A decade-defining decision for GF schools? As unlimited mill-levy authority ends, officials mull tax vote
Grand Forks School Board members must decide this year whether to put the fate of the district’s property taxes directly into the hands of voters or the state.
The district is one of three in the state that now has an unlimited mill authority, which means it’s not subject to caps on property tax revenues and mill levies imposed by the state.
But as state legislation brings that authority to an end in 2016, Grand Forks must either hold an election — during which voters would consider a levy specified by the board — or not hold one at all, which might reduce taxes for residents but cause the district to lose revenue, said Superintendent Larry Nybladh.
This is the first time a school board here has had to consider the district’s unlimited authority status in decades, he said. The authority was authorized by voters in 1961.
The Grand Forks school district’s current general-fund mill levy, which pays for the district’s day-to-day operations, is 89.78 mills, which raised $17.2 million in revenue this year.
State law would essentially freeze the revenue the district can collect each year, according to Nybladh. If the school board wants to collect more, it would have to hold an election before Dec. 31, 2015.
The earliest time would be during the regular election this June, but the board could delay it until later, Nybladh said.
The board’s finance committee will discuss the subject at its next meeting on Thursday.
In 2009, the state Legislature passed a law that forces districts that have unlimited mill levies — Grand Forks, Williston and Bismarck — to give up this authority by the 2015-2016 school year.
The intention was to shift the source of K-12 funding from the local to the state level, said Nybladh in a 2010 memo to School Board members.
If voters authorized a higher mill levy, that mill levy would be allowed for 10 years.
That means a school board would have to consider the school district’s needs over a decade before deciding the mill levy to ask for, Nybladh said.
“It’s finding that balance between the educational system’s needs versus the taxpayer’s desire relative to taxes,” he said. “You’re always trying to seek that balance.”
But if the board holds an election and the proposed levy fails — or if the board doesn’t take action at all — the district could lose revenue for a few years, said Nybladh.
According to the law, the district could only collect a set amount of money from taxpayers, which would be determined by whatever the district collects that year.
Nybladh drew an example using the current year’s mill levy and the growth of Grand Forks’ tax base. This year, the district collected about $17.2 million in taxes, with roughly $1 million of that represented by a 5.5 percent growth in property values in the area.
In this scenario, if the district was forced to cap the amount of taxes could collect at $17.2 million the following year, even if the tax base continued to grow, it couldn’t collect that extra $1 million from new growth, he said.
To stay within the revenue cap, the district would have to reduce the mill levy, he said. “We would not get the benefit of the taxable valuation increase,” he said.
However, the revenue would be capped only until the district’s mill levy reaches a mill-levy cap determined by the law, according to Nybladh. He estimates that cap would be 82 mills next year.
“The likelihood is we would actually catch up to the cap within one or two years, depending on the growth of the tax base,” he said. “If the board does nothing, after we’d catch up, we could take advantage of any tax base increases.”
Local voters first approved the district’s unlimited mill levy authority status in 1961, with an approval rate of 62.5 percent. The status remained unchallenged until the 2009 legislative session.
“There was some pretty remarkable support in the past for that unlimited levy,” said Nybladh.
Originally, the law called for the district’s unlimited mill levy authority to end in 2012, but because of successful lobbying by Grand Forks school officials, the effective date moved to 2015, he said.
This strategy allowed more time for legislators to reconsider the decision and for school districts to budget for the change, he said.
Now, the question is what option the district can best afford, he said. If the board doesn’t hold an election, he said it’s hard to tell exactly how that will affect taxpayers.
“It could mean there could be limited effect on taxpayers or the educational system,” he said. “It just depends on how quickly the tax base grows, and it also depends on the level of support from the legislature for funding K-12 education. Those are two huge variables.”