Whenever an Indiana school corporation proposes to construct or renovate a school building, the project, depending on the cost, is subject to the referendum process. A referendum is an additional levy raised through property taxes that is not subject to the constitutional tax limits.
The Board of School Trustees passed a resolution that places a referendum question on the May ballot. The referendum would only be on the ballot of voters registered to vote in the Valparaiso Community Schools (VCS) district. A referendum tax levy will only take effect if a majority of the voters from the school district that vote on the referendum ballot question, vote "Yes" to the ballot question. If it passes, the referendum levy goes into effect the following calendar year and would be in effect for a period not to exceed 20 years. Passing the referendum would allow VCS to immediately proceed with the design and construction process.
If the referendum passes, the revenue would be collected by the county through the property tax bills of all property taxpayers in the school district. The money does not pass through the state, but goes directly to the school from the county for the purposes of financing the 2015 Multi-Facility Safety, Security, Technology, Construction and Restoration Project.
The VCS district boundaries are inclusive of Center township and are made up of all Center precincts. Only voters registered in these precincts are allowed to vote for the referendum. The referendum question will appear on the May ballot.
A school corporation may conduct a referendum to create a property tax rate for purposes of supplementing the revenue it receives from the state funding formula. The school board passed a resolution that states that the referendum would be used to supplement existing revenues for the purposes maintaining educational services and restoring teaching positions
A referendum is an additional levy raised through a special fund titled "referendum fund" for a period not to exceed seven years. However, a referendum tax may be reimposed or extended under the law if approved by the voters of the district. The revenue would be collected by the county through the property tax bills of property taxpayers in the school district.
The money does not pass through the state, but goes directly to the school from the county for the purposes of supplementing the general fund of the school corporation that pays for faculty and staff.
The referendum would only be on the ballot of voters registered to vote in the VCS district. An Operating Referendum tax levy will only take effect if a majority of the voters from the school district that vote on the referendum ballot question, vote "Yes" to the ballot question. If it passes, the referendum levy goes into effect the following calendar year. The Operating Referendum question will appear on the May ballot with the Construction Referendum.
May 2015 Ballot
“Shall the Valparaiso Community Schools issue bonds or enter into a lease to finance the 2015 Multi-Facility Safety, Security, Technology, Construction and Restoration Project which consists of restoring all or a portion of multiple existing school facilities, constructing school improvements which may include additions or new facilities, and the installation of technology and other equipment at various school facilities, which is estimated to cost not more than $150,000,000 and is estimated to increase the property tax rate for debt service to $0.6482 per $100 of assessed valuation?”
May 2015 Ballot
“For the seven calendar years immediately following the holding of the referendum, shall the Valparaiso Community School Corporation impose a property tax rate that does not exceed twenty and forty-two hundredth cents ($0.2042) on each one- hundred dollars of assessed valuation and that is in addition to all other property tax levies imposed by the school corporation for the purposes of maintaining educational services and restoring teaching positions?”
Only those who pay property tax in the VCS district will pay the referendum tax. Commercial rental property owners may choose to pass the tax on to their tenants. Senior citizens, homeowners, mortgage holders and some other types of taxpayers receive exemptions that lower their assessed value and lessen the impact of the tax rate compared to others. By law, the rate is applied to the net assessed value of the property after these deductions. The law does not allow certain classes of taxpayers to be exempt from the rate. For instance, charging only property taxpayers with children in the schools would be considered tuition and against the law established by the Indiana Constitution that says education is tuition free and available to all.
If a majority of the voters voting on the construction referendum vote in opposition, VCS can not finance the construction project. If the Operating Referendum fails, VCS will not have the required funds to restore the cuts that have so drastically altered programming . Another public question on the same or substantially similar referendum may not be submitted to the voters earlier than one year after the date of the election. The earliest these referendum could be presented would be the November 2016 election, because the May 3, 2016 election happens to occur less than a year from the May 5, 2015 election.
The Operating Referendum automatically expires after 7 years. The Construction Referendum Bonds (Mortgage) will be issued for 20 years; however, new assessed value in the Valparaiso community can lower the tax rate and the impact on taxpayers over the life of the bonds.
The Operating Referendum automatically “falls off” the tax rolls in seven years. Another referendum election would have to be held and a plurality of voters would have to agree for it to continue after seven years. During that time it is expected that student enrollment will continue to grow. The additional revenue generated by more students will eliminate the need for the Operating Referendum. In fact, should the legislature provide the additional funding, the tax rate advertised for the referendum does not have to be applied to taxpayers nor would it.
The rates for both the Operating Referendum and the Construction Referendum are maximum rates that cannot be exceeded. The tax rate from a successful Operating Referendum will be lowered each year. In fact, it can be eliminated earlier than the seven year period should the school corporation not need the additional funds due to additional assessed value and/or a greater level of funding from the state. The tax rate for the construction referendum can be lowered by many factors such as favorable construction bids, lower interest rates, new assessed value in the district, etc. The rate can never exceed the maximum rate or levy as shown in the ballot question.
While the total size of Valparaiso High School is expected to increase a small amount, new heating, cooling, and lighting systems are expected to decrease utility costs. Additionally, annual maintenance and repair costs are expected to decrease for the immediate future.
The impact of the referendums are determined by this formula:
(Gross Assessed Value)-(Deductions)÷ 100 × ((Construction Referendum Rate)+(Operating Referendum Rate))
Using the correct tax rate
The rate that appears in the Construction Referendum ballot question is the maximum rate over the life of the bonds. This maximum rate of $0.6482 per $100 of NET assessed value will never be reached. The school corporation is required to file a payment schedule with the State that shows the tax impact (based on 2014’s assessed value of the school district) for each year of the construction loan. This maximum rate on the ballot and used by the Indiana Department of Local Government Finance (DLGF) is shown on the payment schedule to begin in 2026 after other debt is paid off by the school corporation.
The maximum rate on the ballot is also based on the assessed value of the school corporation in 2014. The rate on the ballot and used by DLGF beginning in 2026 would only occur if there was no growth in the district over the next ten years. The change in 2015 assessed value and other revenue has already reduced the maximum increase in the rate to $0.5831 per $100 of Net assessed value.
The construction referendum is designed to have the least possible impact on the taxpayer. It is also a levy based rate and will go down as the assessed value of the district goes up with new growth. For the majority of homeowners, they will experience only the incremental increase of $0.1717 per $100 of Net AV. That is the difference between the tax rate this year and the tax rate next year. Debt is falling off each year after 2016 that will lower the tax rate.
The DLGF confirms this on their website with a disclaimer that reads, “It is possible that the unit’s existing tax rates will change in coming years, particularly those for any outstanding debt scheduled to expire. It is also possible that the unit will not impose the maximum rate for which it is seeking approval through the referendum for the entire life of the referendum levy. Specific questions about debt amortization and related issues should be directed to the proper officials of the unit seeking the referendum.”
The Operating Referendum is very straight forward in that the maximum rate is always the same over the seven year life of the tax impact. You can read more about Operating referendums and their seven year life on the FAQ page of our website. The maximum rate for the operating referendum is $0.2042 per $100 of Net AV. The school board has indicated they will only take what they need from that rate each year to supplement the funding reductions by the State, so it is likely to go down. However, we should study the impact using that rate as it is unaffected, unlike the construction referendum, by an increase in the district assessed valuation.
The total of the two rates is used for the calculation. The Construction Referendum increase of $0.1717 plus the Operating Referendum maximum rate of $0.2042 for a total rate of $0.3759.
The only impact to your taxes that can accurately be measured is for next year. That is also the greatest impact over the life of the bonds. As assessed value goes up in the district the "levy" of the bonds is shared by more, reducing the impact to everyone. Also debt is strategically planned to fall away from the debt service fund which will also reduce the impact to your taxes.
© 2016 Friends of Valparaiso Community Schools