Lindbergh board approves $4.1738 ‘blended’ tax rate

Lanane says without roll-up, cuts, borrowing would occur

By MIKE ANTHONY

A 2011 overall “blended” tax rate of $4.1738 per $100 of assessed valuation was adopted last week by the Lindbergh Board of Education.

The school board voted 6-0 Sept. 27 to establish the 2011 “blended” tax rate of $4.1738, roughly 96 cents more than the 2010 “blended” rate of $3.2130. Board member Ken Fey was absent and board member Mark Rudoff participated in the meeting by telephone.

The overall “blended” rate, which is not levied but used for state calculations, includes an operational rate of $3.688 — 85.58 cents more than 2010 rate of $2.8330.

As approved, the school district’s new operational rates, per $100 of assessed valuation, are:

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• Residential — $3.5769, up from $2.75 in 2010.

• Agricultural — $4.7978, up from $4.1487 last year.

• Commercial — $3.8906, up from $2.9554 in 2010.

• Personal property — $3.9096, up from $3.044 last year.

The district’s 2011 debt-service tax rate will be 48.5 cents per $100, up 10.5 cents from last year’s rate of 38 cents.

Lindbergh’s total assessed valuation dropped $47,814,810 from last year — to $1,167,634,790 from $1,215,449,600.

No residents spoke during a public hearing on the proposed 2011 tax rates. During the hearing, Chief Financial Officer Pat Lanane outlined how the decrease in Lindbergh’s assessed valuation would result in the district collecting $1,353,244 less in tax revenue this year compared to last year.

He noted revenue from new construction would be “almost nonexistent” — $106,105. The chief financial officer also discussed the impact of Proposition L, a 65-cent tax-rate increase approved by district voters last November.

“… The tax-rate situation for Lindbergh has entered a new era,” Lanane said. “Prior to this year, we were one of the districts that used Amendment 2 of the state Constitution to set our tax rate, and Amendment 2 allowed a tax rate of $2.75 (per $100 of assessed value). You will all recall that last November we had a successful tax election and that election pushed us above the $2.75 Amendment 2 rate. And so what governs our tax rate now going forward for the foreseeable future will be in this case this year, one time only, will be the tax election laws themselves … and also the Hancock Amendment. Those are the two factors. After this year, it will be pretty much just be the Hancock Amendment.

“… One of the things that they anticipate in the election law is in the times before now we were in the times of rising assessed value and what was happening in some cases is districts would pass a tax increase, the assessed values would rise and so they actually got a windfall above what they anticipated on the day of that election,” he said, noting the election law provides “you can only reap the amount that would come to you on that day. In other words, what the assessed values were on the day of the election. And so that stopped districts from getting that windfall amount.

“The other side of that (is) it does allow districts who passed a tax increase on that certain day in November to, again, retain the value of that day,” Lanane said. “And so if there have been subsequent tax losses due to decreases in assessed value, then you’re able to maintain the value on the day of that election — the thinking being, the electorate comes to the polls, we explain the election to everyone … So they knew what they were voting on on that particular day. And so in order to maintain those values with decreasing property values, there is a roll-up that occurs to get back to that original value. In no case is there one more penny being obtained than what was originally anticipated. It’s revenue neutral to the school district. It’s just not a loss …”

The Hancock Amendment, Lanane said, was approved during a time of rising assessments to cap the amount of revenue a taxing entity could reap. The Hancock Amendment had no effect on the district’s tax rate when it was $2.75 per $100.

“… Well now that we’re over, we are governed by the Hancock Amendment and it allows two things. It sets a cap of CPI (Consumer Price Index) or 5 percent, whichever is less, on the amount that you can reap from rises in the assessment. And some day again, that will come into play and I’ll look forward to that when our property values go up and the amount of taxes available then also goes up. But on the converse side of that, it also says districts must have the same amount of money from property taxes — or can have as much as they had in the prior year so that you don’t have to suffer losses, which we did …”

When the district’s tax rate was $2.75, Lindbergh did reap more revenue than the CPI when assessments rose, but it also endured a cumulative loss of $15 million in tax revenue since the 2007-2008 school year when assessments decreased because the district could not roll up its tax rate. As a result, the board made nearly $6.7 million in cuts over two years.

“… Now that we’re over that magical $2.75 mark, the Hancock Amendment applies and so some of the increase that you’ll see, again, is simply a matter of Kling up taxes to make up for losses in assessed value …,” Lanane said.

He noted that much of the decrease in the district’s total assessed valuation was a result of successful appeals to the county Board of Equalization by commercial property owners.

“… There was a very substantial amount of reduction by the Board of Equalization and was almost all commercial values. And that’s a little concerning to me because what that basically does is it says: Oh, too high. We’re going to move those down. But if that doesn’t go away, the burden then shifts to the residential side of the equation … ,” Lanane said, noting that over the past several years there has been “a migration from the commercial assessment and taxes paid to the residential. And this only — for this year particularly —will exacerbate that trend. I’m a little worried about that, but there’s not much of anything we can do about it.”

Adoption of the tax rates, he said, still would put Lindbergh in the bottom third of the county’s 22 school districts.

Rudoff asked Lanane, “… If we did not roll up the tax rate, would you please explain what kind of position that would put us in financially …”

Lanane said the result would be the district would have to borrow money and make cuts.

“… There’s no doubt about that. We would simply not have the funds to cover our cash flow,” he said. “You’re talking about a loss of well over a million dollars.

“Not only would we be borrowing, we would be reducing programs. And this would be just after we passed a tax increase that the people said we want you to maintain your programs,” Lanane said. “So as far as I’m concerned, it would be actually a — I think it would be refuting what I think taxpayers were saying when they and a majority said we want to maintain those Lindbergh programs. And they said that after we made $6 million in reductions.

“And so the mandate I believe was to maintain programs that we have in place after the $6 million (in cuts) and the tax rates as proposed do that exactly. To do anything less than that is you would go back to a position below that, below what was intended in November of 2010.”