Board Of Education Receives Presentation On Finances And Enrollment Numbers Related To Referendum – If Referendums Don’t Pass, Taxes Will Go Down By $100 For A $100,000 Property

Since the Appleton Area School District Board of Education has decided to continue on the path of a referendum, I thought I should go back and review the information from some of the previous meetings regarding this. Yesterday I posted a recap of the first half of a presentation AASD’s Chief Financial Officer Greg Hartjes gave to the Board of Education back on 09/30/2021. In this section of the presentation, he gave an overview of what AASD wanted to spend the $98 million referendum funds on–a new elementary school, additions to all three middle schools, renovations of the elementary schools, and expansions of the athletic facilities at all three high schools. In addition to the $98 million, AASD would also be seeking ongoing annual funding of an addition $1.6 million per year in order to pay for increased staffing and maintenance.

The second half of the presentation was focused the district’s finances and enrollment.

[The main thing I took away from this portion of the presentation was that, from a marketing standpoint, AASD needs a referendum to pass in either 2022 or 2023 because, if one doesn’t, property taxes in the area will drop by around $100 per $100,000 worth of property. That is a pretty hefty tax break, and the concern is that if residents experience that tax relief, they may be hesitant thereafter to approve a referendum and the tax increase that would go along with it.]

Greg started this section of the presentation by telling the Board that the AASD tax rate had decreased from $9.60 per $1,000 worth of property all the way down to $8.32 per $1,000 of property. If both referendum questions passed, they would increase the tax rate by $0.25 to $8.57 per $1,000 of property value which was still below where the levy was in 2018-19. He noted that the PowerPoint slide incorrectly showed a figure of $0.20 but the correct number was $0.25. 

He then reviewed the levy amounts and tax rates going back to 2015. He thought this was important because “it really explains why, financially, there’s a window for us to go to referendum and that window closes in 2 years.”

2015-2016 LEVY YEAR – They levied just under $68 million. That levy was spread across all taxpayer property which had an equalized value of over $7 billion. The levy amount divided by the equalized value gave a tax rate of $9.60 on $1,000 worth of property. Out of the levy amount of $67,986,304, AASD spent $3,365,060 to pay off previous debt from the 2014 referendum.

2016-17 LEVY YEAR – The levy amount went down and the equalized value went up which caused the tax rate to decrease. In that year they also spent over $4.7 million out of their $65.7 million levy amount to pay off debt.

2017-2018 LEVY YEAR – The levy amount went up by around $1.5 million, but the equalized value also went up by almost $400 million, which caused the tax rate to go down.

Greg told the Board, “Knowing that our tax rate was going down, we felt like we could afford to start prepaying on our 2014 debt.” The way that is done for a bond is through a process called defeasance in which they put money to pay off a bond into an escrow account where it earns interest, and when the bond is callable (which in this case would be in 2024) they can use that money plus the interest accrued to pay off the bond. “We save just under $500,000 in interest by levying that additional million dollars and paying that off.”

2018-2019 LEVY YEAR – The levy amount increased, but the equalized value also increased, so, again, the tax rate went down. That year, they defeased $3 million which saved them $1.3 million in interest over the life of the bond. That $3 million was included in the debt payment of $7,711,143 which was part of the levy amount of $68,347,217. He then skipped down to the…

2021-2022 LEVY YEAR – He said that they were projecting their levy amount to be just under $69 million for two reasons. The first was because the district’s enrollment is going down which, in turn, causes the revenue limit to decrease, and that affects their levy amount. The second was that the state was given them a little increase in equalization aid.

So, the levy was going own and would be divided by an increase in equalized value which would result in a projected tax rate of $7.34 per $1000 of property value.

Greg then explained that they were going to pay off all of their debt next year. If they go to a referendum in the next 2 years, they would be able to take the approximately $10.5 million in debt payment and use it to pay for new debt without affecting taxpayers that much. But if they don’t have any debt to use that $10.5 million to pay, that will result in the tax rate going down by over $1 per $1,000 worth of property. Taxes for a home valued at $300,000 would go down by $300. This was a problem for the district because, per Greg, “if we have to go to referendum, we need all of that money back, to support the referendum—very difficult to do. And districts that are struggling to approve referendums are districts that have had their tax rates drop so much that homeowners are saying ‘we don’t want our taxes to increase that much’. So, this window is because we have debt dropping off that we can move our debt payments over to new debt without effecting taxpayers a lot.”

Greg said that he had Mike Clark, one of the people they work with at Baird, look at AASD’s current situation, and, per Mr. Clark, if the district went to referendum April of 2022 for $98 million and $1.6 million in annual operating costs, the result would be that the tax rate would still go down by $0.09 or $9 for a property valued at $100,000. That would be because they had defeased all their debt and property values are increasing. [I didn’t really understand that because just a couple slides before he had discussed how the referendum would result in an estimated increase in property tax rates of $0.25 per $1,000 of property, so it’s confusing to see the claim here that it would go down by $0.09.]

He did note that the increase in equalized value was partially due to inflation. Approximately 1/3 of the increase was due to net new construction while the other 2/3 was from property values going up.

He finished reviewing that slide by stating, “So, like I said, it’s really important to understand that our window, financially, closes in 2 years.”

He then moved on to talking about enrollment. He wanted to stress that this referendum was not about total enrollment but, rather, about the needs of the students and how those needs have changed. The highest enrollment they had was in 2016-17 when they had 16,501 students. During the 2021-22 school year, they were projecting only 15,250 students, a decrease of almost 1,300.

He told the Board of Education that they needed to keep in mind that those student needs had changed. 20 years ago, 15% of students were students of color, 18% were economically disadvantage, 14% received special education services, and 9% were English Learners. Those percentages had increased over the 20-year period to the 2020-21 school year.

He said that for the current 2021-22 school year, students of color made up 35%, Special Education was 17%, and English Learners were 11%. They did not have numbers for economically disadvantaged because applications were still being submitted. [In some respects, one would expect those percentages to go up from last year to this year, even if the overall numbers didn’t change that much, simply because of the decrease in overall enrollment. I also would have appreciated an explanation of what exactly being “economically disadvantaged” entails. That seems like a pretty broad and every-expanding category that, in some situations, covers people who would have been considered middle class in previous generations.]

SLIDE – Students With Special Education Needs

He reviewed the number of students with special education needs. 10 years ago, they had 2,014 such students. This year they had 2,651. So, although their enrollment had decreased by almost 1,300 students over the last 5 years, their students with special education needs had increased by almost 200.

[I would have been interested in hearing more details about that—particularly the sort of special education needs that students have and how those needs have changed over the years. Special Ed seems like a catchall term that could cover any number of issues from kids with something like dyslexia, to those with physical health needs, to those with behavioral issues. I’m also curious how many students have acquired special education needs during the pandemic.]

He said that another way to look at that was that their enrollment of regular education students had decreased by about 1,500 while their enrollment of special education students had increased by 200. [Here again, I’d be interested in hearing what they believe are the factors contributing to regular education students not enrolling in AASD.]

In 10 years, AASD has done very little in terms of adding space, but they have over 600 more students with special education needs “and generally those are students that have a need for more space.” He said this was their biggest challenge across all of their schools.

He noted that the numbers for their English Language Needs students was not so drastic, but they had increased by almost 100. (64-72)

He said that EL student were not going to be educated in classrooms of 28 and 30 but needed to be in smaller groups. So, even though AASD’s enrollment had gone down, there were still some significant challenges for them.

He opened things up for questions but they only had a few minutes before the end of the meeting so there was not much time.

Board member Jim Bowman commented that, financially, the timing was unbelievably good, but the thought the declining enrollment was going to be a major challenge, with voters questioning why AASD wants to build another school when enrollment is down. “So that one we have to deal with very effectively I think.”

Board member Deb Truyman asked if students open enrolling from other districts had contributed to the increase in special education numbers.

Greg responded that, generally, they were in-district students. They don’t accept a lot of students with special education needs for open enrollment because the special education programs are, for the most part, full.

There were no further questions.

He did go on to spend a few minutes reviewing referendum timelines, but for the most part that is moot since they have since settled on a timeline.

[One item of interest, however, was the slide he threw up regarding referendums held during the November 2020 and the April 2021 election. He didn’t comment on this other than to say he was shocked that some districts went through with referendums. Personally, I was surprised to see just how much support for the referendums dropped off from November 2020 to April 2021. In November of 2020 90% of the operating (recurring) requestions passed and 83% of the capital project questions passed. By April of 2021, those percentages dropped down to 62.5% of the operating questions and 53% of the capital project questions. That seems like a large decrease in support and enthusiasm in a short period of time.]

View meeting details here: http://go.boarddocs.com/wi/aasd/Board.nsf/goto?open&id=C6WNT461183D
View meeting video here: https://youtu.be/XW1wjFFAVSw