With the Tennessee General Assembly now back in session in Nashville, the Oneida Special School District will likely ask Scott County’s representatives in the legislature to carry a bill that would increase the school tax paid by property owners inside the school district’s boundaries to 50 cents, if all goes according to plan.
Before that happens, however, OSSD director of schools Ann Sexton says there is an important distinction to make.
“We want to make sure that we’re getting the amount of money that we were originally intended to get; the amount of money that is needed to retire our debt,” Sexton said Friday.
Sexton and Connie Thomas, OSSD’s budget overseer, sat down with the Independent Herald to discuss plans to request a tax increase after the intention became public at County Commission’s Jan. 6 work session.
The need to revisit the school tax has been a quiet issue for years. Plans to finally bring the subject to the table have been in the works for months, but were not made public until the county’s Budget Committee was informed at last week’s work session.
“For years, we were reluctant to move on this because of the reaction when the words ‘tax increase’ are mentioned,” Sexton said. “But it is at the point that we really have no choice.”
First levied in 1992 to help pay a $1.5 million bond that was part of the new school construction for the system’s elementary school and middle/high school complex, the tax for property owners inside the school system was originally 70 cents per $100 of assessed property value. Over the years, that rate has gradually decreased to 38 cents.
The reason for the decreases is the state’s process of automatically revisiting property values every four years. As property reappraisals take place, state tax authorities adjust local tax rates accordingly. If property values rise during a reappraisal year, property tax rates are adjusted downward to compensate. In theory, the end result is the same amount of tax revenue being generated from year to year.
It is a theory, though, that — according to Sexton — has not exactly proven true for the Oneida school district.
In 1995, the first year the tax was levied, it generated $194,000. This year, at 32 cents per $100 assessed value, the tax will generate $162,218 in revenue. That leaves a budget deficit of $94,727 to meet the school system’s debt obligations.
The breaking point, according to Sexton, was the most recent certified tax rate handed down by the state, which decreased the tax rate from 38 cents — a rate that had been in place since the last certified tax rate in 2008 — to 32 cents last year.
Sexton said the school system will be forced to dip into its fund balance to make up the deficit this year, but added that it is important to avoid that in future years.
“Our fund balance is not very large to start with,” she said. “The important thing to note is that this increase we’re asking for is just to cover our yearly debt payment. It has nothing to do with our operational budget; it isn’t for purchasing equipment or paying salaries.”
Based on current estimates provided by Sexton, that yearly debt payment deficit would increase gradually over the years, based on the current tax rate of 31 cents. By 2018 it would top $100,000 annually.
An increase from the 2013-2014 tax rate of 32 cents to 50 cents — the figure needed to cover debt service requirements — would cost property owners of a residence valued at $100,000 approximately $48 in additional taxes each year.
In the meantime, Sexton said that she and OSSD board of education chairman Nancy Williamson have spoken with state Rep. Kelly Keisling and will speak to state Sen. Ken Yager, who represent Scott County in the legislature, and ask them to carry the bill .
The bill itself has not been drafted. When that bill is drafted, she said, the context will be worded in such a way as to ensure that the tax rate cannot increase or decrease from year to year.
“It is important that the bill be worded so that the tax stays the same in order to prevent this from happening to the system and the tax payers in the future,” Sexton said.
Currently, the school system’s debt — which includes funds that were used to match county-provided funding for the most recent school expansion projects — is $2.4 million, which is scheduled to be retired by 2026. With the most recent major improvement of replacing 20-year-old carpet with tile now complete, Sexton said the school buildings are in good shape as far as capacity and physical condition and that major capital projects should not be needed for a number of years.
“I think it bodes well for our school system that we have nice instructional facilities and that we’re in good shape, and we’re only $2.4 million in debt,” Sexton said. “There are a lot of school systems that would love to be only $2.4 million in debt. We just need to make sure we can continue to make our debt payments without having to dip into our operational funding to do it.”