JCPS panel considers property tax increase

Prop C waiver would bring in millions for the school district

Jefferson City Public Schools could join the majority of school districts keeping all of their state sales tax revenue instead of returning 50 percent to local taxpayers, which would result in property tax increases.

The school board's Finance and Audit Committee met Thursday and started the discussion, an issue that could eventually be brought to the board and would have to be passed by voters.

A small portion of the school district's revenue comes from the additional state sales tax, Proposition C, passed in the 1980s to supplement school districts and highway funds. About 8 percent of school districts roll back half of those funds to local taxpayers, keeping property taxes lower.

This year, JCPS received $8.2 million from Proposition C revenue - which is doled out to districts based on attendance - and returned $4.1 million to taxpayers.

Sales tax is really unpredictable, JCPS Chief Financial Officer Jason Hoffman said, since it depends on the health of the economy. The fluctuating figure is also a downside for taxpayers because it means their property taxes go up and down.

If JCPS applied for a Proposition C rollback waiver, property taxes for the average homeowner with a house assessed at $150,000 would go up $94 a year. It would also make property tax rates more stable, Hoffman said.

"It's never popular raising taxes," committee member Ken Theroff said. "But the thing that turned my head is that 92 percent of districts don't roll it back."

Committee member Steve Bruce said the district needs the additional revenue. Next year, JCPS will operate with a $1.1 million deficit, cutting into its reserve fund to make up the difference.

Bruce suggested coming up with a plan for how the additional funds should be used so taxpayers can see the direct benefit of raising taxes.

"Ninety-four dollars may not be a lot to some, but it is to others," he said. "They'd want to know what you are going to do with this funding."

The committee also discussed potentially trying to raise its reserve fund. The reserve fund is used to pay faculty from June through December, since the district gets the majority of its revenue in January but has to continue operating and paying staff throughout the year.

For several years, Hoffman said, the district tried to keep its reserve fund at 20 percent of its expenditures. But he heard the state average reserve fund is 26 percent, which made the committee members think maybe JCPS should aim for a higher reserve.

In 2012-13, the district's reserve fund was at 25.8 percent of expenditures, which has been spent down through the years. The district's reserve fund is projected to hover around 20.3 percent next year and dip to 19.7 percent the following year.

Some districts require bigger reserve funds if the majority of their revenue depends on one source; that way, if the main source plummets, they'll have back-up funds.

JCPS relies mostly on property taxes, which have remained fairly stable even through the recession. The district hasn't needed to have a high fund balance, but committee member Michael Couty asked whether it should have more of a cushion for emergency situations. Eight percent of the reserve fund is used for operating expenses, and the rest is used for unexpected expenses.

"For any unexpected issues, we can't just go down to 12 percent," Couty said. "But I think 20 percent is not bad for a district our size."

One argument against having a larger reserve balance is that it holds back taxpayer money that is intended for educating children. The district doesn't want to hold onto too much extra money because that's not what the funds are for, Hoffman said.

He plans to look at where comparable school districts keep their fund balance for a better comparison. The committee will take up the issue again at a later date.