Wednesday, August 27, 2014

Ledgemont BOE Takes Unprecedented Action, Moves Inside Millage
January 14, 2014 by Cassandra Shofar | 1 Comment

Residents were divided on the board's action that would result in a tax hike to property owners

“Well, this is the board making the decision as opposed to the taxpayers making the decision." — Cathy Hadley-Samia

Ledgemont Schools Board of Education took matters into its own hands Monday night, voting to adopt a resolution that will move its inside millage to a separate fund to pay off its debt.

More than 40 residents attended a nearly 45-minute public hearing on a proposal to move 4.5 mills, called “inside millage,” from the district’s general fund to a debt service fund to pay down the $2.67 million it still owes to the State of Ohio.

“The state actually allows a district to move inside millage, which is that 4.5 we’ve assessed from the general fund for purposes of debt service,” said Ledgemont Treasurer Belinda Grassi during a presentation to the audience, which packed the Ledgemont Elementary School library.

“At that point, those dollars are no longer able to be used to fund general fund expenditures,” she explained.

Ledgemont — which slipped into fiscal emergency status in 2010 — received three loans from the state to date: $2.17 million in 2010-11, $1.677 million in 2011-12 and $1.114 million in 2012-13.

The district has repaid about $2.59 million out of its state foundation money, but still owes the state $2.672 million, Grassi said.

Repayment of state debt takes up a “substantial chunk” of the district’s operating dollars, she said.

“So, for every dollar we pay back to the state, it’s one less dollar that we’re able to put into the education of our children in this district,” Grassi said, adding the district anticipates borrowing more money from the state, which has yet to approve any additional advance.

She explained that inside millage is provided by the Constitution of the State of Ohio and is levied without the vote of the people — from its general fund and operational expenses for the purpose of paying debt service.

The inside millage is limited to 10 mills in each political subdivision. Public schools are allocated a portion of the 10 inside mills. Ledgemont’s portion is 4.5 mills.

“They give us that right legislatively. Debt service is one of the allowable purposes,” Grassi said.

Ledgemont would be allowed to divert funds as long as needed to repay its debt, which Grassi estimates would take six to seven years.

“It is the board’s intention to not do that for any longer than is needed,” she said.

The diversion of funds would begin in 2015, Grassi said.

What’s the Catch?

State law requires school districts to have a minimum total millage of 20 mills, the treasurer said.

“That means that district residents are required, by law, to contribute a minimum of 20 mills to their school’s operating budget,” Grassi said.

Ledgemont is slightly above the 20-mill floor at 21.12453 mills, she added, noting most school district’s have millages of 30 or more.

If the district moves 4.5 inside mills — estimated to be $451,573 annually — to debt service, it is left with only 15.62453 mills.

“This is under 20,” said Grassi. “At that point, the county is then required to reset our tax base to boost us back up to 20. This bump amounts to 4.37565 mills.”

As a result, residents would face a property tax hike of approximately $401,350 annually.

This adds up to roughly 4.4 mills or $130 per year for each $100,000 property valuation, Grassi said.

The net effect on the district’s general fund budget would be an increase of $401,350, she added.

While Grassi said Ledgemont will end fiscal year 2013-14 with a potential $300,000 deficit, which it will have to borrow from the state, if the district is able to move the inside millage and raise additional funds, it won’t need to borrow more money from the state and should be able to restore some programming.

A Divided Crowd

Residents were mixed in their reactions to the board’s proposal, some calling it a good idea, others calling it a violation of their voting rights.

“If you want to do something like this, why not put something like this on the ballot and let the residents vote? Why do you put it in a way that we should put it into your hands? You’re taking our voting privileges away,” said Colleen Luoma, of Montville Township. “This is us, this is the United States, it’s our right. We should get to vote on this stuff. Why should we put it into your hands and trust you?”

Board President Cathy Hadley-Samia said there have been numerous levies on the ballot and they’ve never passed.

“We have to look at the school’s interest,” she said.

Grassi noted Ledgemont voters have not passed a new property tax levy since November 1992.

“Well, this is the board making the decision as opposed to the taxpayers making the decision,” Hadley-Samia said. “The board in years past left it in the taxpayers’ hands.”

Board member Jim Cozens added, “Our choices are running out of what to do.”

Hadley-Samia said the board did not pursue the plan earlier because “taxpayers get angry when you take their money.”

One resident noted the proposed property tax bump under this plan would be less than the tax hike recent school levies would have caused had they passed.

Those failed levies, however, would have gotten the district in the black much sooner and restored cut programs, said Superintendent Julie Ramos.

The proposed plan simply repays the district’s debt, Hadley-Samia told another resident.

“The State of Ohio will not release our debt,” Cozens added.

And while the district borrowed money three times from the state since 2010, Grassi noted the amount borrowed is declining because the district has “drastically reduced” its expenses.

“And hopefully by next year, we wouldn’t have to (borrow), if we could get the millage moved,” she added.

“I’ve never heard of this before and I’ve never heard of other school districts doing this,” said Dennis Judd, of Thompson Township. “This is totally new to me. This is just taxation without representation.”

But Montville Township resident Greg Combs, whose three children are open enrolled in neighboring Madison Schools, called the district’s plan “decent” and said he appreciated Grassi’s professionalism.

“But what are we going to do when the income tax possibly fails?” he asked.

“That’s a good question,” Grassi said. “Make every attempt to pass the income tax levy.”

The district’s five-year, 1.25-percent earned income tax levy expires at the end of 2015.

“If your income tax fails, what’s the long-term plan for this district? Are there any thoughts of consolidation?” Combs asked.

Ramos said the district cannot consolidate because its current debt.

“With the amount of debt that we currently have, our options are very limited,” she said.

“So we just die on the vine then,” Combs said.

“We can’t do that either,” Grassi said.

Board member Carol Geisman added, “The state won’t let you close the school if you can’t afford to keep it open.”

“I think it’s sad,” Combs said. “But if there’s no money to run it, what do you do?”

So Why Do This?

“That’s the question of the day,” Grassi said. “First of all, this district is definitely in dire financial straits. Should we continue to not think about options such as millage movement, we continue to incur debt year after year because we don’t collect enough dollars, based on 1992 dollars, to meet our operational expenditures.”

The proposed action is a formulated plan, which the state would have to sign off on.

“It is a plan with a finite beginning. It has a finite end,” Grassi told residents. “It starts as soon as 2015; it ends when the debt is repaid.”

She added, “This provides the district with a viable opportunity to recover from the financial stress that we find ourselves under. It gives us some breathing room and it actually would give us some time to explore other alternatives, other options that we might have at our disposal.”

Those options include shared service opportunities and consolidation or merger.

In addition, the proposed plan would allow the district to address its debt without the need for legislation “that may be out there but is currently not being discussed.”

Potential Setbacks

Grassi identified several potential setbacks to the district’s proposed plan, including the potential that solvency assistance funds are not considered debt.

“Currently, it’s a gray area. It’s very vague. They don’t specifically say that it’s not debt, but everywhere that the state addresses our loans, they call it debt,” Grassi said.

She added, “There is no legal precedent for this sort of repayment because there is no other district in the State of Ohio that’s gotten themselves into such financial stress with solvency assistance loans.”

The state auditor and attorney general would have to issue an option that the solvency loans are considered debt, Grassi said, adding another potential setback is the Ohio Department of Education would have to accept Ledgemont’s repayment terms.

“They have the option of saying no,” she said, noting the district’s fiscal oversight commission — which meets Jan. 25 —  has to approve the board’s decision.

Grassi also recognized property owners might be unhappy with the unvoted millage bump up in property taxes, but was realistic about the situation.

“I just want to remind people that the reason that this district is in the predicament that it is … is simply because you’re very property rich, but the property values are not that high,” Grassi told the crowd. “People own a lot of property, but the value of that property isn’t as significant as it could be in some other districts. So, it doesn’t collect as much in tax revenue.”

Left with few options, the board voted unanimously, albeit reluctantly, to approve the proposal to move the inside millage.

Board member Rick Loveland, who remained quiet throughout the evening and paused before his “yes” vote, made a single statement at the end of the night.

“We’re here to do what’s best for the Ledgemont students, K through 12,” Loveland said.

“We thank you for that,” rang a voice from the back of the room.

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  1. […] said the cessation of education operations at the high school — along with an unprecedented move of inside millage — will help free up funds to get the beleaguered district out of debt and into the […]

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