KEY TAKEAWAYS: School administrators are proposing additional borrowing by issuing a $6.2 million general obligation bond that would increase the debt service property tax rate back to .5375. This would increase property tax bills for homeowners with lower value properties, but would likely have no effect on the tax bill for those with high value homes. The board was also provided with a list of proposed maintenance projects. The recent construction borrowing had exhausted the school corporation’s debt capacity, but the subsequent rapid increase in property values now allows for some limited additional borrowing. There was a discussion about which of the projects should be prioritized: demolition of Happy Hollow, JSHS locker room remodel, replacing the tennis courts, new school buses, etc. The school corporation currently has $5.5 million remaining in construction accounts and will soon receive a $1.7 million transfer from the WL foundation.
Agenda with links to board documents
TOPIC TIMESTAMPS (Youtube Recording Link)
- 0:12 Communication from the audience
- 1:41 Decrease in enrollment and number of transfer students
- 32:40 Property tax rates
- 34:48 Borrowing more would increase debt service property tax rate back to .5375
- 39:57 Potential projects to fund
- 44:06 Proposal to borrow $6.2 million
- 50:58 Property tax bill increase for lower value homes, commercial, and rentals
- 1:11:11 Additional revenue as compared to the additional costs of borrowing
- 1:19:03 Construction account restrictions
- 1:24:54 High value homes will not be affected by the proposed tax rate increase
- 1:36:03 Additional borrowing would reduce money available for education expenses
- 1:44:08 Administration proposes starting the JSHS locker room project
The following is my summary of the public school board meeting, not the official meeting minutes. My personal thoughts and opinions are given in italics and represent my own views which do not necessarily reflect those of any other member of the school board. I identify myself as Mumford in the summary but use first person when describing my personal thoughts and opinions.
0:12 Communication from the audience (those who had signed up before the meeting began):
- Randy Studt (JSHS German teacher) said that many of the proposed projects are very important. He said that there have been questions about the borrowing decisions that the school board made in the past. But said that if board members are opposed to the current borrowing proposal they should clearly state why they are opposed to the current borrowing.
1:41 Greiner introduced Mike Reuter (financial consultant) to discuss the school corporation fiscal plan. This document was not shared with the public before the meeting. I requested that it be made publicly available, but it took some back and forth before it was finally posted a few days after the meeting. Reuter began his presentation referencing the last page of the fiscal plan which gives an overview of enrollment data. Last school year, total enrollment was down 67 students from the year before. Reuter said that this year’s enrollment as of August 21 suggests that we will again have an enrollment decline. Currently, kindergarten enrollment is just 132 students as compared to 159 last year. He said that many districts across Indiana are seeing drops in kindergarten enrollment and noted the decline in birth rates. He also suggested that vouchers may be a reason for the decline in public school enrollment. The likely decline in our school district’s enrollment this year will mean a decrease in state funding. Reuter said that fewer students means our schools are operating at a less efficient scale. We currently have 122 transfer students this year which is also less than the 155 that we had last year. Having 33 fewer transfer students means about $300,000 less in transfer tuition revenue. Reuter said that more and more school districts are seeking transfer students; it is a competitive market. There are a few more weeks before the official ADM count that determines state funding, so our enrollment numbers could change. This decrease in ADM count (the number of students who live in our district and attend one of our schools) is concerning. I know several families that live in our district but send their children to other schools. Another possible cause is that our current practice of increased acceptance of transfer students may have caused a decline in families choosing to live in our school district.
7:51 Page 13 Assessed Values: Reuter shared that the certified net assessed value for the property in our school district increased by 1.22% over the past year, much less than we have experienced in recent years. This means that our property tax revenue will not go up very much. However, over the past two years, property tax bills across Indiana have gone up pretty significantly and Reuter said that he thinks that the state legislature will likely pass some sort of property tax reform in the next legislative session.
14:03 Page 18 State Education Funding: The state provides a foundation amount per student that is the same for all school districts. Last year the foundation amount had a large increase of 5.69%, but this year the increase is only 1.38%. We are also losing enrollment, so the school district budget is going to be tighter. Reuter said that our state education funding will be approximately the same amount that we received last year. Also, interest rates are likely going to drop and this will lead to less interest income for our school corporation.
19:30 Page 1 Education Fund: Last year, there was a drop in our education fund spending because rather than transfer money from the referendum fund to the education fund, the state required the money be spent directly from the referendum fund. Reuter said that next year’s budget will see some tightening and we may need to start using some of the cash balance. He noted that Indiana law allows transfers from the education fund to the operations fund. Because of the referendum funding, our school district is able to spend all the education funding on education expenses.
23:50 Page 7 Operations Fund: In 2024 there was a decrease in our circuit breaker losses (for an explanation of circuit breaker losses, see the September 2023 Budget Hearing at 16:14). Reuter said that one of the reasons that we were reluctant to borrow last year was because borrowing more would have not allowed us to receive the waiver which allows us to apply circuit breaker losses proportionally to both the operations fund and the debt service fund, rather than putting all the circuit breaker losses in the operations fund. He said that because we were not certain of the circuit breaker loss amount, we didn’t want to take the risk. However, the plan he is now proposing is to allocate all the circuit breaker losses to the operations fund which will direct more of the property tax revenue to debt service with a corresponding decline in operations fund revenue in 2025. Many of the expenses in the operations fund, for things like utilities, maintenance, repairs, and buses, have increased in price significantly in recent years. The referendum fund will be used to pay for operations expenses that exceed the operations fund revenue.
29:05 Page 8 Rainy Day Fund: There is no plan to spend the $1.2 million that is in the rainy day fund; that money is there for an emergency. However, Reuter said that the plan lists $800,000 from this fund as appropriated for spending if it is needed, so that the administrators do not have to go through an additional appropriation process to spend the money.
30:01 Overall summary is that the school corporation has a strong cash position, but revenues are not increasing as quickly as expenses, so the budget will be tighter.
30:47 Page 10 Referendum Fund: The school district is spending more out of the referendum fund than it is bringing in which is why there is a reduced cash balance in the referendum fund. However, doing more education spending directly out of the referendum fund has allowed cash to accumulate in the education fund. Reuter said that the plan is to continue to spend more out of the referendum fund and reduce the cash reserve in this fund.
32:40 Page 12 Property Tax Rates: Because of the increase in property values, the debt service property tax rate declined from 0.5375 to 0.4909 last year. The operations property tax rate also declined from 0.3480 to 0.3348 last year. However, Reuter believes that the operations property tax rate will increase because the operations levy increases by 4% each year. After several years of very large increases, the certified net assessed value for the property in our school district only increased by 1.22% last year, so the operations property tax rate will likely increase.
34:48 Page 2 Debt Service Fund: This year, circuit breaker losses are much less than they were last year. The increase in property values has yielded more debt service property tax revenue and so for the first time in several years, the debt service fund has sufficient revenue to make the debt payments. Reuter explained that this year, we will not need to transfer money from the construction accounts in order to make the debt payments. Reuter is proposing that we borrow more now in order to have higher debt payments which will allow us to raise the debt service property tax rate from 0.4909 back to 0.5375. He is also recommending that we use the remaining money in the 2017 construction account as an immediate debt payment in order to increase the amount we borrow. Reuter noted that several years ago, the board passed a resolution restricting the remaining 2017 bond funds to only be used to make debt payments. The school corporation has 2.8 million left over from the 2017 construction borrowing which Reuter said can now only be used to make debt payments. There are also leftover funds in the 2018 and 2020 bonds, but the board did not restrict those funds and so they can be spent directly on projects.
39:57 Greiner explained that the proposed general obligation bond is included in the fiscal plan for next year. Fanny Howie produced our capital improvement plan (November 2022 6:47) which is focused on preventative maintenance. The administration used this plan to create a list of potential projects. Cronk said that once the utility and insurance bills are paid, there is no money remaining in the operations fund to pay for projects. The projects listed in red (tennis court replacement, JSHS roof replacement, JSHS HVAC work, WLES HVAC work, and purchasing three school buses) must be addressed in the next 3 years. Cronk explained that the tennis courts are in such bad shape that they can no longer be resurfaced, they must be entirely replaced. She noted that the Happy Hollow school building is also a priority and that the list of potential projects can be adjusted. (More conversation on this topic at 1:04:50.)
44:06 Lindsay Simonetto from Baker Tilly shared an Illustrative Financing Presentation for the proposed general obligation bond. Current bond payments for this year is about $6 million and increases each year to about $7 million a decade from now. Bond payments begin to decrease in 2039 when they are fully paid. The call dates for each bond are the dates when the bonds could be refinanced if interest rates are lower at that point. General obligation bonds are issued in the name of the school corporation with a limit to the amount that can be issued. General obligation bonding ability is tied to the assessed value of property in the school district. This year, the maximum amount of general obligation bonds that our school district could issue is $8.4 million. Based on conversations with the administration, the proposal is for a $6.2 million general obligation bond. In 2025, the school corporation would make a large debt payment, funded by the remaining money in the 2017 construction account. Issuing more debt should increase the debt service tax rate back to the historical 0.5375 rate.
50:58 For taxpayers, this property tax rate increase would increase the median homeowner’s annual tax bill by $78 compared to last year’s tax rate. However, only properties below the 1% property tax cap would actually pay more. Those who own high value homes are likely already at the property tax cap and so the proposed debt service tax rate increase would not cause any increase in their property tax bill. However, lower value homes are likely below the property tax cap, and so owners of those homes would pay more. For commercial and rental properties, the increase in tax rate is projected to cause a $46 annual tax increase per $100,000 in property value. (More conversation on this topic at 1:24:54)
56:03 Reuter explained that the proposed borrowing is time sensitive: General Obligation Bond Proposed Timeline. If the bonds are not issued by December 31, the Department of Local Government Finance (DLGF) will remove this from our school corporation budget and the debt service tax rate will not go up. Cronk said that she is planning to send out a notice to the local newspapers this week advertising the bond hearing. For the prior construction borrowing, the school board did not use a transparent process. They advertised in the Lafayette Ledger rather than the Journal & Courier. The hearings for the 2018 and 2019 bonds were held during the winter break. I really appreciate our new administration’s much more open process with a work session to discuss and bond hearings scheduled as part of regular school board meetings that are already well advertised.
1:00:55 Wang asked about limits on the length of the general obligation bonds. Reuter said that it is not about time limits, just capacity limits. The way to get around borrowing capacity limits is to use a lease agreement, which is what our school corporation did for the recent construction borrowing. The general obligation bond is cleaner, cheaper, and quicker than doing a lease agreement. Witt asked about the possibility of obtaining a general obligation bond just for the amount of the 2017 restricted bond funds. Reuter said that the cost of issuance is about the same regardless of the amount of the bond. He doesn’t recommend considering a lower amount.
1:04:50 Witt asked if the potential projects list had been considered from the perspective of what most impacts students. She said that tennis only has about 50 students and is an extracurricular activity and asked why replacing the tennis courts is a priority. Cronk said that she used the capital improvement plan to create the priorities list and that she has heard about the needs at the tennis courts at least once a month since she got here two years ago. Greiner said that there is a community component as well. We have a community who passed the referendum and the courts are heavily used. Witt asked why the city hasn’t partnered with us. Greiner said that is a possibility and they could have the dialogue. Greiner said that even if it is just 50 students, this is their passion and, “I don’t apologize for the tennis player, the choir boy (which was me), the football player, the wrestler (which was my son), wherever their passion and their talent, I think we owe it to our community to support them.” Yin said that when she served on the Parks and Rec board they had indicated that they were open to a tennis court partnership with the schools. Yin also suggested fundraising to name the complex or even fundraising to have each individual court named. Reuter said that corporate sponsorships could be a possibility. He noted that hospitals may be interested in sponsoring a tennis court because of the health aspect. I think Witt made a great point about which projects should be prioritized. We still have time before we need to decide and this list of potential projects is a great start, but the administration is also pushing for a renovation of the JSHS locker room and is working on plans for the Happy Hollow building and property. The administration needs to explain which of all the projects they are proposing are the highest priority. (More conversation on this topic at 1:32:19)
1:08:38 Reuter said the attorneys can write the proposed general obligation bond description to be broad enough that the conversations on which projects to prioritize can continue and that the list of projects does not need to be decided at this meeting.
1:11:11 Wang asked how much extra tax revenue would be raised from the increase in the debt service tax rate. Reuter referenced page 2 of the fiscal plan and said that he is projecting an increase of about $700,000 per year. Reuter also noted that there will be no circuit breaker losses in this fund because they will all be applied to the operations fund. When Reuter addressed this question last year (September 2023 Budget Hearing, 18:30), he projected that this debt service tax rate increase would increase revenue by about $200,000, much less than what he is now projecting.
Wang asked about the interest cost. Simonetto said that the total interest cost is about $724,000. Reuter said that if the interest rate turns out to be lower than the 5% they assumed, the length of the bond could be shortened. Wang asked if general obligation bonds can be refinanced. Simonetto said that these bonds do not have a call date and cannot be refinanced, so the decisions on payments and the bond length have to be determined before the bonds are issued.
1:19:03 Mumford said that if there is a board resolution that has restricted the use of the 2017 bond money, why doesn’t the board just pass a new resolution un-restricting this money? Reuter said that he doesn’t know and recommended having an attorney examine the resolution to see if it is revocable. If this is possible, Reuter said that remaining money in the 2017 construction account would still be restricted to just the original purposes described in the 2017 bond issue, which he thinks was just the elementary and intermediate schools. Actually, the original purpose listed in the 2017 bond issue included: “construction of a new Happy Hollow Elementary School, and improvements to and renovations of West Lafayette Junior/Senior High Schools, Cumberland Elementary School and the current Happy Hollow facility” (2017 Bond Statement). Seems pretty broad to me. It sounded as though this resolution restricting the use of the 2017 construction funds was passed by the school board in 2021, but back then all the documents in the school board packet were strictly confidential and so I’ve never seen this resolution.
Austin said that they passed the resolution because all the 2017 bond projects were completed. She said that the school corporation received more money for the 2017 bond than had been requested and claimed that we don’t pay interest on the “extra money” that was received. Reuter disagreed and said that the bonds were sold at a premium because of the larger payments the school corporation was offering. I’ve also never understood why the 2017 bond was set up to sell at such a large premium. The face value was $46,495,000, but the school corporation was offering such large payments that the bond sold for $54,610,029, a more than $8 million premium. It felt like a way to disguise how much was being borrowed at a time when the community was not provided with information about the construction expenses.
Mumford asked for more information about the restrictions on the $2.8 million remaining from the 2017 bond. Cronk said that she would get answers the next day. Simonetto said that when there is money left over from a bond, those funds are declared surplus and after that the only way to use them is debt service. Mumford said she is also confused about why the school board decided to restrict the 2017 bond money when the district had additional projects that fit with the purpose of the bond. She noted that the board only restricted the 2017 funds and did not pass a resolution to restrict the funds remaining from the 2018 and 2020 bonds. Reuter said they would get more information about the restrictions.
1:24:54 Mumford asked Reuter to again explain the distribution of the increase in property taxes if the debt service rate is increased as proposed. Reuter confirmed that the owners of lower value homes (not already at the property tax cap) will have their taxes increased. High value property is already at the cap and will not be affected by the proposed property tax rate increase. Mumford said that the claim that this will only be a slight increase in property taxes is not how it may be perceived by homeowners who have recently seen big increases in their tax bills. Compared to the Tippecanoe School District, our residents already pay higher property taxes because we supported the referendum. Reuter agreed that people have seen higher property tax bills and added that those with fixed incomes, like retirees, are especially frustrated with the recent increases. He thinks that upcoming legislation will provide some property tax reductions.
Austin verified that the .5375 tax rate has been constant for many years. Reuter said from his records it has been constant at least since 2018. She said that even if we chose to lower our tax rate, that doesn’t necessarily mean that taxpayers will pay less because other entities, like the fire department, could take that money. Reuter said it depends on the circuit breaker and tax caps, but he agreed that there are not a lot of incentives to lower the tax rate. He said the reason he recommended allowing the tax rate to decline last year was to get the waiver so that circuit breaker losses didn’t happen just in the operations fund. Mumford asked about the possibility that the other government entities like the city and library also borrow more in order to increase their tax rates which results in our district not getting the .5375 rate. Reutter said that this is a possibility. He said that about 90% of his clients (other school districts) try to hit a target property tax rate and issue debt to hit that rate. The argument is that if we don’t raise property taxes, some other level of local government will and then they will get all that tax revenue that we would have gotten. Indiana’s property tax system provides terrible incentives for local government.
1:32:19 Mumford asked when the board would need to commit to specific projects. Cronk said that at the project hearing, the project description would be very generic and would have flexibility. Cronk said that because the proposed projects are all large, each would need to first be approved by the board. Mumford asked when they would see the proposed language for the bond purpose. Cronk said she thought she had already shared it and said that she would. Simonetto said that it will be shared publicly at the project hearing and that the wording will be very generic to allow flexibility. Greiner said it will say “renovations and improvements to facilities throughout the school corporation including site improvements and purchase of equipment, technology, and buses.”
1:36:03 Mumford noted that in comparing the last three capital project plans, some projects that were included on earlier lists have now been removed and others have been added (2024, 2023, 2022). Mumford asked who provided feedback on the list of projects and asked specifically if our principals and teachers think these projects are the highest priority for our school district. Mumford explained that if the board chooses to focus funding on facilities then there will be less money available for education expenses. Austin disagreed and said to Mumford, “If you have a budget in your home and you have budgeted $1,000 a month for food and then you have a credit card where you paid for a new roof; you haven’t taken money from the food budget.” There were some raised eyebrows but no comments. I don’t think anyone knew how to respond to Austin’s assertion that there is no trade-off.
1:39:59 Mumford continued by asking if it makes sense to decide to prioritize these projects now, right before our school district completes a strategic plan that will contain feedback from all stakeholders. She noted that the results will not be available until this spring. What if the results say that the highest priority for our schools is to prioritize special education and hire more special education teachers. If we borrow more now, that will limit our ability to instead prioritize education spending rather than construction spending. Mumford then noted that one of the items on the potential project list is building demolition at Happy Hollow. She said that the community has not yet been given the opportunity to weigh in on the options for the Happy Hollow building nor has she been included in the discussions on what to do with Happy Hollow. Mumford said that it would be more appropriate to consider taking on additional debt a year from now. Greiner responded that we need safe facilities and we don’t want to be negligent. The administration is presenting needs and trying to keep the tax rate steady. The school corporation currently has several million dollars in the construction accounts (left over from the 2017, 2018, and 2020 bonds as well as an expected transfer of $1.7 million this November from the WL Foundation) that are available to be used for facility maintenance. The money is already there to address safety concerns.
1:44:08 Mumford said that the administration recently said that they want to earmark the funds from the 2018 and 2020 construction accounts for the JSHS locker room project and she asked how much money is left in those two construction accounts. Cronk said $1.5 million and $1.2 million, respectively. Cronk said that she has a call scheduled with Ice Miller to ask about the logistics of using the money. Mumford asked if money from the 2018 and 2020 bonds could be used for projects on the potential projects list and asked where the locker room renovations rank on that priorities list. She noted that at the April school board meeting, the board approved to have the foundation fundraise for the locker room project with the understanding that the school district would not be using school funds to begin the project (March 2024, 2:41:16, April 2024, 1:43:49). Cronk said that the request is to use the funds in these construction accounts to add to the funds raised by the foundation. She said first they need to do an architect plan which will be a significant amount of money because the completed locker room project will be a $10-12 million project. She said they are trying to brainstorm a variety of options to pay for all the projects that have been brought up over the past 2 years. Cronk said the foundation has not started fundraising for the locker room yet and this plan is to get that project started to see if we can get more done. Mumford asked if the administration changed their minds and is now wanting to use school district funds to start the locker room project. Cronk answered that if Ice Miller says that this money is available to be used in this way that yes, that is the plan.
1:48:02 Yin recommended that the board spend some time in the future discussing the potential project list, especially after receiving community feedback, as well as considering alternative funding sources. Greiner said that we can expand and alter the list going forward. I agree with Yin. It feels like the administration is saying that the locker room project is their biggest priority while also saying that Happy Hollow is their biggest priority, while also saying that the tennis courts are their biggest priority, while also saying that new school buses are their biggest priority, etc. There isn’t enough debt capacity for the school district to do it all (at least not on our own).
1:49:53 Cronk responded to Mumford that issuing a general obligation bond would not affect our education fund funding nor the referendum funding. She said that if it is determined that we want to spend more on special education, then that comes from the education fund. Mumford said that much of the money used to pay for education expenses comes from the referendum fund and that money is flexible. The plan to have all the circuit breaker losses apply to the operations funds will mean that more operations expenses will be paid out of the referendum fund which will leave less money available for education expenses like paying teachers. Cronk agreed and said that strategically speaking, our school corporation is in a much better position as compared to other school corporations who have tons of needed projects on their lists. She said there are never ending facilities needs. Marley said that we have stayed at the same tax rate for years and that we need to issue this additional debt in order to increase back to that tax rate. Austin said that the administration will go forward and the board will be asked to vote on the general obligation bond at the September meeting. Cronk corrected her and said that there will be a preliminary determination hearing at the September meeting and that there will be a vote at the October meeting.
1:55:55 Mumford asked for some additional clarifications on some items in the fiscal plan. On page 1, there is money budgeted for summer school and she asked if a decision has been made about offering summer school classes. Cronk said that they are considering it. Mumford asked why on page 1, the budget for central services increased. Reuter said he had specifically highlighted it on the page so board members would see that change. Cronk said that this has to do with the textbook rental fund going away. The reimbursements from the state for textbooks will start going into the education fund and anything purchased for students including textbooks and laptops will have to come from the education fund. Cronk said that she will share more about this at the budget meeting in September.
Location: Happy Hollow Building, LGI Room
Future Meetings (calendar link)
- Public Work Session – *Monday, September 16th at 5:00pm at Happy Hollow LGI Room
- Public School Board Regular Meeting – *Monday, September 16th at 6:00pm at Happy Hollow LGI Room
*DATE CHANGE: 3rd Monday of September instead of typical 2nd Monday
This document is my summary of the public school board meeting, not the official meeting minutes. My personal thoughts and opinions are given in italics and represent my own views which do not necessarily reflect those of any other member of the school board. I identify myself as Mumford in the summary but use first person when describing my personal thoughts and opinions. Previous agendas, minutes, and audio recordings can be found at the WLCSC website.
Dacia Mumford 