School District of Fort Atkinson administrators have been advised to work with legal counsel to craft a two-part operational referendum question to appear on the April 7 election ballot.
Meeting in special session Monday, board of education members gave that directive at a referendum workshop during which Jason Demerath, director of business services, presented several referendum scenarios for the board’s consideration.
A hybrid, or combination referendum question was the board’s unanimous choice.
“The scenario that the board advised the administration to work with legal counsel to craft is continuing the current $2.25 million (exceeding the state’s revenue limit) in a recurring format (starting in fiscal year 2021), and then $3 million non-recurring for (each of) three years (2021-23),” Demerath said.
He said the district’s legal counsel will draft the question this week and then the board will vote on it when it meets Thursday, Jan. 16.
He said that based on the assumptions built into the budget projection, with that referendum scenario the local property tax rate for school district purposes should be “flat, maybe slightly decreasing based on property values increasing over the next three years.”
The current 2020 tax rate stands at $10.66 per $1,000 of equalized valuation, he noted, with projections showing it decreasing to $10.61 in 2021, $10.54 in 2022, $10.17 in 2023 and $8.03 in 2024.
“As more information becomes known, due to prior planning, we will have the flexibility to manage the tax impact through restructuring our debt payments,” Demerath added. “With that in mind, an increase in the referendum amount could have a minimal impact on local taxes.”
He explained that the most common types of referendums are for capital or operational needs.
“Capital needs are for things like new buildings, maintenance projects and technology upgrades,” Demerath explained during his PowerPoint presentation. “An operational referendum is to exceed the state-imposed revenue limit through an increase to the tax levy. The two types of an operational referendum are recurring, where the taxing authority does not have a sunset and the revenue gets added to the base revenue limit, and non-recurring which grants the taxing authority for a limited time frame and those funds no longer are available.”
He next looked at why the board needs to hold a referendum in April. He said the state-imposed revenue limit, established more than 25 years ago, limits the amount of revenue a school district can receive through state aid and local property taxes.
“In 2016, (district) voters approved a question that had both a recurring and non-recurring component,” Demerath said. “That non-recurring component sunsets at the end of the 2019-20 school year. As a result, we end up with a gap between allowable revenues and expenditures beginning in 2020-21.”
The director said allowable revenue from the state has not kept up with expense increases over the past 11 years.
“Those expense increases, a $10 million increase over the 11 years, is equivalent to about a 3.25- percent increase per year,” Demerath noted, “while the increase in state-allowed revenue has been about 1.3 percent per year.”
One of the factors to examine in conjunction with the state’s allowable revenue increases, he said, is the increase in the consumer price index, or inflation.
“In most cases, the state-allowed increase has not kept pace with inflation,” Demerath shared.
The business director said the School District of Fort Atkinson has been operating under an operational referendum since 2006; however, he only discussed those held within the last 10 years.
In April, 2011, a non-recurring referendum for $694,000 per year for three years was passed by four votes following a recount. The next referendum in April of 2014, he noted, was non-recurring for $1.75 million per year for three years.
In November of 2016, the district’s last operational referendum passed with nearly 61.48 percent of the votes, the director stated, noting that this time it was one question that included two parts: $1.75 million recurring plus $2.25 million non-recurring.
During a recent community survey and focus groups — conducted by Donovan Group LLC, Milwaukee — themes were developed and presented by the consulting firm to the board to inform its decision.
Community survey responses from the comparison group, which does not have ties to the school district, Demerath said, showed that: 79 percent believe the district’s most urgent financial needs should be addressed now; 67 percent of that group would support an operational referendum; there is low-level support for making any programming reductions; 63 percent would support a slight tax increase with no reductions; 46 percent would support a moderate tax increase with programming and services enhancements; 76 percent would vote “yes” if there was no tax increase; 64 percent would vote “yes” if there was a $25 tax increase per $100,000 home value; 45 percent would vote “yes” at a $50 increase per $100,000 home value, and 31 percent would vote “yes” at a $100 increase per $100,000 home value.
During several recent community focus group sessions, the following themes emerged: Participants are very pleased with the school district; there was no “sticker shock” with any of the referendum scenarios, and no lack-of-trust indicators toward the district; there was some confusion between the operational needs and facility needs; having stability and sustainability in the district was the focus groups’ main theme.
Also, Demerath indicated, the focus groups felt the district should pursue an operational referendum, and should not make additional cuts; the projected mill rate was not considered to be a barrier; recurring versus non-recurring responses were mixed, with the consensus that non-recurring needs to be part of the solution; and there was speculation whether the amount of referendum funding presented to the focus groups was sufficient.
The business director said another factor to consider is the district has been undergoing a strategic facilities-planning process at the same time as it eyes an April operational referendum.
“That process is utilizing an advisory committee as well as some meetings and community sessions for broader feedback,” Demerath pointed out, noting the goal is to have recommendations on next steps by late spring to present to the board.
Still another factor to consider, he said, is that the district currently is limited by state law to only two referendum questions per year.
“When looking at the possibility of both an operational referendum and a capital referendum, this is something the board has had to keep in mind,” Demerath said. “We have recommended that an operational referendum take precedence over a capital referendum as those funds are needed to operate our current programs and services.”
Still other factors to consider with respect to an operational referendum, he said, are possible debt prepayment this year with the ability to retire all district debt in February of 2023; this year’s smaller four-year-old kindergarten class by 40 to 50 fewer children, and future enrollments; the state biennial budget timelines in 2019-21 and 2021-23; national and state elections in November 2020, and the 2020 census resulting in new electoral maps, and possible state and federal funding changes.
On Monday night, the board looked at floating a recurring, non-recurring or a combination referendum; the length of a non-recurring referendum, and the amount and structure of the amount.
Demerath said a recurring referendum offers the district the benefit of future planning through ongoing revenue, but might carry a negative community view of future accountability if the district has to return to a referendum in the future.
A non-recurring referendum, he said, offers the benefit of a community view of future accountability, but carries uncertainty in future planning and requires the district to return to referendum every three years or so.
“I think the argument for the risk of a longer non-recurring (referendum) is good because it guarantees money, but it’s bad in the sense that if you go too far out, stuff (funding) might change in the middle of it that we (district) are not geared up to adapt to,” board Treasurer Adam Paul said. “It’s nice to not have to do this (referendum) more than every three years, but in some ways, it’s good because it allows you to roll with the federal and state budgeting.
“I would like to have it (referendum) be longer from a selfish standpoint and not having to deal with it as often, but I think keeping it at three years probably is wise from an accountability and success rate,” he added. “It also gives you more ability to get that recurring money in there.”
District residents, he said, seem to be getting somewhat accustomed to going to referendum on a regular basis.
“Based on the feedback everybody’s getting, it’s the community’s responsibility now to fund the schools,” Paul stated. “It’s like an expectation.”
Demerath concurred, saying the view on referendums has been shifting to where now it is considered a “regular operational procedure.”
Board Clerk Dick Schultz said there is a communications element with taxpayers concerning recurring versus non-recurring referendums.
“If they approve it (referendum) now, I think they assume then that keeps going,” Schultz said. “But if it expires, and you come back and ask them for the same money over again, then you really have to communicate what it is that you’re doing, and is there really a possibility that you won’t need that money three years from now — probably not. So, I think there’s a strong argument for it (referendum) to be recurring.”
While he would “love to go big on stuff,” Paul said he wants to be very confident that an operational referendum will pass.
“Because it’s, like, super critical, obviously, for operations,” he said. “And, also (that the district) not bite off more than we need to now because that could impact people’s appetite for capital. From the sentiment of the survey, I think people would have no problem voting for something that slightly raises their taxes.”
Interim District Administrator Rob Abbott said the April 2011 operational referendum was a pioneering one in the sense that it still was a relatively new phenomenon.
“People were not as accustomed to it,” he said, noting that a recurring theme now is the need periodically to come back to taxpayers with a referendum. “I do think that you’ve seen that habituation over time, too, where the communications story is more about what, for how long and why, and it’s less about trying to educate people as to what an operational referendum is.”
Board member Rachel Snethen said she believes non-recurring should be a component of April’s operational referendum.
“I think a combination question makes sense,” she said. “I’m seeing a $25 increase on a $100,000 home value — that’s really a number that we should look at. I think if we do anything more than that, it’s not going to go over well.”
Additionally, she said, she liked the three-year timeline.
“I think it gives us a lot of opportunity to see what’s coming up in the next year or two,” Snethen said. “And I think our taxpayers probably would appreciate that as well for doing a non-recurring. And I like that it’s a shorter time period.”
Paul said being conservative with the dollar amount requested of taxpayers in the April referendum is imperative.
“If we had all new schools and everything was great, I would be more inclined to be a little more aggressive here because you’ve got the fallback to go back in November (for a referendum) if something doesn’t work,” he said. “But I think we need to be within some order of magnitude very confident that what we’re going to ask for is going to pass.”
Board President Mark Chaney said he wanted to make clear that operational referendum dollars never are about just “keeping the lights on” in the school district.
“We’re always teaching and learning,” he emphasized. “We want to continue that; we don’t want to stagnate by just keeping the ‘lights on.’”
Director of Instruction Amy Oakley said a combination question probably can be viewed as “comfortable” for voters since the messaging to educate people on recurring versus non-recurring was done last time.
“So, this will feel like a very familiar message and affirm the (district’s) direction, and I think it will feel comfortable,” she said.
Moreover, the director underscored the trust factor the district has earned with voters based on the credibility of Demerath’s financial forecasting.
“And I think those three-year increments are at the threshold of what is safe to project (for a referendum),” Oakley added. “I think when you get further out … when you do come back to the community, you don’t have that nice message of ‘See, we’re right about where we thought we would be’ and ‘we said we’d be back and here we are — everything played out’ versus ‘It wasn’t enough, and we had to make cuts.’
“So, I think there’s something to be said about that sweet spot with the budget cycles,” she concluded. “And projections are just that — they’re informed projections.”
Lastly, Superintendent Abbott said the operational referendum is needed in order for the district to continue to provide goods and services for students.
“We will not be talking about a second facilities referendum (in November) unless we have the operations solid,” he said. “Part of our message will definitely be: operations are the funds that we need to continue the good work that we’re doing with kids.”