The Mehlville Board of Education unanimously approved the 2023 blended tax rate with little discussion at its annual tax rate hearing on Sept 21.
The Board of Education approved a blended tax rate of $3.9680 per $100 of assessed valuation, an increase from last year’s blended rate of $3.6784 – a difference of around 29 cents. It includes April’s ballot measure, Proposition E, the 31-cent levy increase to raise teacher and staff salaries.
The blended rate is not levied, but is used to compare the district to other school districts, and is a combination of the residential, commercial, agricultural and personal property tax rates.
The approved 2023 tax rates per $100 of assessed valuation are as followed (note that the rates include 3.19 cents for the temporary tax Proposition A, passed by voters in 2016, which will sunset in 2025):
• Residential real estate – $3.7218
• Commercial real estate – $4.2165
• Agricultural real estate – $4.7150
• Personal property – $4.8161
The Prop A temporary levy decreased slightly because it is subject to the 5% assessed value limitation, while the permanent levy is not subject to the limitation, said Chief Financial Officer Marshall Crutcher.
“The permanent tax levy amounts … are exactly 31 cents higher than the prior year, but the reason the blended is only up 29 cents is because your asset classes increase at different rates,” Crutcher said as to why the overall blended rate was not exactly 31 cents more than last year.
Real estate increased at 18.2%, commercial increased 9.5%, personal property increased 6.2% and so on.
“You got different amounts that change that weighted average and since residential increased the most, and they have the lowest tax rate, it dropped the blended rate down slightly. But the actual tax rates of the individual classes did increase 31 cents,” said Crutcher.
This year was a reassessment year, and typically taxing jurisdictions are limited in the windfall they can bring in if assessment values spike, per the Hancock Amendment, which limits tax revenues to increase only up 5% or the rate of inflation, whichever is lower.
If Mehlville had not passed Prop E in April the tax rates per each category would have been lower – $2.8899 for residential, $3.6137 for commercial, $3.7565 for agricultural and $4.3461 for personal property. However, because voters approved the levy increase in April of this year prior to reassessments, the voter-approved rates ($3.5728 per $100 of residential assessed valuation) were used to calculate the new rates, effectively allowing the district to bypass the Hancock Amendment, ultimately levying a residential rate that is 68 cents higher than last year’s if Prop E had not passed.
The district’s revenues are projected to be $101.1 million in the next fiscal year, up $19.5 million from last year. According to Crutcher, $7 million of that will go to normal operating expenses and is from the assessed valuation increase up to 5%; $7.2 million is for Prop E expenses such as salaries, benefits, security and some counseling; and the final $5.3 million is part of $10 million being allocated to the HVAC capital reserve in fiscal year 2024. The district has an estimated $33 million in HVAC replacements through summer 2026 and Crutcher said the additional revenue would help the district avoid a general obligation bond tax increase and saves up to $12.1 million in interest expenses plus election fees; this additional $5 million is from the revenue that is in excess of that 5% assessed valuation increase.
“The $12 million savings in interest comes from that fact that we already have $9 million in the bank, so instead of getting a bond for $33 million, we’d only need a bond for $24 million,” said Crutcher. “At current interest rates, the interest over 20 years to pay off that bond would amount to $12 million.
“That’s a significant savings of interest expense and that’s why this is a very good opportunity to be able to cover our HVAC without that interest expense,” added Crutcher.
Board President Peggy Hassler said it was “common sense” to keep the additional tax revenue and not voluntarily roll back the rates, which followed an earlier recommendation of the district’s Finance Committee.
“It would seem to me that common sense would say that we should spend the money as allocated toward HVAC,” Hassler said.
Not all district residents were convinced of the district’s decision to not roll back the rates. On one of the Oakville residents Facebook pages, Oakville resident Tim Archibald stated in a comment “Yes, the schools do need the additional money and if the rate is rolled back a bond issue may be needed, but that is the proper way to raise people’s taxes. It is not right to spend other people’s money without their approval.”
Others said the decision would hurt any chances at future ballot measures for the district.
However, despite the discontentment expressed on social media by district residents both before and after the hearing, no members of the public signed up to speak at the tax rate hearing prior to the board setting the rates.
In a press release from the district’s first-year Superintendent Jeff Haug, he stated that while the district had made progress addressing some of its facility needs through the no-tax-rate increase Proposition S in 2021, the district continued “to operate our schools with outdated HVAC equipment.”
“By levying this tax rate, the district avoids having to ask voters for a tax increase bond issue in the immediate future that will cost taxpayers more in interest and fees,” said Haug.