Presentation on theme: "Argyle and Pecatonica School Districts The Fiscal Impacts of Consolidation Pecatonica Argyle."— Presentation transcript:
Argyle and Pecatonica School Districts The Fiscal Impacts of Consolidation Pecatonica Argyle
Background ■ 2007-09 state budget allocated $250,000 to study consolidations ■ Argyle and Pecatonica approached WISTAX ■ Limited funds ($10,000 per study) – study fiscal implications
Strategy ■ Assumptions about school finance, enrollments, and property values ■ Fiscal future of individual districts ■ Comparison with new, combined district ■ State subsidies for consolidated districts ■ Cost savings from consolidation?
Assumptions - Enrollments ■ State: up 1.4% over 7 years (through 2015-16) ■ Argyle: decline from 335 to 291 (-13%) ■ Pecatonica: decline from 443 to 402 (-9%)
Assumptions – Equalized Values ■ Argyle and Pec value changes fluctuate widely ■ Growth forecasted slightly below state avg. ■ Effect of farmland valuation is hard to predict
Scenarios 1. No consolidation 2. Consolidation District does not spend incentives District spends incentives to reduce property taxes District spends some incentives to hold taxpayers harmless
1. No Consolidation: Revenue Limits ■ Revenue limits to grow < 2%/year ■ Costs growing 4% or more…spending cuts?
1. No Consolidation: Tax Rates ■ Rates depend mostly on prop. values and state aid ■ Rates will be higher if referenda needed & passed
Other Pecatonica Issues Hollandale School costs Heating system Roof New school? Other capital costs
Issues: Scale Economies I? ■ Examining district spending shows likely savings of 5%-10% Pecatonica Argyle Consolidated?
Issues: Scale Economies II? District savings estimates $480,000 teaching staff $165,000 administration $80,000 custodial $25,000 food service $45,000 in additional transportation costs $750,000 cost to remodel schools $705,000 operating savings (about 6%)
Issues: Consolidation Incentives I ■ State bumps aid factors 10% ■ Five years ■ Amount depends on spending ■ Estimated incentives average $621,000/year ($3.1 million total, 5 years)
Issues: Consolidation Incentives II ■ Total incentive is about 1/3 of consolidated revenue limit ■ Save it all – create endowment? ■ Spend a portion (earnings or earnings and some principal) – new programs or reduced property taxes? ■ Spend it all – buy down property taxes or spend on current/new programs Save it all? Save some, spend some? Spend it all?
Consolidation: Three Scenarios ■ Assume 5% (conservative estimate) cost savings due to scale economies District does not spend additional state aids (endowment?) District uses additional aids to reduce property taxes District uses some aids to hold taxpayers harmless
Consolidation: Revenue Limits ■ Revenue limits are the same under all scenarios Consolidate limit grows 1.2% per year Argyle/Pec revenue limit sums
Consolidation: Buildings ■ Under a consolidation, the Hollandale school would likely close ■ Approximately $750,000 needed to remodel current facilities ■ Could use part of the incentive aid, or borrow to fund (we assume borrowing; adds $0.10 to $0.15 to tax rate)
Tax Rates, Scenario 1: Endowment ■ With state incentive $$ invested, consolidated tax rate is average of Argyle and Pecatonica ■ Consolidated district puts $3.6 million in fund balance ($3.1 million incentive aid and $0.5 million from economies Argyle Pec. Consolidated
Tax Rates, Scenario 2: State Incentives Reduce Property Taxes ■ Lower property taxes in each of first five years ■ Incentive $$ “spent”, but district rolls over revenue cap space ■ $0.5 million in scale economies to fund balance Argyle Pec. Consolidated
Tax Rates, Scenario 3: Taxpayers held harmless ■ Argyle taxpayers no worse off; Pec taxpayers save ■ Some state incentive $$ spent, but district “saves” rev. cap space ■ Save $2.2 mil. in first 5 years; after 5 years, ?? Argyle Pec. Consolidated
Summary of Findings ■ Both districts face difficult decisions Costs growing faster than revenue caps Cut spending? Referendum? Repairs/new school (Pecatonica) ■ With consolidation, revenue caps still grow slower than costs (i.e., doesn’t solve declining enrollment) ■ Consolidation could generate cost savings (5% or more) ■ State provides $3 million + in additional aid ■ Hollandale likely closes under consolidation ■ Other issues (e.g., programming, transportation, etc.)?
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What if no scale economies (5% savings)? ■ More spending, more state general aid ■ Slightly more state incentive aid ■ No scale economy savings to fund balance ■ Same options as previously outlined, bottom line only slightly different