help mitigate the impact.

Everyone is worried about finances and what effect lower tax revenues statewide might mean to school districts reliant on that money. Some have fretted that the state might lower funding mid- year if revenues don't pick up.