Good-news budget comes with warning signs

PW-S Board OKs spending plan that maintains programs, provides raises, promises tax break but deficit looms
By 
BILL SCHANEN IV
Ozaukee Press staff

There is a lot for taxpayers to like in the budget approved by the Port Washington-Saukville School Board Monday.

The 2024-25 spending plan maintains academic and extracurricular programs, provides raises for teachers and other employees intended to retain and attract top talent in a highly competitive job market, invests money for future capital improvement projects and promises a modest tax decrease.

But some key components of a budget that was balanced without the use of reserve funds won’t be available next school year, when the district could face a deficit of as much as $1.2 million, Director of Business Services and Human Resources Mel Nettesheim said.

“We need to start looking at what we can do to offset that $1.2 million,” Nettesheim said, telling the board the district will conduct a staffing audit as well as audits of utility costs and health insurance and retirement benefits.

At the same time, declining enrollment continues to vex the district, which lost about 50 students this year and more than 180 over the last three years.

“Losing 50 students in a year is something we need to take seriously,” Nettesheim said.

Enrollment is a key factor in calculating how much state aid districts receive and how much money they can raise in property taxes, and the loss of revenue over the years students spend in school is significant, Nettesheim said.

“Over 12 years, that’s a lot of money,” she said.

The district will receive a $600,000 declining enrollment exemption to its revenue limit this year, but that is a stopgap measure intended to protect districts from the sudden loss of students.

“It’s really a one-time exemption,” Nettesheim said. “We would need to have another big decline to receive it again next year.”

The majority of students who left the district this school year moved away, primarily to communities in southern Ozaukee County and the middle of the state, as opposed to using the state’s open enrollment program to attend schools in other districts, Nettesheim said.

“It means we are legit losing students,” she said. “Resident students are moving out.”

But open enrollment, the state program that allows students to attend schools outside the districts where they live, continues to be a challenge for the Port Washington-Saukville School District.

This year, 185 resident students are attending schools outside the district while 160 students who live outside the district are using open enrollment to attend Port-Saukville schools. That difference — 25 more outgoing than incoming students — is the largest in the last five years.

School revenue limits are based on the number of students living in a district, so open enrollment does not affect them. But resident districts must transfer money — $8,962 per student this year — to the districts that educate their students.

The Port-Saukville School District will receive about $1.4 million this year in open enrollment transfers, but it will pay roughly $1.7 million, a difference of $300,000.

And while taxes will dip this year, that may not be the story next year. A survey asking residents if they support a $66.7 million referendum to pay for a new Saukville Elementary School at a new site and fund major maintenance projects at the district’s other schools closed Wednesday, and if the results suggest there is support for the plan the district is likely to put the question to voters on the April ballot.

Borrowing $66.7 million  — $45.8 million for the school and $20.9 million for maintenance projects — and financing it over 24 years at an interest rate of 4.75% is estimated to cost the district $39 million in interest for a total obligation of $105.7 million, Brian Brewer, managing director of Baird, told the School Board in August.

The impact on the tax rate is estimated to be 36 cents per $1,000 of equalized property value, or about $108 a year for the owner of a home and property valued at $300,000.

The cost to taxpayers of borrowing $66.7 million would be added to what they are already paying for debt the district incurred after the approval of the $49.4 million referendum in 2015. The tax rate for existing debt payments is $2.39 per $1,000 of equalized property value, which costs the owner of a $300,000 home about $717 in taxes a year. That amount would climb to an estimated $825 annually if the district borrows an additional $66.7 million.

The projected tax rate impact of borrowing for a new elementary school and districtwide maintenance reflects the fact it would be offset by an adjustment made to payments on the 2015 debt. Because the district has been repaying more debt than it needs to annually, or pre-paying, it could reduce those payments and redirect some of that money to the new debt.

If held in April, the referendum would come at what is likely to be a time of soaring City of Port Washington property taxes and promises a double hit for the majority of School District residents.

The city’s proposed 2025 budget calls for a tax increase that would cost the owner of a $300,000 home an additional $383 in large part because of increased spending for emergency medical services approved by voters in a referendum earlier this year.

The following year, the city plans an even more significant tax hike, one that would cost the owner of a $300,000 home an additional $573 to pay for a public safety building.

That would amount to a $956 city property tax increase over two years for the owner of such a home.

The city’s plan to increase taxes isn’t lost on school officials, who note that while the School District must hold a referendum seeking permission to borrow money for a new school and maintenance, the city does not need voter permission to borrow for a public safety building.

“So Port Washington with its safety building doesn’t have to go to referendum but we don’t have that luxury if we need a new school,” School Board President Sara McCutcheon said.

The School Board on Monday also approved the 2024-25 tax levy, which increased by $522,655 (2.9%) to $18.6 million in large part due to increases in salaries and wages.

The district is levying the maximum amount allowed under its revenue limit but in one sense is over-levying because it will make a $6.1 million payment on the 2015 referendum debt, Nettesheim said. The district has been paying significantly more than is due on debt in recent years in an effort to reduce interest costs and provide capacity to borrow additional money while softening the blow to taxpayers.

“In fact, we are over-levying with the $6.1 million payment,” Nettesheim said. “We’re trying to pay off our debt faster and reduce the impact of future referendums on taxpayers.”

Although the levy is increasing, the tax rate will decrease by 18 cents per $1,000 of equalized property value because of a 5.5% increase in the equalized value of property within the district. That means that the owner of a $300,000 home will theoretically pay $54 less in school taxes, although the actual amount will depend on where that home is and how much property values changed there.

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