NOSD plans referendum to save it from fiscal cliff

The Northern Ozaukee School Board on Monday took the extraordinary move to place a referendum on the April ballot asking voters to allow the district to exceed levy limits for the next five years to cover its operating expenses.

In doing so, the district became the first in Ozaukee County to take such action to avoid falling over the so-called fiscal cliff — the point at which districts can’t make ends meet because Covid relief funds are spent and their enrollment is declining, which means significantly less state aid.

Districts have two alternatives, to either drastically cut expenses or ask taxpayers for more money.

While the school district is the first in the county to seek voter approval to exceed the state-imposed levy limits, it is far from alone. Director of Business Services Josh McDaniel said 49% of districts statewide are considering or have held such a referendum.

According to the Wisconsin Policy Forum, last year 76 school district referenda were approved to exceed the levy limits for operational expenses — more than in any other year since 2000.

The School Board on Monday approved two resolutions, one authorizing the district budget to exceed the revenue limits by $1.7 million annually over the next five years and the other asking voters to approve this measure during the April 4 election.

Only board member Rick Hamm voted against the two measures. He did not explain why he dissented during the meeting, and when asked afterward said, “No comment.”

The School Board surveyed residents last month to determine support for a $1.9 million referendum and found widespread support, but decided after a board workshop last week to reduce the amount of funding it’s seeking to $1.7 million.

That’s because recent tax bills received by district residents in the village and town of Fredonia reflected steep increases in municipal taxes.

McDaniel noted that a typical Village of Fredonia tax bill showed that village taxes increased 18.9% and school taxes just 5.1%.

In the Town of Fredonia, he said, the town taxes went up 18.1% while the school taxes increased 4.8%.

“Our part of the bill didn’t go up considerably, but we realize this hit people hard,” Supt. Dave Karrels said. “But we want to be responsive. We recognize the impact on taxpayers and want to be cognizant of that.”

The district can make ends meet with the lower amount, he said, because it’s also changing the way it repays its debt service.

The district has been paying off more than the minimum on its debt service as a way to save interest payments — the district has already reduced the interest payments on its current loans by more than $2 million and shaved four years off the repayment plan, McDaniel said — and originally planned to continue the practice after the referendum, albeit with a reduced payment.

This would allow the district to keep its tax rate at $9.41 per $1,000 equalized valuation.

To make ends meet with a $1.7 million referendum, the district will make loan payments of just over the minimum amount, Karrels said.

That will allow the district to decrease the  tax rate to less than $9 per $1,000, he said.

But support for the referendum may still be hard to come by. Officials said it’s up to the board and administration  to educate the public on the need for the referendum and the fact the district’s tax levy will actually decrease even if it exceeds the levy limit.

Board member Jeff Decker said that’s imperative, noting that he recently talked to a group of senior citizens and seven of 11 said they wouldn’t vote in favor of the referendum, in large part because their tax bills had gone up significantly.

Even after he explained that it wasn’t the school taxes that increased — and wouldn’t increase under the referendum plan — they still opposed the measure, Decker said.

“They got hit with the property tax bill,” he said. “They see the taxes going up in the town and village and now the schools.”

Karrels noted that one resident came to the recent board workshop and the Finance, Buildings and Grounds Committee meeting and told officials he had been talking to his neighbors and they all opposed the referendum.

The man said, “I don’t have any interest in supporting this if my tax rates are going to go up or stay the same,” Karrels noted.

But after the situation and tax impact was explained, he said, that man told officials he supported the measure and would talk to his neighbors about it.

“I think once we share the information, people will see we’ve tried to be fiscally responsible,” he said.

Board member Dan Large noted that the district has been fiscally responsible, reducing its budget over the past several years, increasing its fund balance so it can handle expenses throughout the year without borrowing and coming up with a referendum plan that will actually reduce taxes.

To spread the news about the referendum, Karrels said, there will be community meetings at 7 p.m. on Feb. 15 and March 13, both in the Fine Arts Center, and he and McDaniel will hold an open house every Wednesday morning from Feb. 15 through the election to meet with residents.

They will be available to meet with residents outside that time frame, he said, adding that school officials will also invite town and village officials to meet and discuss not just the referendum but also growth in the community.

Ultimately, growth will help the schools navigate their way out of the problem, Karrels said, because it will not only increase the tax base but also the enrollment, which in turn will increase the amount of state aid the district receives.

“I know the village is excited to move things forward,” Karrels said. “We need growth. They need that too. You need to have houses in our district for people to live in. That’s at the heart of this.”