The Lowndes County School District won a major court victory on Friday to secure more local tax funding for operations.
Chancery Court Judge Rodney Faver ruled the school district in his lawsuit against the county. The verdict concluded that LCSD was entitled to collect tax from companies with expiring fee-replacement agreements as “new property” without counting this against the government-mandated local value-added tax caps that a school district may apply for during the year can. Year.
At first glance, the ruling essentially does two things: it tells the county that it was wrong to deny LCSD more than $ 3 million in requested values for 2020-21, and it sets up a scenario in which LCSD could raise taxes on its customers by around 20 percent for this fiscal year without a referendum.
“It was an important judgment for us,” LCSD Superintendent Sam Allison told The Dispatch. “It was what we expected. Now we just have to wait and see what the district board does. “
Every year school districts apply for local tax revenue from their tax-collecting authority, be it a county or a municipality, to cover operations and debt servicing. According to the law, a school district can only request an increase in the previous year’s collections by up to 4 percent plus new real estate in order to avoid a possible referendum. Up to 7 percent will trigger a potential reverse referendum, which means citizens can sign a petition to get the tax increase on the ballot, and 7 percent or more will require a direct referendum.
In August 2020, LCSD called for $ 27.4 million in local taxes (including about $ 21.1 million for operations), claiming it was a 4 percent increase in operations from the $ 16.5 million earned on operations last year plus more than $ 3 million in “new ownership.” ”Recoveries from expiring industrial compensation agreements.
Industries that invest at least $ 60 million are eligible for fee reimbursement that allows the industry to pay one-third of its taxes for up to 10 years. For 2020-21, several of these agreements expired, mostly a high-grade phase from Steel Dynamics, and LCSD claimed it was entitled to these full collections as new property as it was never on the tax lists.
Otherwise, the county argued, it would never get the full tax breaks from these industries, as it could only ask for a 4 percent increase in operating income each year.
Fulfilling the request would have increased the school district’s tax rate for the 2021 financial year by around 4 million Percent exceeded. Instead, regulators approved $ 24 million for LCSD (including about $ 18 million for operations) and cut LCSD’s tax rate by 2 million.
LCSD sued the county in October 2020.
The district’s argument was that “new property” could only be counted if it had never been valued before. For example, if a new commercial or residential building was built in fiscal 2020, it could be considered new land in 2021. paid over 10 years.
Faver’s ruling inconsistent with the district by clarifying that the “fee” was “in place of” tax and stating that real estate was first added to the tax registers last year, meaning LCSD will list them as new Property plus an increase of up to 7 percent could count in operations without a direct referendum.
LCSD declared a lack of local revenue in June of this year for the $ 3 million the county declined in its motion. This enables LCSD to borrow for that loss that will be repaid over three years and will continue to count towards its operating base. It is planned to apply for $ 27.9 million ($ 21.3 million for operations) in local value for fiscal 2022.
According to LCSD’s own estimates, this will increase the millage from 44.76 to 52.35 this fiscal year. This $ 7.59 million increase will add $ 75.90 to property owners’ tax bills for every $ 100,000 of the estimated property value. The county authorities have estimated that the increase will be closer to 9 mills.
Board chairman Trip Hairston told The Dispatch that the county is weighing its options on whether to appeal the ruling. At least, he said, he would like to ask Faver for clarification in his decision on what the county should do about the $ 3 million he denied LCSD last year.
What the board of directors will do on Aug. 16 when regulators vote on LCSD’s $ 27.9 million ad valorem filing for this fiscal year, it wasn’t sure.
“We’re all just trying to process it right now,” Hairston told The Dispatch Friday. “I am disappointed with the verdict because every time you submit your application to taxpayers by more than 7 percent, you should hold a referendum. Convince the voters that you need it. “
Despite the ruling, Hairston said he was pleading with the district to make incremental increases instead of raising taxes all at once.
“Just because you can do something doesn’t mean you should,” said Hairston.
However, Allison said this year’s tax hike would look bigger than it should because of regulatory action over the past year. If they’d approved last year’s motion, the tax hike would have been gradual, he said.
Even if LCSD did not claim all fees as new property after the expiration date, they would legally never have the chance again.
At a public hearing on the school budget for FY 2022 on Thursday, the school district officials explained why they needed the additional income.
For years, LCSD’s static millage rate was 46.71. In those years the board never asked for new properties or a 4 percent increase in operating income. In a few years demand was even lower than in the previous year.
LCSD issued bonds in 2017 to pay for major construction projects across the district and increased the 2.55 million over time 32 back.
That cut the district’s fund balance from what was once $ 17 million to about $ 6 million two years ago, Business Manager Sayonia Garvin reported Thursday. Since then, it has grown to more than $ 13 million as of June 30.
However, for each of the past three years, LCSD has borrowed millions in advance tax payments to pay bills in December because the fund’s balance ran out. The majority of the district’s ad valorem revenue, which accounts for nearly 40 percent of its total budget, is earned between January and March each year. The TANs basically allow the district an advance payment on this collection, which it pays back with interest when the collection arrives.
To avoid TANs, the district will need at least $ 15 million in its fund balance as of July 1. Building a stronger fund balance will also help the district cope with long-deferred maintenance on its facilities – some things are even as easy as painting classrooms.
“It’s not really about balancing the fund,” said Allison. “It’s about having enough money to run. … From July to December (every year) we don’t spend money that we don’t have to because we’re only a major disaster or breakdown away from calling the bank. “
Hairston attended Thursday’s session, ahead of Friday’s court verdict. Although he said he understood LCSD’s position, he similarly advocated a gradual increase rather than taking it all in one fell swoop.
“I’m worried that taxpayers will get this in the mail,” Hairston said, waving an envelope with his own county property tax bill. “… your phones will ring.”
Board members and Allison countered claims that the county increased the millage for itself in the years the LCSD was not increased, and that the overseers shouldn’t blame the school district for a large tax increase.
“If you mind that the taxpayer pays more, cut your wheels,” Allison told Hairston.
Zack Plair is the editor-in-chief of The Dispatch.