Local schools will get revenue boost thanks to location equity

WMHS LogoThe Watertown-Mayer School Board opted last week to participate in a new location equity program approved in May by the Minnesota State Legislature that will provide the district with more than $300,000 in additional revenue while local residents will actually pay less in school district taxes.

As part of the complicated new program, each school district in the seven-county metro area will receive $424 per pupil from the state to offset a portion of local voter-approved levies. In addition, school boards are allowed to pass a board-approved levy of up to $300 per pupil — without voter approval —  to generate even more revenue for their district. The Watertown-Mayer School Board voted at its Aug. 26 meeting to participate in that portion of the program, passing a new $171.58 per pupil board-approved levy.

The formulas and reasoning behind it are complicated, but the bottom line is this. Even with the new $171.58 per pupil levy that the school board approved at its last meeting — a decision that is estimated to generate nearly $315,000 in additional revenue for the district — local residents can expect to see a reduction in the school district  portion of their taxes. The owner of a $200,000 home paid $279.64 as part of the school district’s operating levy this year, a number that is estimated to drop by around $50 in the 2014-15 school year because of the new location equity program.

Taxes for local residents might have gone down even further had the school board not passed the additional board-approved levy, but the district would have lost out on the additional revenue. Given that taxes will still go down even with that new board-approved levy, the board unanimously felt that it would be wise to cash in on the revenue from the state.

In Watertown-Mayer, the local, voter-approved operating levy for the 2014-15 school year would have been $552.42 per pupil. Voters approved a $500 per pupil levy in 2011 that increases each year because of inflation. However, the $424 in location equity revenue will reduce the local levy authorization to $128.42 per pupil in the 2014-15 school year.

However, because local tax money is still contributing to that location equity revenue, school district taxes will not be reduced by the massive margin it might seem at first glance. Had the school district simply accepted that location equity revenue without passing an additional board-approved levy, taxes on a $200,000 home would have decreased by roughly $88 instead of $49.

But had the school board not passed that additional board approved levy, its revenue also would not have increased by any significant margin. Despite what would have been slightly greater savings to taxpayers, the overall referendum authorization would have remained at $552.42 per pupil ($424 + $128.42).

Instead, by also approving a new $171.58 board-approved levy, the school board raised the total referendum authorization to $724 per pupil, thus generating $314,712.04 in additional revenue without asking taxpayers to pay any more than they already were.

Because of the additional revenue to the district, local residents will likely also see reductions to other portions of their school district taxes. Normally, items like health and safety, safe schools, and deferred maintenance receive no funding from the state, and are 100 percent funded by local taxpayers. But by paying for these programs with the additional $300,000 in revenue — a large portion of which is coming from the state — the Watertown-Mayer district will reduce the burden on local residents to cover those other costs. Local residents can likely expect to see additional savings in the “other” portion of their school district taxes.

The location equity program is designed to recognize the higher cost of living in the metro area compared to the rest of the state, and the fact that schools in metro area districts face greater expenses for the same services as schools elsewhere. Schools outside the metro area will receive just $212 in location equity revenue.

The board-approved levy that School Board passed last week was the maximum allowed as part of the new program. While the program allows for up to $300 in board-approved levies, that only applies to districts whose previous levies were less than the $424 per pupil they will receive in location equity revenue, thus leaving them  with a “zero” levy. Districts like Watertown-Mayer, with a balance somewhere between $0 and $300 per pupil after accounting for location equity, are only allowed to assess an amount to bring the total local levy back up to $300 per pupil.