The dollars and sense behind Howard-Suamico’s referendum questions
By Ben Rodgers
SUAMICO – Howard-Suamico School District voters will see a pair of referendum questions on the April 6 ballot, and they come with a caveat.
If voters approve a $98 million facilities referendum question issuing new debt, and a question asking for revenue limit override of $5 million a year for five years to retain and better compensate teachers, taxpayers can expect to see the $9.19 tax rate the district has held for the past six years drop to $8.99 per $1,000 of equalized value.
“The board was seeking that (tax rate) consistency and utilizing that consistency from a strategic-finance perspective to be able to prepare for future needs, such as the projects we mapped out,” said Mike Juech, assistant superintendent of operations.
The district would spend the $98 million on facilities improvements and additions, primarily at Bay View Middle School and Forest Glen Elementary School for new gyms and other renovations.
Even with increasing property values in the two villages (rising nearly $1 billion in the past six years), taxpayers will most likely see their school taxes reduced if both referendum questions pass.
Under the $9.19 tax rate, a $300,000 home in the district would pay $2,757 in taxes for the school district.
Under the $8.99 tax rate, the same home would pay $2,697 under current equalized value levels.
Simply put, Juech said the lower rate and potential savings come on the heels of an aggressive plan implemented years ago to pay off existing debt, something the district was able to manage with the steady tax rate of $9.19, as property values increased.
“The board has been very aggressive and strategically aggressive on paying down debt over the last few years and managing the tax rate at that current $9.19 level, which allows for significant amounts of debt to be paid off,” he said.
Juech said the board could have asked for $140 million and still have maintained the $9.19 tax rate.
Per state statute, Howard-Suamico is allowed a debt-to-valuation ratio of up to 10 percent of the total equalized value of the district, meaning if it wanted to and voters approved it, the district could borrow close to $350 million.
As of Dec. 31, 2020, the district had just under $16.2 million in debt, and that figure is anticipated to decrease to $9 million at the end of 2021.
The remaining debt the district is carrying is what remains from refinancing debt from prior referendums.
“Basically, we’ve absorbed that new debt into those current debt payments, and that gets to the aggressive nature of those debt payments,” Juech said. “We can absorb or really take on that additional level of debt built into our current debt payment.”
Two bonds for the $98 million would be issued, the first in 2021 for $50 million, and the remainder would be issued in 2023.
Michele Wiberg, chief sales and marketing officer with PMA, a firm contracted by the district, said a tax rate decrease coming after the potential passage of two referendums is unheard of.
“I can think of several circumstances where a district has been able to maintain the same tax rate after a referendum or investment in the schools, but I cannot think of one where they were able to decrease the tax rate,” said Wiberg, who has worked on more than 100 school referendums in her 29 years in school finance.
She said the strategy used by the school board isn’t unique in Wisconsin, but it hasn’t been executed quite the same anywhere else.
“I think that many districts are using a tax levy and mill rate strategy in order to accomplish their goals,” Wiberg said. “I don’t want that to diminish the work they did in Howard-Suamico, but I want to put it in context. That strategy is certainly being used in many districts across the state. It’s just a matter of what you can accomplish using that strategy. In Howard-Suamico, they’re able to accomplish quite a bit.”
She said two factors combine to make the tax rate decrease a reality.
The first is the aggressive payment of debt, and the second is decreasing the asking amount of the second revenue limit override referendum question, a renewal from a question approved in 2018.
“They couldn’t accomplish what they want to accomplish without a referendum, and the concept of referendum is exactly what the state’s goal has been – the concept of local control,” Wiberg said.
Paying it down early
Teresa Ford, school board president, said aggressively paying off debt is in the board’s “DNA.”
“What we use debt for is for large things that we cannot handle in our own yearly budget, and as the funding became less predictable, we started to be more intentional about managing the debt in such a way we would be able to address the larger building maintenance projects,” she said.
Ford, a 16-year board member, said paying down debt early and keeping a stable tax rate longer than the vast majority of districts in Wisconsin is a combined effort between the board and administration.
“It’s because there has been such strong planning and forward-thinking planning for years, and I’m not just talking about the board,” she said. “I’m talking about the district administration, the people that came before Mike Jeuch – Matt Spets, Betty Zimdars, John Keller – those are the people who have done that job for the past 20 years. They have looked to the future, paid attention to what we can expect from the Legislature in terms of what our funding will be, paid attention to the growth in the villages and what effect that will have on the rates and the valuations.”
When it comes to property taxes, Ford said the school board can only control one thing – the tax rate, and the steady hold on $9.19 has led to the current position heading into this April’s pair of referendum questions.
“I believe we are good stewards of this money, and that is a huge benefit to the district and the communities,” she said. “A strong district and a strong community work hand-in-hand. We have been very open about the needs that have led to this ask. Even though it seems counterintuitive to be lowering the rate and borrowing $98 million at the same time, it is because we have planned for this and planned well for it.”
In 2015-16, the first year of the $9.19 tax rate, the overall levy including operations and debt payments was $22,904,323, and the most recent Wisconsin DPI data from 2019-20 showed an overall levy of $28,248,522.
Prior to the 2018 revenue limit override referendum approved by the community, the district was restricted from using funding for operations beyond the statutory revenue limit and could only levy more dollars for additional referendum debt payments.
Reducing district debt with these annual additional debt payments has allowed the board to plan to take on additional facilities debt while lowering the tax rate.
Over nine years from 2011-12 to 2019-20, minus the voter-approved levy override in 2018 of $5.85 million, Howard-Suamico’s state revenue limit increased $396,232 to end the most recent year at $18,811,741.
The $98 million need
The board approved the $98 million question based on recommendations from a community referendum task force.
Task force member and Howard village trustee John Muraski said the 40-person task force met five times between two and three hours each time and delved into topics such as school finance, the state-imposed revenue cap, the history of facilities in the district and the priority of projects.
“We started down a path of looking at the list of prioritized needs based on a 2016 facilities study the district did,” Muraski said. “They said ‘We’re doing maintenance, we’re doing improvements, but we have this list of things that have to get done because they’re large items.’”
He said the task force also took into account a community survey in regards to the tax rate and what community members wanted to see done about it.
“Our recommendation from this task force was to the school board to consider a lowering of that mill rate,” Muraski said. “We’re keeping the costs under what we could theoretically ask for, and we wanted to keep it under that and be respectful to what the voters and residents were saying.”
He said the projects chosen to be included are in some cases a necessity, like a new roof at Forest Glen.
In other cases, changes need to be made to improve learning environments, while being cost-effective, such as new gym additions at Bay View and Forest Glen.
“As I think about it, what is the cheapest way to add square footage on a building?” Muraski said. “It’s not to add two stories of classrooms – it’s to put up four walls and renovate that (existing) space.”
He also said low interest rates make now the best time to borrow for these projects.
The district anticipates interest rates below 2 percent for the two bonds, which would be over a 20-year period.
“Knocking out some of these costs now are cheaper in the long run than delaying and paying later at more expensive money when the cost is going to be more and the problems are going to be greater,” Muraski said.
He said he joined the task force to help the community he has called home for 20 years.
“I think good schools drive good communities,” Muraski said. “I see that as a trustee, I see that as a 20-year resident now. We have a nice community in Howard-Suamico because of good schools.”
The operations side
The other referendum question voters will see is an extension of a previous referendum passed to decrease class sizes, better compensate teachers and complete more facilities maintenance.
For those purposes, in 2018, voters approved a non-recurring referendum for the district to exceed the state-imposed revenue cap by $5.85 million a year for five years.
This year’s operational referendum also decreases the amount the district would be allowed to exceed the state-imposed revenue cap down to $5 million annually, starting in the 2023-24 school year.
Because there is such a significant facilities investment with the $98 million question, the board reduced the $5.85 million revenue cap override to $5 million.
It will allow the district to extend a revenue limit override through the 2027-28 school year.
Chris Miller, a sixth-grade teacher at Lineville Intermediate School, said the additional funding has allowed for retention of dedicated coworkers.
“I’ve been here for over 23 years, and in the past you would often have teachers you worked with, quality educators, good collaborators, and they would leave to go to another district because of better pay and better benefits,” Miller said. “We really tried to address that with our Compensation 2020 goals. We looked at the data from all the comparable districts around us, and we tried to see where we can come in at about the same level of other districts.”
In addition to retaining teachers because of better pay, the district was also able to hire 35 new teachers to reduce class sizes.
Miller said this has allowed him to better teach to the district’s graduate profile, instilling a set of qualities and skills into all students upon graduation.
“When you have 26 students, you can really focus on the collaboration piece, you can focus on being an innovator. Having more teamwork with the students is such a benefit when you have 26 versus 30 students,” he said. “Our classroom sizes even at one point were getting so large that walking amongst the desks was a challenge at times. Making the classroom’s physical environment a more comfortable space is a big part of that.”
Miller said as long as he’s been teaching in Howard-Suamico, the district has made strides to offer the best educational opportunities it can with the fiscal restraints it faces.
He said the passage of the 2018 referendum showed the community supported the effort as well.
“That has allowed us to increase our starting salary to be competitive with the local market,” he said. “It also has allowed us to retain those teachers we lost… I could go through a list of names of teachers I worked with who went somewhere else because it meant a better income for their family. Now we’re reaching the spot where the community has been generous with us. They allowed us to give our position, and they understand it.”