What is an operating levy?
Operating levies provide school districts money for day-to-day expenses such as staff salaries, supplies, utilities, transportation, activities and programming. A school levy is a local tax on the value of all residential and business property in a school district.
Local school boards recommend levies for school funding, the community votes on the levy and the county collects the taxes and distributes the funds to the school district. An operating levy, once approved by the voters is subject to a reduction factor each year pursuant to HB920 (legislation passed in 1976). This means the taxes collected on the property will not exceed the amount collected at the property’s value in the first year the taxes are collected. Although property values may increase while the levy is in effect, the amount of taxes collected on those properties do not increase, thereby restricting an increase to taxes as the value of the property increases over time.
What is a permanent improvement levy?
A permanent improvement levy is for capital improvements, repairs & maintenance to facilities and for equipment with a useful life of at least five (5) years. Funds generated by the permanent improvement levy cannot be used for current operating expenses such as personnel, benefits and instructional supplies.
School Funding Overview
How will funds from the permanent improvement levy be used?
The $1.6 million annually generated by the permanent improvement levy will be used to protect the community’s investment in its facilities providing for the continued long-term care of our valued capital assets. Funds will be used for the upkeep and repair of District facilities instead of using dollars from the General Fund. Some of these projects include:*
– Safety and security improvements
– Technology infrastructure and equipment
– Roof work and repairs
– HVAC updates/replacements
– Plumbing, lighting, electrical, well/septic and structural repairs and improvements
– Increased preventative maintenance budget
– Maintenance of athletic facilities and fields
– Parking lot maintenance
– Purchase of buses, vans and other maintenance vehicles
*This is not intended to be a comprehensive list, but rather a list of large capital improvements.
In 2020, the district proactively commissioned an independent firm to conduct a thorough facility assessment in preparation of asking residents for a continuous permanent improvement levy for the first time.
Why an operating and permanent improvement levy at the same time?
As in many households, projects and improvements are often deferred to stretch budgets. While Kenston has always done routine maintenance, there comes a time when infrastructure and systems need to be replaced or upgraded while at the same time additional operating revenue is required to meet the District’s educational programming.
Passage of this levy will enable Kenston to continue educational programs and protect the investment the community has already made in our school facilities by providing funds specifically for the care, upkeep and improvements to district buildings and grounds.
Why do schools come back to voters every three or four years for additional funding?
In most schools, real estate tax dollars account for the largest portion of revenue, and in our District, real estate taxes account for approximately 75% of total revenue. HB 920 enacted in 1976 restricts tax growth as property values increase, but because expenses continue to rise (just like in your own home), schools ask voters to approve levies to keep up with increasing costs related to educating students.
During the periods between levies, school districts are faced with increasing costs and flat revenues. The levy amount is set to accommodate this increase by collecting more than is spends in the early years to make up for a projected deficit in its later years. Kenston has already passed the Critical Point, where expenditures are exceeding revenue [known as deficit spending] each year resulting in a declining cash balance.
Why is Kenston coming back to voters now; people are struggling with challenges presented by COVID?
There is no right time to ask voters to increase taxes; Kenston knows that. Operating levies typically last for three to four years, but Kenston through diligent fiscal management has remained off the ballot since the 2015 operating levy. Since the passage of the 2015 levy, the district management team has continued to work tirelessly seeking out more effective and efficient ways of operating the district and has implemented cost saving measures reducing future costs by more than $2 million since 2016.
The Board of Education receives and approves a detailed monthly spending plan which provides revenue and expenditures estimates for the month, the quarter and the fiscal year-to-date along with actual revenue and expenditure amounts and a narrative explaining significant differences. Additionally, as required by the Ohio Revised Code, bi-annually [or more often if necessary], Treasurer Paul J. Pestello, provides a Five-Year Financial Forecast to our Board of Education and the Ohio Department of Education. The forecast requires districts to evaluate their General Fund for potential long-term outcomes when making current decisions about new initiatives and funding existing programs and services over multiple years. The multi-year budgeting process lends itself to meeting both short and long-term goals while maintaining financial solvency.
As early as October 2019, the need for an operating levy was discussed when reviewing the 5-year forecast. Expenditures would begin exceeding revenue each year resulting in a declining fund balance falling below the guidelines set forth in Board Policy 6210. It should be noted that deficit spending (expenditures exceeding revenue) does not suggest mismanagement or misappropriation of district funds, rather it signals the current levy cycle is growing closer to a conclusion.
Based on the 5-year forecast submitted in September 2020 [reflecting extremely conservative estimates as a result of the pandemic], Kenston will have a projected ending cash balance of only $626,573 on June 30, 2022 and a projected deficit of nearly $5.4 million on June 30, 2023.
The five-year forecast was updated and approved at the February 8, 2021 Board of Education Meeting to reflect changes in the forecast. The February 2021 forecast reflects a revised estimate with increases from the State Foundation program, actual collections of real estate and delinquent taxes exceeded projections and an unexpected dividend check and premium refund from the Bureau of Worker’s Compensation.
Based on the latest information, the district will have a cash balance of a little over $1 million (approximately nine days of operating expenses) on June 30, 2023.
The forecast is a “snapshot” in time and will continue to be updated as additional information become available.
What will the combined 6.5 mill levy cost?
$228/per year per $100,000 of housing valuation ($19/month) of home value as identified “market value” on the Geauga County Auditor’s website. Here is how you can determine the tax increase based on the value of your home:
Market Value x 35% x .0065 [6.5 mills] = Tax Increase per year
Example: $100,000 x .35 x .0065 = $227.50 additional per year.