Referendum tax impact a head-scratcher for some

The Port Washington-Saukville School District’s plan to build a new school at a new site and tackle major maintenance projects at its other schools has begged one question in particular.

Why is the tax impact of the district’s plan to borrow $59.4 million significantly lower than the impact of the City of Port Washington’s plan to borrow $33.5 million to build a safety building for its fire and police departments?

“That is definitely one of the questions that has been popping up at our informational sessions,” Supt. Michael McMahon said Tuesday, referring to the sessions the district is hosting to explain the referendum ahead of an April vote.

According to the city, borrowing $33.5 million for the safety building will cost the average taxpayer — one with a house and property valued at $300,000 — an additional $573 in taxes annually.

The School District’s plan to borrow $59.4 million — $25.9 million more than the city — however, will cost that same taxpayer only $78 more in taxes annually.

The explanation for the difference is twofold, school officials and the district’s financial adviser said.

First, the School District, which includes the city and town of Port Washington, parts of the village and town of Saukville and a sliver of the Town of Grafton, has a total equalized property value that is about $1 billion more than the City of Port Washington, thus it has a larger tax base over which to spread its levy.

“The $1 billion more in equalized value is significant because it means the district can spread it over a bigger (tax) base,” Brian Brewer, managing director for Baird, the district’s financial adviser, said.

But more significantly, the fact the School District has a significant amount of existing debt and how it has financed that debt and structured payments helps explain the difference in tax impacts.

The district borrowed $49.4 million following a successful 2015 referendum to overhaul Port Washington High School and expand and renovate Dunwiddie Elementary School.

It has increased its debt payments recently, putting it in a position to be able to reallocate some of the levy earmarked for existing debt to the new debt if the referendum is approved, thus reducing the impact of the new borrowing.

“The district has been paying down existing debt to create an opportunity to layer in new debt,” Brewer said.

By doing so, McMahon said, the district can keep the tax rate relatively flat.

“In 2015, we were at zero (debt),” he said. “Then we added $2.30 (per $1,000 of equalized valuation in tax levy for debt payments), which was a significant increase.

“Our goal is to have a consistent tax rate.”

The district currently owns $44.6 million in principal and interest for the 2015 referendum borrowing.

On April 1, it will make a payment of $2.6 million to reduce the total amout owed to $42 million.

Residents currently pay $2.30 per $1,000 of equalized value in annual property taxes — $690 for the owner of a $300,000 home — to service the existing debt, which is scheduled to be paid off in 2039.

If the April referendum is approved, the district would borrow an additional $59.4 million starting this summer and finance it over 21 years.

Based on a conservative rate estimate of 4.75%, the interest costs would total $33.6 million for a total in principal and interest of $93 million.

Baird notes that current borrowing rates for Wisconsin schools are closer to 4%, which would lower the district’s interest expenses by about $6 million.

The new debt would add 26 cents per $1,000 of equalized value to the tax rate, or $78 for the owner of a $300,000 home. The tax rate for the district’s total referendum debt would climb to $2.56 per $1,000 of equalized value — $768 a year for the owner of a $300,000 home.

The tax rate increase associated with the new borrowing is small enough, McMahon said, that he has been asked by residents if the district has considered adding projects to the April referendum.

“Some people look at the tax impact and ask, ‘That’s so small. Why not do the middle school at the same time?’” he said.

A facilities study that led to the current referendum proposal identified Thomas Jefferson Middle School as an area of need and proposed two options — renovate the building to create a “like new” school for $53.8 million or construct a new school on the same property to the west for $80 million.

Either option would displace the District Aquatic Center, which is at the middle school, and leave the district with two options — build a new swimming pool and related facilities on vacant land immediately north of the high school for $22.1 million or forego a pool.

The district’s Operations Committee, a group of 25 people that includes school officials and employees, parents, representatives of school-related groups and other district residents, recommended the district proceed with building a new middle school, but administrators and the School Board agreed that including the middle school and swimming pool project in the April referendum would result in an untenable tax rate increase and decided to leave those projects for a future referendum.

The district is now focused on replacing Saukville Elementary School with a new building on a new site for $45.8 million and spending $13.6 million on major maintenance projects at its other four schools.

Saukville Elementary School was built in 1955 and last underwent a major remodeling in 1989, but beyond its age and failing mechanical systems, its space limitations and open concept create what administrators say is a noisy, distracting environment that is being blamed for compromising the academic achievement of students who struggle to learn as well as the school’s performance on key indicators such as the state report card issued by the Wisconsin Department of Public Instruction for all schools that receive public funding.

The School District has ruled out remodeling or rebuilding Saukville Elementary School on its current Mill Street site because the property is in a floodplain and flanked by wetlands. Bray Architects, the firm that conducted a facilities study for the district and would design the new school, has advised that building a new school on a new site would be a better use of taxpayer money.

The maintenance projects at other schools would address aging heating and cooling systems, Americans with Disabilities Act compliance and security, as well as window and roof replacements, new playgrounds and emergency generators.

The district has already held two referendum information sessions and will host four more on Tuesday, Feb. 18, at Dunwiddie Elementary School; Wednesday, March 5, at Port Washington High School; Wednesday, March 12, at Thomas Jefferson Middle School; and Tuesday, March 18, at Saukville Elementary School again. All sessions begin at 6 p.m.