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Serving Northern St. Louis County, Minnesota

New levy will help districts with facilities projects

Legislature grants schools new levy authority for third straight year

Tom Klein
Posted 8/28/15

REGIONAL - A newly-established Long Term Facilities Management levy will give schools more funds for maintenance and health and safety projects.

But it also means a potential increase in property …

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New levy will help districts with facilities projects

Legislature grants schools new levy authority for third straight year

Posted

REGIONAL - A newly-established Long Term Facilities Management levy will give schools more funds for maintenance and health and safety projects.

But it also means a potential increase in property taxes beginning in 2016 for school district residents.

The new levy replaces the current alternative facilities, deferred maintenance, and health and safety levies used to fund capital projects at schools.

In addition to folding all three levies into a single tax, the Legislature also boosted the amount that districts can levy. The previous formula allowed $64 per pupil for capital projects. That will increase to nearly three times as much, to $193 per pupil in fiscal year 2017. The levy maximum will be raised to $292 per pupil in 2018 and $380 in 2019.

Charter schools will also receive an increase, but it will be a fraction of that provided to other public schools. Charter schools will receive $34 per pupil in fiscal year 2017, $85 in 2018 and $132 in 2019. In addition, charter schools may use the revenue for any purposed related to the school.

The driving force behind the change has been a backlog of maintenance at schools across Minnesota and an inequity in funding between other schools and the state’s 25 largest schools, according to Tom Melcher, director of the Program Finance Division of the Minnesota Department of Education.

“Schools struggled to keep up with maintenance needs at $64 per pupil,” said Melcher, adding that passing bond issues in many rural school districts is difficult. Meanwhile, the state’s largest schools had no limit on their levy for capital improvements. The average levy among those 25 schools is about $500 per pupil, he said.

A working group formed to address the issue recommended a three-year phase-in that increased the levy by $300 per pupil in 2017, $400 by 2018 and $500 by 2019. In addition, the proposal would give all districts the ability to levy whatever they needed by fiscal year 2020. But the Legislature scaled back that proposal and capped the increase at $380 per pupil.

“That still leaves an inequity among the biggest schools and other districts,” said Melcher, “ but it helps to close the gap.”

Melcher said there are three exceptions that would allow districts to levy additional funding. The three exceptions are projects that address indoor air quality, fire safety or asbestos abatement. “Those are typically big-ticket items for a school,” said Melcher.

How it works

School districts have the authority to levy the additional dollars without the public’s consent. The state is providing equalization aid for districts that don’t exceed 123 percent of the average net taxing capacity of the state’s school districts, but neither St. Louis County School District or the Ely School District will qualify for equalization aid. That means any tax increase in those districts will be borne entirely by the district’s taxpayers, including those who own seasonal or recreational property in the district.

Districts could choose to levy on a pay-as-you-go basis, issue bonded debt, or use a combination of both methods.

The funds can only be used for improvement to existing school buildings and cannot be used for building additions or new buildings. To ensure that schools are using dollars for their intended use, schools will be required to submit a 10-year facilities plan to the Minnesota Department of Education. The St. Louis County School Board approved its plan on Monday.

The plans can be modified and the district will have to submit an updated 10-year plan each year to the Department of Education.

ISD 2142’s case

During a St. Louis County School Board retreat earlier this month, Business Manager Kim Johnson presented a chart showing the difference in revenue for capital projects created by the long-term facilities maintenance levy.

Under the old formula, ISD 2142 would receive $208,113. Under the new formula, that revenue would increase to $350,870. The estimates exclude any levy adjustments from prior years. The levy paid in 2015 by taxpayers for health and safety and deferred maintenance, including prior levy adjustments, was $221,581.

The increase grows larger the next year. Under the old formula, the district would get $265,310. The new formula boosts that amount to $544,785. The gap gets wider in 2019 with the old formula providing $268,941 to the district while the new formula would produce $730,530.

That’s assuming, however, that the district would levy the maximum allowed under the new formula. The district has the option of levying less. Johnson suggested the board might want to reduce other levies if it opts for the full increase in the facilities management levy.

Johnson added that ISD 2142 receives about $180,000 to $200,000 annually from the taconite production tax that is targeted for building maintenance and could offset a portion of the tax increase. However, she expects that funding, which is based on taconite production, to take a dip in light of the massive layoffs at area mines.

Another factor for ISD 2142 is the passage of a $78.8 million plan for remodeling and building schools, which has eliminated a large share of the district’s capital needs at aging facilities.

School board member Bob Larson suggested one option would be to not levy for the full increase in the new facilities levy, but keep levying the maximum in the local optional revenue levy. He suggested the LOR levy gave the district more flexibility on how it spends the money. The new levy can only be used for capital improvement projects.

The facilities maintenance levy comes on the heels of two other actions that allowed districts to generate more revenue without voter approval.

In 2013, the St. Louis County School Board approved a new excess operating levy, taking advantage of legislation that allowed districts to levy up to $300 per pupil without voters’ approval. In the past, districts had to put any excess operating levy up to a vote by the district’s residents. The district did qualify for some equity aid on the levy.

A year later, the district added another $424 per pupil with the Legislature’s approval of an expansion of the (LOR) levy to all school districts. Local taxpayers had to shoulder the full weight of the increase for the LOR levy.

As a result of those two levies, ISD 214 collects an additional $724 per pupil beyond basic aid provided by the state — a jump of nearly $1.3 million.

The district will set a proposed levy for property taxes in September and finalize the levy in December. The preliminary levy approved in September can decrease before the board finalizes it, but cannot increase.