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County Schools Eye Millage Increase

lc

BY BRIAN JONES

brian.jones@packet-media.com

COLUMBUS – The Lowndes County School District is facing a potential increase in its millage rate for the first time in years.

The FY16 budget the LCSD submitted to the Lowndes County Board of Supervisors was based on a projected value of $338,000 per mill. Due to recent changes, the value of a mill is actually going to be around $332,000. The district does not set the millage. They request a dollar amount and that dollar amount is divided by the value of a mill. The resulting number is the millage rate.

While the dollar amount the LCSD submitted would have maintained the current millage rate of 46.71, the change in the value of the mill would lead to a tax increase of roughly 1.56 mills.

The board met Tuesday at noon to discuss the issue. Business Manager Ken Hughes, Tax Assessor Greg Andrews and County Administrator Ralph Billingsley were all present. In the end, no action was taken as there was no clear consensus on how to proceed.

The meeting opened with Board Attorney Jeff Smith explaining the situation.

“Last week I got a telephone call from the tax collector, and our request for our budget that was sent to the board of supervisors had millage going up a slight amount,” Smith said. “I’ve talked with (Hughes and Andrews) and it has us raising the milllage by about 1.56 mills. You don’t set the mills, you just send your request to the board of supervisors and they then fund it. Y’all need to see what the taxing authority may have to say about raising the millage, and if you want to go forward with your request.”

Andrews explained further.

“On July 6 I presented the preliminary tax rolls to the board of supervisors,” he said. “On July 15 they came back and allowed depreciation on $118 million of value that in the past had not been depreciated. They did that nine days after I presented the preliminary roll. That did decrease the value of the mill some. There was a further impact in the reduction in inventory at Airbus and at Stark. Both of those will probably come back next year, Stark just got a new contract. But those are the three major players that contributed to some of this.”

“Mr. Hughes, how much would it take for us to decrease our budget so we wouldn’t have to raise the millage?” asked President Jane Kilgore.

“Before we get there, let me make a recommendation,” Hughes said. “(Andrews) has got some property that could possibly pay some back taxes this coming year. I would leave the budget the same. It’s what you advertised, it’s what you held your public hearing on. It’s the request you adopted. If you want the millage rate to stay the same, they just need to leave it the same. If they pay these back taxes, the request is there, we’re entitled to it, fine. If we get a year down the road and you really do need that money, you could declare a shortfall and more forward.”

“To answer your question, I think it would take $518,000,” Andrews said. “The request was $15,787,975. Last year it was $15,461,011. What Mr. Hughes is talking about is taking that $518,000 out of your fund balance doing it internally. [For more on where these numbers came from, see below. – Ed.] But to answer your question, to reduce your request by $518,000 would reduce your millage back to 46.71. What Mr. Hughes is talking about is taking $518,000 out of the fund balance. That’s one way to do it. You could just reduce your request, but he’s saying down the road it could cause problems.

“They’re having an auction in September at KioR,” Andrews said. “The debt is $12 million. The first $1.5 million goes to the lawyers and the administrator of what’s been going on. The second $1.1 million goes to the in lieu taxes. Those were not budgeted by the county or the county schools. There’s $376,000 in there for you that was not budgeted. So the $518,000 would be reduced by $376,000. You will get that money probably in November. That would leave about $141,402 that would have to come out of fund balance to make ends meet. You also have other projects coming on. We based the bond stuff on projects we knew. We’ve got around a $200 million project at Severstal that they’ve already started.”

“Let me point out one thing,” Billingsley said. “Y’all pass and submit to the board of supervisors what you need the board to provide to you from millage. All the board does is take this number, divide it by the value of a mill, and that’s what the millage rate is. They have to do that by law unless you’re outside a specific threshold, and then it goes to a referendum or something. If you don’t want the millage to change, you’ve got to send us a new order with the corrected amount. All we do is the math. We take $15,461,000 divided by the value of a mill and the answer is what the millage is that the board sets on Sept. 15. The board will raise the millage if this number isn’t correct. You can do whatever you want to in your budget, but the millage is set by what y’all pass and send to the board of supervisors.”

After Billingsley spoke, Andrews went back and explained the $518,000 figure in more depth.

“I want to clarify something,” he said. “On your operations from year to year, your operations last year to this year was down $407,000. Debt was up $734,000. That’s only a $306,000 increase from one year to the next. But on your July 1 letter also, you have a $232,000 (homestead exemption) loss. That’s where the $500,000-and-something figure comes from.”

“On the Severstal Phase IV, are we going to be looking at more fee in lieu revenue?” asked Superintendent Lynn Wright.

“Yes,” Andrews said. “That’s coming up, but not this budget year.”

“They are just now starting the project,” Billingsley said. “That project will not give fee in lieu this budget year. It’ll be October 2016.”

“If we keep our number of mills the same, can we borrow out of fund balance?” Wright asked.

“With that (KioR money) that’s not in the budget, I think you’ll end up being about $142,000 out of your fund balance, or however you want to do it internally,” Andrews said.

“When you calculated the millage rate, did that include the $300,000 from KioR?” Hughes asked.

“No,” Andrews said. “That had nothing to do with it.”

“But if that’s taxes you’re anticipating getting in October, that could be considered ad valorem revenue to calculate this millage rate,” Hughes said.

“Let me answer that question this way,” Andrews said. “Ad valorem money is ad valorem money. It is for operations and debt. I see that as your budget. The way the county, the city and schools handle in lieu money, in lieu money is unencumbered money. You can spend it anywhere you want to spend it. It’s not tied to millage.”

“We don’t set the millage rate, but we try to set is based on the anticipated value of that millage rate,” Wesley Barrett said. “Last year when you came back to the board and asked for $500,000 more, we felt like that was a reasonable thing. The same thing with this budget. From my standpoint, we never submit any increase in taxes until it’s the absolute last resort. We have needs, and I don’t want to do something just to make it look good on paper.”

“Again, let me point out that the board of supervisors sets the millage rate,” Billingsley said. “You say this is the number that we need you to give us this year, and they divide that by the value of a mill, and that’s the millage. If this number stays like it is, you are going to have a millage increase. By law the board has to do that. There’s no choice.”

“If you’re expecting $376,000—” Hughes said.

“That’s fee in lieu money that you’re looking at getting from KioR,” Billingsley said.

“I say no, that’s not ad valorem dollars,” Andrews said. “But I also say that it’s in lieu money, which is unencumbered money and you can put it anywhere you want to.”

“So basically we can vote today to write the county a check for $518,000 and should reasonably expect a check back to us for $300,000-and-some and then we’d be out of fund balance about $141,000,” Barrett said.

“You’re not writing a check,” Billingsley said. “You’re reducing the request.”

“I think what we’ve talked about is if the board would set the mills at 46.71, then the school district wouldn’t complain,” Smith said. “But (Billingsley) is right, they have to do that, and if they don’t they’re liable for a lawsuit.”

“If you fix your submittal so that the request goes down, that’s exactly what the board is going to do,” Billingsley said. “If this request stays the same, it’s going to end up being 47 or 48 or whatever the other number is. They have to fund what you request.”

“Keep in mind that your tax request is all you’re entitled to,” Hughes said. “He can collect $1 million more than what you request, and if you do not request it, you do not get the benefit of it. I very much stress that. If you take a shortfall and come up short, you take a shortfall. If you’ve got excess, then you’re obligated next year to reduce your request by what you got above and beyond your tax request. That’s why I recommend you leave your request the same. There is some discretion in there based on collections. It’s not as simple as saying take the request and divide it by the value of a mill and you’re good to go. It’s not that simple.”

“All this is just an ‘if,’ ” said Jacqueline Gray. “I’m not into ifs. I’m into hard numbers. The bottom line is if we take Mr. Hughes’ recommendation, the millage goes up.”

“It seem like every year we fix a budget before the actual numbers are in,” Barrett said. “It seems like it’s backwards. We are always trying to anticipate what this is, and we get the possibilities and the maybes. We try to keep an honest faith with the public. It just seems like the process is backwards. We submit a budget and then you do the calculations and tell us that it’s going to be higher than what we submitted. We tried our best to make sure it wasn’t higher than it was last year, and then these calculations come in and we look like we’re raising millage.”

“The main problem is that (Lowndes County’s) budget is October to September,” Andrews said. “Y’all’s budget is from July to June 30. That’s state law. Y’all start your budget July 1. (Lowndes County) has tax hearings in July and August. We just had our last tax hearing yesterday. The numbers I give you in July are my best estimates. If the board of supervisors changes something midstream, or something goes out of business, or there’s an inventory reduction of $20 million, it changes very drastically.”

September 15 is the date the millage is set,” Billingsley said. “Although your budget starts on July 1, the millage is not set until September 15. You’ve got some variances.”

“Mr. Hughes, if everything stays the same do you see any problem with us being $141,000 short and pulling from the fund balance?” Barrett asked.

“We can afford the $140,000-something,” Hughes said. “But if you do not request it, he can collect it and send it to us and then we have to reduce our request next year.”

Andrews said that he built some cushion into the value of the mill.

“When I project the value of a mill for the county, the city or the schools I have a $5,000 per mill padding,” he said. “I back off $5,000 off the value of the mill. If your mill is actually worth $300,000, I tell you that’s it’s worth $295,000. I do that because that $5,000 per 46 mills is a padding. I’d rather have too much money next June than not enough. That padding is about $250,000. That padding will cover your $141,000.”

Brian Clark made a motion to take Hughes’ recommendation and leave the millage request alone.

“We need to try to be mindful of the taxpayers dollars,” he said. “When we set the budget, we set the budget on what the operations of the school system are.”

His motion died for lack of a second.

“Up until the last two years when you did the budget, you had in front of you the anticipated number of mills,” Smith said. “Last year and this year we didn’t have that. When you adopted your budget and sent it to the county, you have no idea what your millage was going to be. (Hughes) had nothing to do with it, because he wasn’t here. I suggest in the future you take $332,000 and divide it into your budget and that gives you your number of mills. It’s not rocket science.”

Barrett asked Wright what he recommended.

“I would recommend that we reduce the budget,” he said. “There are some possibilities on other properties that might come in, and there are other variables. The cost of fuel is going down, and we may be able to return some of that to the fund balance.”

Barrett made a motion to “reduce the request to the county by $517,920.” Kilgore seconded the motion.

It failed 2-2, with Barrett and Kilgore voting yes and Clark and Gray voting no. Bobby Barksdale was not present.

The meeting adjourned with no decision being reached. The district has until September 14 to take action.

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