The Racine Unified School District is proposing three referendum questions to improve educational facilities and educational outcomes for the public schools. The first question asks for approval of an $83.5 million bond to finance the building of five new elementary schools and renovate five existing elementary schools. The five new schools will replace the existing elementary school buildings. Four will be replaced on their present sites and one, Olympia Brown, will be built on land the District currently owns. Olympia Brown Elementary will then be converted to a secondary school.
The second question asks for increased operating funds to implement small class sizes and increase student achievement. It asks for $2.5 million for two school years starting 2011/12 and then increasing to $6 million for five school years, 2013/14 – 2017/18. The final question asks for voter approval to continue an existing referendum that calls for an increase in the fund balance by $1 million per year for ten years.
It is important that Racine Unified present the referendum questions in conventional terms that are widely understood and used in other school districts. Typically referendums do not include total interest payments for the full term of the bond. Nor do operating referendums summarize the total cost of the operating revenue increase over the term of the referendum period. The actual cost of buildings and renovations are included in the referendum questions, but interest costs are not typically reported as part of the referendum.
The value of a private home accrues to individual(s) living in the home. Public property is used by the public and benefits both current and future taxpayers and students. Because the community will benefit for years to come, it is fair that present and future taxpayers finance the purchase of public property over the 20 year term of the bond. It is unfair to expect current taxpayers to fund the full cost of school renovation and replacement. Long term bonding appropriately distributes the project and interest costs over the long term. So when the referendum question asks for $83.5 million, this “principal” amount as well as the interest will be paid over the 20 year life of the “mortgage”. This is similar to a homeowner who pays for their $100,000 house over the life of their mortgage with monthly house payments.
Just as the private homeowner should be informed of the total cost, so should the local taxpayer be informed of the total cost. The total cost of question #1 is $83.5 million plus interest over 20 years. The total cost of question #2 is $2.5 million for the school years 2011/12 and 2012/13 and $6 million for school years 2013/14 thru school year 2017/18. This amount totals $35 million over a seven year period and there are no interest costs. The total cost of question #3 is $1 million per year for 10 years beginning in school year 11/12 or a total of $10 million.
The conventional cost of the three proposed referendum questions is best seen as how much the combined annual payment for the bond and the increase in operating costs will raise the tax levy. Given current interest rates, the annual bond payment with interest is estimated to add around $7 million annually to the overall tax levy or $0.767 cents per $1,000 of property value. The operations questions would add $2.5 million for question #2 and $1 million for question #3 for the first two years then the question #2 amount would increase to $6 million for the next five years. The maximum annual levy increase for the operating question would be in the 2013/14 thru 2017/18 school years and that amount would be $7 million. For operating expenses, the District collects state aid, so the cost to the local taxpayer is reduced. Currently the District receives just over 60 percent state aid for every dollar of general fund expenditures. For the referendum, we are assuming only a 50 percent state aid ratio so the tax rate will increase by an estimated $0.375 cents per thousand. So the bond and operating referendums will cost approximately $1.14 per $1,000. This means that a home worth $100,000 will have a $114 tax increase or $9.50 per month.
