Commercial valuation drop increases Lindbergh deficit to $5.5 million for 2009-’10

By MIKE ANTHONY

A further decline in the assessed value of commercial real estate has increased the Lindbergh School District’s projected budget deficit for the current school year to roughly $5.5 million.

Chief Financial Officer Pat Lanane told the Call that recent appeals by taxpayers to the county Board of Equalization have resulted in an 8.48-percent reduction in commercial valuation from July. That’s nearly a 19-percent drop since March in the assessed value of commercial real estate in the district.

On March 10, commercial real estate within the school district was assessed at slightly more than $432 million, 18.8 percent more than the previous year. But the commercial valuation fell to roughly $387.5 million on July 1, a 10.33-percent decrease from the $432 million projected in March.

In July, Lanane told the Board of Education the decrease in the assessed value of commercial real estate would result in a loss of nearly $1.17 million loss in operating revenue for the 2009-2010 school year.

At that July 21 meeting, the chief financial officer said the timing couldn’t be worse as the board had voted the previous month to adopt a 2009-2010 operating budget that projected a deficit of $3 million.

Furthermore, that $3 million deficit was reached by making more than $2 million in reductions for the current school year.

Cognizant of the financial difficulty residents and businesses currently are experiencing, district officials pledged last November not to seek a tax-rate increase for at least 24 months. Though Lindbergh also faces financial challenges as a result of the current economic recession, the district’s reserves of roughly $24.6 million are the reason why the situation is not a crisis at this point. The district’s long-range financial plan calls for a planned spend down of those reserves with a deficit-spending cap of $3 million per year.

While the majority of local taxing districts have rolled up their tax rates through the Hancock Amendment to regain lost property-tax revenue, Lindbergh was unable to roll up its operating tax rate, which remains at the state minimum of $2.75 per $100 of assessed valuation.

After learning about the further decline in commercial assessed valuation, Lanane sent an e-mail to staff seeking suggestions on cost-cutting measures, he told the Call.

“… I sent out an e-mail and I asked for any and all input from staff. I said every suggestion you send me will be collected, compiled and reviewed, and I’m getting them,” Lanane said. “You know, some are little-bitty things, but you know what? They’re all good things … But unfortunately, the problem that I have is that most people don’t deal in the world of numbers that I do. Understanding what it takes to make $2 million in reductions is not possible because it’s just not a file set that people have access to. They don’t know what that means.

“They think: Well, you know, I bet they spend millions on paper. No, we don’t. I bet there’s millions just in utilities that could be saved. No, there isn’t. We’ve already got energy-management systems. We already are trying to turn out every light we can find. I just recently made them unhook all the beverage-machine lights … So that’s what we’re down to on that sort of stuff.

“Again, I love all of those suggestions because they make us stronger in the future because some of that stuff, you just need to tighten up, and every once in a while, it’s a great exercise to go through where you’re tightening up every cinch in that belt, but it’s more than belt-tightening.”

With more than 80 percent of the district’s costs related to personnel, substantial cuts will be difficult to make without impacting the classroom, Lanane said.

“… We’ve already made more than $2 million in reductions going into this thing. I can tell you, everything that was considered by anybody — other than muscle — has been cut. So if they’re looking for fat to cut, it got cut quite a while ago,” he said. “And I don’t consider some of those things fat because there’s a reason that our educational reputation and achievement is as high as it is. We’ve been doing all the right things. But now we can only do what we can afford to do. It’s a big difference. I’m just sick about it.”

While commercial valuation dropped 8.48 percent from July, the assessed value of residential property dropped 0.62 percent, Lanane said, adding he doesn’t have a problem with those who were successful in appealing their residential assessments.

“… For the most part when they do that, that’s justified. I’ve always said I do not want anybody paying one more penny in tax than can be justified. And if they’re paying something they shouldn’t, that should be stopped immediately,” he said. “Now what’s worrying me, though, is how did these commercial reductions happen?

“… Was this the result of a company that’s out there who organizes commercial businesses for the purposes of reducing their taxes? Was that what happened? And I don’t know if that’s good or bad. You know, that’s one of those things you have to look at the case. Did they have the information to prove that they really should have gotten a reduction or did they just scream loud enough and they got a reduction at the cost of other taxpayers?”

With the district now facing a deficit of roughly $5.5 million, Lanane said reserves beyond the deficit-spending cap of $3 million will have to be utilized for the current school year while some difficult decisions will have to be made about cutting an additional $2.5 million from the budget for the 2010-2011 school year.

“… We’re looking for midyear reductions and might we find a couple hundred thousand (dollars). Maybe — projects that we say: Oh, we thought we were going to do this technology project. No, we’re not. That kind of thing, which hurts. There are things like that we can do, but for real reductions, we’ve got to look at the budget for next year,” he said.