EDUCATION CORNER: Taxing problem challenges school board and community
The Cloquet School Board and administration have been working with financial consultants to determine why the projected cost of our school bond referendum is going to increase the taxes on a $150,000 home about $6 a month more than what had been projected. Before the bond referendum election, the district hired Springsted, a public sector financial advisor, to calculate the tax impact on a newly structured annual debt payment if the bond election were successful. When the projected property tax statements were delivered and showed discrepancies between those Springsted projections and the actual tax increases due to the bond election, the school board launched an investigation.
The outcome of that investigation showed that Springsted had miscalculated state aid for the district’s annual debt payments by just over $500,000. The reasons for that calculation error and the amount of that error are fairly complicated. The brief explanation is that Springsted projected state aid for some categories of debt in the restructured debt payments that did not qualify for state aid. If there is any good news in this finding it is that those categories of debt are paid off in six years, and the tax impact due to the bond referendum will then be in line with Springsted’s original projections.
The district has been working with legal counsel and Springsted to try to find ways to mitigate the tax impact of the tax calculation error. We are making some progress with this effort, but the resolution of this problem is not going to be as quick as we would like. The governance structure of organizations, contract analysis, legal advice, and other factors create a slower progress towards this problem’s resolution than we would like. In the meantime, our public should know what the impact of that tax calculation error is currently, and that we are exploring ways to lower that tax burden.
Our total school district’s levy for all school taxes payable in 2015 was $4.89 million. The new school levy for all school taxes payable in 2016 is projected to be $6.58 million. That 2016 tax is just over $500,000 more than projections which included the Springsted mistake in the state aid calculations. Currently, this half-million-dollar impact will be in place for six years before the debt miscalculated to include state aid is paid off. The results of that error on an annual tax and monthly mortgage for residential properties are listed in the table below. It is important to note that the amounts listed are only the increases in tax projections due to the debt sources that were mistakenly included to receive state aid.
IMPACT OF TAX PROJECTION ERRORS ON RESIDENTIAL PROPERTIES
Residential Taxable Market Value
This tax calculation error is a mistake that never should have happened. One of Springsted’s presidents attended a school board meeting and took full responsibility for that error, but we are continuing to work with Springsted and legal counsel to explore ways to mitigate this unexpected tax burden.
I want to conclude by thanking our community for supporting what will be a fantastic new middle school and much needed upgrades to our other schools. Our Cloquet School District has taken tremendous pride in our students’ successes in the academics, arts, and activities. This new building project will help our students continue that success and will develop a community pride in how much we value our students’ education.
Writer Ken Scarbrough is the superintendent of Cloquet Public Schools.