Monday, September 3, 2012

Kicking Can Down the Road

Proposing to add $1,000,000 to the 2012-13 tax (debt) levy to help reduce the impact of 2013-14's debt levy increase is ludicrous; it reeks of ill-informed representation.

Thankfully, clear headed Mike Krachey quickly made a motion to table this nonsense.  But John Whalen made a comment (as if he knew something) that we would be discussing this again at the annual meeting.

Caren Diedrich gets partial credit for at least requesting a report from the district on the "bounceback" impact on future debt levies.  Of course requesting clarity from the district administration is like asking John Whalen to cast a vote in opposition to district wishes.  Temper your expectations.

According to documents provided by the district, the 2012-13 debt levy portion of the total proposed (school district) tax levy is $11,505,387. And the scheduled debt levy payment for 2013-14 is $12,365,565. That means an increase in the scheduled debt service levy of almost $1M, which translates to about a 2% total tax levy increase (2013-14) before we talk about a dime in annual expenditure increases. 

Finance Committee Citizen Rep Mike Hietpas is desperately trying to get the board to tax us $1M for 2012-13 for the purpose of reducing the debt levy for 2013-14. Well...truth be told, he initially wanted to simply add it to fund balance with no express purpose other than building savings. Someone must have quietly whispered to him that you cannot simply budget (tax) to increase fund balance with no express.

 But....but...hold on a second...according to other documents from the district, the "one-time additional state aid" ($350K) will be used to lower the debt levy for 2012-13. And didn't the district also tell us at last year's annual meeting that $450K in construction "savings" would be applied to lower the debt levy for 2012-13? Welll...that adds up to $800K to reduce the 2012-13 debt levy.

The question we have...and certainly it's not clear in district whether that $800K being applied THIS year means that instead of taxing $11.5M for debt service, will we actually be taxed only $10.7M?   Because if that is the case, then the bounceback for next year (2013-14) is not just $1M due to programmed debt service payments.  It becomes closer to $1.7M ($12.4M - $10.7M).

The concern with making one-time payments to reduce debt levy (or any tax levy) is that it becomes a game of kicking the can down the road one year at a time.  And that means that EACH successive year we need to tax more to kick the can further.  The only time this approach works is when the next fiscal year projects to see a scheduled REDUCTION in debt service payment.  For SPASD, the first time programmed increases in debt service payments occurs is in 2017-18 (5 years from now), when instead of increasing by $500K, the increase is only a bit over $100K.  The first time a scheduled reduction in debt service payment will occur is the year 2021-12, nine years from now. sum...don't hold your breath, and don't tax us to reduce further debt levy.

Now...if someone is barking up the "let's make an extra payment towards principal" tree, that is a separate issue which would have to be discussed.  That's the equivalent of winning $2,400 in the lottery and deciding whether to blow it all on vacations and other things or whether to make an extra payment or three on your mortgage to pay it off earlier/gain equity.

That is the root of our situation.  SPASD is projected to receive $2.4M more in state aid than it anticipated.  That is currently being applied to reduce the tax levy by 2% over last year instead of having an increase of 2.5% or more.   Gee...people are still struggling, the economy isn't that great (unless you're a 1%er)....maybe  giving a year of tax relief would be a good thing to do.  You know...maybe to buy some good will with the electorate  for 3-4 years from now when you (really) need a $20+M referendum for a new elementary school.

Wait...what's this thing called Debt Service Fund Balance?
You know...historically when the talking heads speak about "fund balance", they are referring to Fund 10, or the "General" Fund.  In reality, there are a number of "funds" (think of them as individual checking accounts) that comprise a school district's finances.    At the end of fiscal 2012-13, we are still projecting to have a little over $4M in Debt Service (fund 39) fund balance.  Hmmm.

Perhaps the bigger issue is that the Debt Service fund balance is slated to drop almost $900K for 2012-13.  Hmmmm...we don't recall that ever being discussed.  Is THIS the magic holding pen for the $350K and the $450K being applied against this year's debt levy?

Oh happy day...we get to use one of our top all-time phrases here.  It would seem that our questions here would suggest that the budget information presented by the district is tantamount to exegesis without clarity.
Look that up in your F&Ws.  In any event, we can't be having any of this exegesis without clarity nonsense.