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Argyle and Pecatonica School Districts

Argyle and Pecatonica School Districts. The Fiscal Impacts of Consolidation. Pecatonica. Argyle. Background. ■ 2007-09 state budget allocated $250,000 to study consolidations ■ Argyle and Pecatonica approached WISTAX ■ Limited funds ($10,000 per study) – study fiscal implications. Strategy.

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Argyle and Pecatonica School Districts

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  1. Argyle and Pecatonica School Districts The Fiscal Impacts of Consolidation Pecatonica Argyle

  2. Background ■2007-09 state budget allocated $250,000 to study consolidations ■Argyle and Pecatonica approached WISTAX ■Limited funds ($10,000 per study) – study fiscal implications

  3. Strategy ■Assumptions about school finance, enrollments, and property values ■Fiscal future of individual districts ■Comparison with new, combined district ■State subsidies for consolidated districts ■Cost savings from consolidation?

  4. Assumptions - Enrollments ■State: up 1.4% over 7 years (through 2015-16) ■Argyle: decline from 335 to 291 (-13%) ■Pecatonica: decline from 443 to 402 (-9%)

  5. Assumptions – Equalized Values ■Argyle and Pec value changes fluctuate widely ■ Growth forecasted slightly below state avg. ■ Effect of farmland valuation is hard to predict

  6. Scenarios • 1. No consolidation • 2. Consolidation • District does not spend incentives • District spends incentives to reduce property taxes • District spends some incentives to hold taxpayers harmless

  7. 1. No Consolidation: Revenue Limits ■Revenue limits to grow < 2%/year ■Costs growing 4% or more…spending cuts?

  8. 1. No Consolidation: Tax Rates ■Rates depend mostly on prop. values and state aid ■Rates will be higher if referenda needed & passed

  9. Other Pecatonica Issues • Hollandale School costs • Heating system • Roof • New school? • Other capital costs

  10. Issues: Scale Economies I? ■Examining district spending shows likely savings of 5%-10% Pecatonica Argyle Consolidated?

  11. Issues: Scale Economies II? • District savings estimates • $480,000 teaching staff • $165,000 administration • $80,000 custodial • $25,000 food service • $45,000 in additional transportation costs • $750,000 cost to remodel schools $705,000 operating savings (about 6%)

  12. Issues: Consolidation Incentives I ■State bumps aid factors 10% ■Five years ■Amount depends on spending ■Estimated incentives average $621,000/year ($3.1 million total, 5 years)

  13. Issues: Consolidation Incentives II ■Total incentive is about 1/3 of consolidated revenue limit ■ Save it all – create endowment? ■ Spend a portion (earnings or earnings and some principal) – new programs or reduced property taxes? ■Spend it all – buy down property taxes or spend on current/new programs Save it all? Save some, spend some? Spend it all?

  14. Consolidation: Three Scenarios • ■Assume 5% (conservative estimate) cost savings due to scale economies • District does not spend additional state aids (endowment?) • District uses additional aids to reduce property taxes • District uses some aids to hold taxpayers harmless

  15. Consolidation: Revenue Limits ■Revenue limits are the same under all scenarios Consolidate limit grows 1.2% per year Argyle/Pec revenue limit sums

  16. Consolidation: Buildings ■Under a consolidation, the Hollandale school would likely close ■Approximately $750,000 needed to remodel current facilities ■Could use part of the incentive aid, or borrow to fund (we assume borrowing; adds $0.10 to $0.15 to tax rate)

  17. Tax Rates, Scenario 1: Endowment ■With state incentive $$ invested, consolidated tax rate is average of Argyle and Pecatonica ■Consolidated district puts $3.6 million in fund balance ($3.1 million incentive aid and $0.5 million from economies Pec. Argyle Consolidated

  18. Tax Rates, Scenario 2: State Incentives Reduce Property Taxes ■Lower property taxes in each of first five years ■Incentive $$ “spent”, but district rolls over revenue cap space ■$0.5 million in scale economies to fund balance Pec. Argyle Consolidated

  19. Tax Rates, Scenario 3: Taxpayers held harmless ■Argyle taxpayers no worse off; Pec taxpayers save ■Somestateincentive $$ spent, but district “saves” rev. cap space ■Save $2.2 mil. in first 5 years; after 5 years, ?? Pec. Argyle Consolidated

  20. Summary of Findings • ■Both districts face difficult decisions • Costs growing faster than revenue caps • Cut spending? • Referendum? • Repairs/new school (Pecatonica) • ■With consolidation, revenue caps still grow slower than costs (i.e., doesn’t solve declining enrollment) • ■ Consolidation could generate cost savings (5% or more) • ■ State provides $3 million + in additional aid • ■ Hollandale likely closes under consolidation • ■ Other issues (e.g., programming, transportation, etc.)?

  21. Wisconsin Taxpayers Alliance: 77 Yearsof Nonpartisan Research and Citizen Education www.wistax.org

  22. What if no scale economies (5% savings)? ■More spending, more state general aid ■Slightly more state incentive aid ■No scale economy savings to fund balance ■Same options as previously outlined, bottom line only slightly different

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