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Board narrows range for school levy hike

Decision squeezed between a bad economyand mounting spending needs

September 14, 2012 at 9:45PM

(The Minnesota Star Tribune)

Pick a number somewhere between zero and 7.4.

That's essentially the direction that school board members gave their staff Friday in a committee session focused on next year's tax increase.

The staff's recommended 7.4 percent levy hike appears to be a non-starter. Board members are reluctant to impose a tax hike of that size as the recession drags on.

The lower campus of Lake Harriet Community School, formerly known as Audubon, is among schools the district is expanding. (The Minnesota Star Tribune)

But it sounds like a repeat next year of this year's no-increase levy also has been ruled out. Two factors are pressing the board to spend more.

First, there's bill due for previously accumulated pension obligations to non-teaching retirees. That totals $6.2 million. There's no escaping it . The issue is how much to pay through a dedicated pension levy vs. taking it out of other district spending.

The district paid the entire amount in this school year's budget with onetime funds. But there's some danger that the Legislature could take away the district's authority to levy for past pension bills if it doesn't get used, and with the overdue pension bill being retired through 2031, that levy could come in handy. Not fully using the pension levy also means that more money comes out of the general fund, consuming dollars that could be used for job one--educating students.

So it's likely that the pension bill next year will get paid partially by a levy and partially by the general fund, phasing in the tax bite.

The second factor looming over next year's budget is spending for fixing or expanding buildings. The board last year approved a $50 million annual program to keep up with deferred major maintenance at schools. That typically includes such major jobs as replacing furnaces or roofs and the like. The school board, relatively new to the job, seemed surprised to learn that the program it approved requires a tax increase.

There are several potential outs for the board in dealing with this commitment. It could decide to spread these improvements over a longer period, meaning less would be spent each year. The current board could also levy less from property taxes and borrow more money to finance the improvements.

The district also needs to spend money on expanding classroom space to keep up with enrollment. The modest growth in district students has been strongest in southwest Minneapolis, where there's no excess capacity. The most likely solution will be to expand existing schools, and district staff is developing a $70 million proposal to do handle anticipated enrollment.

The board asked for several middle-ground tax hikes to gauge their impact. The suggested range fell between 2 percent, which is roughly what the city is likely to ask for, and as high as 5.5 percent. Finance Chair Hussein Samatar was particularly vehement in opposing the staff's recommended figure.

Actually, although the recession hurts the ability of some property owners to pay, 2013 could be the best time in years to raise property taxes from one standpoint. That's because residential property values in many areas of the city fell by more than they did for apartments and other commercial property. That means a hefty tax increase would be felt more by business than homeowners.

Interestingly, the major exception to that pattern is Southwest, where stable home values means that area absorbs a greater portion of any increase than homes in other parts of the city. And that's exactly where the need for more classroom is greatest. But it's also the source of the city's highest voting turnouts, something that has to be factored into political calculus of raising taxes.