Analysis: Red Oak’s levy among the highest in conference

 Despite a steady decrease over the last several years, the Red Oak school district will likely have the second highest personal property tax levy in the Hawkeye 10 conference next year. 

The school board is hosting a public hearing on the proposed budget for 2015-16, which includes a proposed levy of $15.69 (per $1,000 assessed valuation). 

According to a Red Oak Express study, if left unchanged, that levy would be higher than all other Hawkeye 10 public schools with the exception of Creston. That school board is proposing to increase its levy from $15.18 to $16.60. 

Shenandoah, which has the highest levy this year, decreased theirs to $15.63 at a meeting last week.

Red Oak’s will be discussed and voted on at a April 13 hearing which starts at 6 p.m. in the high school cafeteria. The meeting’s location was changed from the administration office due to an expected large turnout. 

The Last Three Years

In the three years analyzed by the Express (2013-14, 2014-15, and 2015-16), Red Oak’s property tax levy was the highest in the conference in 2013 at $16.58, followed by Shenandoah at $16.51. 

Shenandoah slightly eclipsed Red Oak this year, $15.94-$15.93. 

By comparison, the next highest levy in 2013-14 was $15.34 for Glenwood and $15.05 for Creston. This year, Creston had the third highest levy at $15.18, followed by Atlantic at $14.87.

Clarinda consistently had the lowest levy of the public schools in the Hawkeye 10, with tax levies of $10.43, $10.53 and $10.88 projected for the upcoming fiscal year. 

A Look Back

While the current average levy among public schools in the Hawkeye 10 is $13.91, it wasn’t that long ago when Red Oak was consistently within a dollar of that figure. 

From 2007-09, Red Oak’s levy ranged from $14.68-$14.83. During that time, property taxes collected ranged from $3.75-$3.95 million. 

That quickly changed though with the fiscal year 2010 budget. 

Red Oak’s property tax levy jumped from $14.76 to $16.25, while the amount of property taxes collected increased from $3.95 million to $4.5 million. 

The increase continued with the fiscal 2011 budget when the levy climbed to an all-time high of $17.86, generating $5.2 million in taxes, a more than 30 percent increase in just two years. 

Red Oak Superintendent Terry Schmidt said at the time the levy increased, the district was in a critical financial situation, ending the 2009 and 2010 fiscal years with negative balances near $500,000. 

“We had a serious cash position problem,” Schmidt said. “If you are spending more than you are bringing in, you are going to have a problem. And that problem will be compounded when enrollment numbers begin to decline.”

As a result, the board voted to impose a cash reserve levy to get those negative balances into the positive. 

“Had we not made those adjustments, we would have had to go before the state’s school budget review committee with a remediation plan,” Schmidt said. 

The district increased those balances to about $2.5 million, the maximum allowed by state law, which restricts cash reserves to 20  percent of the district’s annual general fund expenditures. As a result, the cash reserve levy, which generated $1 million a year, was removed from the overall levy. 

Why the Levy Didn’t Decrease

While the cash reserve levy was removed, the school board decided last year to include a $2.12 debt service levy, which generates about $750,000 annually. 

The debt service levy was approved by voters in 1999 to fund construction of the Inman Primary School. 

That debt was previously being paid through sales tax dollars, which are now being earmarked for phase one of the Tigervision construction project. 

Board President Lee Fellers said while Tigervision hadn’t taken shape when the decision was made, the board recognized they would be doing some sort of large-scale project. 

“The primary reason was we knew we would have a project of some sort coming up.” he said. “Knowing we would have a project of some form coming forward, being able to generate and maintain as much sales tax revenue as possible was important to us.” 

Fellers noted using the current approach, the board was able to gradually decrease the levy while also taking on a $13 million construction project. 

He also said the Tigervision project will eventually result in the levy decreasing due to a drop in operational expenses. 

“We are looking several years down the road and our continued challenge with the general fund. Becoming more efficient as a school district is very important and operating five campuses is not financially efficient,” he said. “Because our campuses are spread out, sharing is more difficult, especially between the high school and middle school. If we have someone who can teach high school and middle school, it is difficult to get them back and forth and not affect student schedules. With one campus, it makes it much more easy. It allows us to be more efficient, which takes more pressure off our general fund moving forward.”

Had the $2.12 debt service levy been removed, Red Oak’s personal property tax levy for 2014-15 would have been $13.81. That rate would have been sixth highest of the nine public Hawkeye 10 schools, and it would have also been ranked 173rd out of 357 public schools in Iowa. 

Currently, Red Oak ranks 75th statewide with its levy of $15.93, which is in the top 21st percentile. 

However, Fellers pointed out without that debt service levy, the sales tax dollars aren’t available for Tigervision.

“If we were to take our debt service levy off, you could say that takes a significant portion of our phase one funding away to the point where I’m not sure this is possible,” he said. 

Schools are required to approve a budget and their 2015-16 levy by April 15.