Lowndes County School District is requesting about $5.5 million more than last year from county property tax revenue for Fiscal Year 2021, much of which would boost its operating revenue.
Whether the district can legally request that much of an increase, and what it would mean for the taxpayers if it is ultimately approved, remain at issue.
County administration received a school-board approved request for more than $27.4 million in local taxes for the fiscal year by the Aug. 14 deadline. That included $21.1 million for operations (up roughly $5 million from Fiscal Year 2020 which ended for LCSD on June 30) and $6.3 million for debt service (up about $600,000).
About half of the overall increase would come from a rise in the assessed value of taxable properties in the school district boundaries that would not require an increase in the property tax, or millage, rate. Getting the other half could result in a rate increase of at least 4.55 mills.
Property taxes are measured in mills, which represents a certain percentage of a person’s real and personal property value. For a residence assessed at $100,000 without a Homestead exemption, a 4.55-mill increase would raise the owner’s taxes by $45.50 annually. For a commercial property owner, the new rate would increase taxes by $68.25 per $100,000 in assessed value, according to calculations Lowndes County Tax Assessor/Collector Greg Andrews shared with The Dispatch.
Andrews said the millage hike would see steel manufacturer SDI paying about $900,000 more in school taxes next year than in 2020.
LCSD Superintendent Sam Allison said the district is trying to find firmer financial footing after spending down the $17 million fund balance it boasted in 2014 to about $6 million on June 30. Because property taxes are mostly collected in the spring, LCSD has depleted its reserves in the fall semester the last three years, taking out loans to make payroll in December 2018 and 2019, then repaying those loans with tax money when it came in a few months later.
This year, Allison said, LCSD would probably need a loan to make September payroll.
“I don’t see how without asking for more money (from local taxes) how we’re ever going to get out of this hole,” said Allison, who began working as superintendent in January. “… We can’t keep borrowing money, even if we can pay it back in the spring. We aren’t asking for anything we don’t need to keep our head above water.”
School district taxpayers haven’t seen a millage rate increase since 1989, with the school district instead requesting funds in local taxes that kept the rate flat. Last year, the millage rate actually decreased by .06 to 46.65.
With the current proposal, the rate would jump to at least 51.2, which drew criticism from some county supervisors when Andrews presented them the figure at their Monday morning meeting. The board of supervisors must approve the school district’s local tax request by Sept. 15, but District 1 Supervisor Harry Sanders said he isn’t sure the county can legally approve the current request without a voter referendum. He also expressed concern over the county’s ability to recruit industry to take on such a large tax burden.
“We’ve been able to entice industries to come to Lowndes County because of our lower tax base,” Sanders said. “And then if we go ahead and raise taxes … the next thing you know, we won’t have anybody (coming).”
Allison said he realizes LCSD is asking for a “big increase” in funds, some of which will require higher taxes. Keeping the tax flat for more than 30 years has created gaps in operations that widen each year.
“The last thing we want to do is not be a team player with everyone,” Allison said. “But we have to get our finances in order.”
Building back operations; covering debt
LCSD did not raise taxes last year despite rising bonded debt payments and a set debt millage that wasn’t covering the payments, both Allison and new district business manager Sayonia Garvin said.
The district initially dedicated 7.69 mills in 2017 to cover debt, which primarily includes repaying a $44 million bond voters approved the year before for various new construction districtwide.
The 2021 budget shows $4.5 million in annual debt service payments due, a total Garvin said has increased the last two years.
Last fiscal year, the district raised its debt mills to 11.7 and dropped its operating mills from 39.02 to 34.95. Even then, the debt millage collected about $100,000 less than what was owed, Garvin said, and added the shortfall to this year’s payment.
The mill increase, Allison said, would mostly help the district bump its operating millage back to 39, while also shoring up the debt payment shortage.
To cut expenses, Allison said, the district has eliminated three central office positions and a few teaching positions, which should save the district between $250,000 and $300,000 this fiscal year.
‘New’ property
By law, a school district can increase its request for local funding for operations by up to 4 percent each year without a referendum and up to 7 percent with a reverse referendum — requiring 1,500 district voters to submit a petition to force it to the ballot. Any increase exceeding 7 percent requires voter approval.
But the law allows school districts to add estimated collections from new property entering the tax rolls to their request that are exempt from being counted in that percentage. That new property could consist of new businesses or homes built, as well as expiring fee-in-lieu contracts — an incentive that allows developments, usually industrial, valued at $60 million or more to pay one-third of their assessed tax amount for up to 10 years.
For example, last year LCSD collected $16.3 million in local taxes for operations. Andrews said between new builds and 13 industrial fee-in-lieu deals expiring, the school district could claim as much as $2.5 million in collections from new property. Add 4 percent to that, and the district could request roughly $19.6 million for operations without requiring a referendum.
Doing that would only require a 1.7-mill increase, Andrews estimated.
A 7-percent increase would bump the total operating request to $20.1 million — still about $1 million short of what LCSD is requesting.
But Allison argues the district’s request is legally in-line because Andrews is undervaluing the amount LCSD can claim from expiring fee-in-lieu. Since the companies have paid on one-third of their assessed value for 10 years, Andrews is counting as “new property” the difference between one-third of the original assessment ($34 million) and the new full tax assessment after depreciation ($84 million).
Instead of just counting collections from $50 million in new assessment, though, Allison said LCSD should get to include what $84 million would generate as new property on its request. That would allow, he estimates, the district to request $27.4 million, including $21.1 million for operations, and be within the 4-percent threshold.
“We’re not trying to fight with anybody,” Allison said. “Our intent is to request new property plus 4 percent. If our request is outside the lines, we’ll adjust it. … If they reject it, we’ll have to take steps to find out why and who’s right.”
Money on the table
Overall, the value of the county school district mill — the amount of money one mill can generate for LCSD — is increasing from $469,000 to $536,000 this fiscal year, according to Andrews’ conservative estimates. That difference, which includes increased property values from reappraisal, will generate a total of $3.2 million for the district (for operations and debt) with no tax increase at all. But if LCSD doesn’t claim new property, and only increases its request by 4 percent, it would cap it at $17 million and actually cause the millage rate to drop.
Allison told The Dispatch a school district has “no incentive” to do that. But Andrews said that’s happened before and with much more money at stake.
In 2016, Andrews said, expiring fee-in-lieu agreements generated $4.7 million in collections the district didn’t include as new property on its local tax request. So, though the set millage rate collected taxes at the proper assessed rate, the school district could have collected more mills on that money if they had requested what they were legally entitled. That decision came in spite of the fact voters had just approved the $44 million bond.
“Why didn’t they ask for it in 2016 when it was double (what it is this year)?” Andrews said. “Why haven’t they asked for this until right now? The biggest year for fee-in-lieu was 2016, and they did nothing.”
It wasn’t until this year that LCSD board member Brian Clark learned that had happened. He said he had never understood that to be the case from previous years’ budget planning and presentations from former business manager Kenny Hughes, who was fired earlier this year.
“That’s a lot of money, and my question would be ‘Why?'” Clark said. “Why would we leave that money on the table when we needed it?”
As for increasing taxes, Clark said he would prefer it come incrementally, if possible. In any case, he does not support any tax increase that requires a referendum.
“If we need to raise taxes for the school to educate its students and cover its bills, then I think it’s something we need to look at,” he said. “… I want to make sure that the school board and the board of supervisors both have an agreed understanding of what the definition of ‘new property’ is. We need a solid, singular voice because we’re serving the same people.”
Dispatch reporter Yue Stella Yu contributed to this report.
Zack Plair is the managing editor for The Dispatch.
You can help your community
Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. In the past week, our reporters have posted 36 articles to cdispatch.com. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.