Accelify Blog

It’s a Time of Change for School Sales Tax (IA)

July 19, 2010

Polk County school districts have invested millions of dollars from sales tax revenues in the past 10 years to build new schools and renovate and expand dozens of others.

Air conditioning has become standard. More buildings are now equipped with wireless Internet and other technology upgrades. Districts have improved safety features, constructing student drop-off and pickup areas and installing security cameras.

In the past decade, $595.5 million has been raised by the local option sales tax in Polk County, allowing the county’s 16 districts to improve their schools and reduce their debts, lifting some of the burden from property owners. Nearly half of the tax money went to the Des Moines district, Iowa’s largest.

The 10-year tax expired on June 30 and was replaced with a 1 percent statewide sales tax. That change will mean other changes for Iowa’s public school districts.

School officials welcomed the statewide tax when lawmakers approved it in 2008, despite the fact that some districts, such as those in Polk County, will collect significantly less money than the old tax brought in.

That’s because the money is collected statewide and is distributed based on local enrollments, instead being based on the amount of sales tax collected in the local area.

For example, Polk County’s 16 school districts expect to collect about $55 million for the fiscal year that ended June 30. That is about $820 per student, according to figures from the Iowa Department of Revenue.

However, if districts had been under the new statewide sales tax at the beginning of the past fiscal year, they would have only received $757 per student. That is a $4.3 million loss, according to state figures.

The upside for schools is the statewide tax does not expire until 2029, meaning districts do not have to seek voter approval every 10 years to continue collecting the special levy, several school officials said.

The change eliminates uncertainty about future funding, allowing officials to develop long-range plans.

"It has changed the way we are using the sales tax money," said Shelly Clifford, business services director for the Urbandale schools. "We are able to use the money for significant projects. In the past, it was used mainly for smaller remodeling projects in the district."

Some districts issue bonds

Some Des Moines-area districts have issued bonds against the money to get a head start on building projects in an attempt to reduce the effects of inflation on project costs.

For example, Urbandale borrowed money to pay for a $15.5 million renovation project at Urbandale Middle School and a $2.7 million addition at Webster Elementary School.

The district avoided doing so under the local option sales tax, because it used nearly $14 million — or half — of the money it collected to pay off debts. The rest went to pay for smaller improvement projects, Clifford said.

In Des Moines, officials issued $70 million in bonds this spring, allowing it to begin renovations at Howe, Madison, Mitchell, Park Avenue and Wright elementary schools, at North and H oover high schools, and at Meredith Middle School, said Bill Good, the district’s chief operations officer.

Des Moines sets up its priorities

The Des Moines district has a five-year plan and 10-year vision for spending the money it raises through the statewide sales tax. That plan scales back the size of projects compared with their size under the local option tax.

Officials’ first concern will be updating the 35 schools that did not receive any improvements in the first 10 years of the sales tax.

Other priorities include improving safety, security, technology and energy efficiency in buildings, Good said. The district will also continue its push to put air conditioning in all schools.

In the past, Des Moines spent more than $100,000 on new furniture for schools, constructed large multi-purpose rooms and built new playgrounds. Such things are not in the district’s plans for the money generated by the statewide sales tax.

"We are a district with facility needs — significant needs," Good said. "We knew we had to be different in how we did things. You can either impact fewer schools or you don’t do everything. What was decided was let’s get to the basic needs of our students first, and then we can in the future look at the more grandiose type of things."

Des Moines officials also will cut costs by not renewing its contract with its construction management firm and, instead, moved those jobs in-house. The district paid Taylor Ohde Kitchell $19 million over 10 years to manage its building projects. Good says his goal is to save about $4.8 million by ending the contract next year.

Des Moines is endin g its practice of moving students to other sites during renovations, which cost $9 million, Good said.

The money from those cost-savings will be funneled back into building projects.

"Our approach now is that it’s about need," Good said.

Brian Millard, chairman of the Des Moines sales tax oversight committee, said: "I have visited site after site, and I am impressed that we were able to do what we have done to date with the limited amount of money that we had. We are on track to finish every school that was in our plan."
Valley addition in works for West Des Moines

In the West Des Moines district, local option sales tax money touched every school, except Walnut Creek Campus, which houses the alternative high school. District officials plan to address that building next year with money from the statewide tax.

Improvements to schools have included significant additions and renovations to schools like Valley High School and Clive Elementary School. A new stadium was built and Clegg Park and Rex Mathes elementary schools were merged into Hillside Elementary School. Schools also received technology upgrades with the nearly $79.9 million the district collected from the sales tax.

Its 10-year plan for the statewide tax includes a two-story addition to Valley, as well as a new auditorium and fine arts area.

Some elementary schools will be renovated and expanded and will get computer labs and improved technology. Fire alarm systems, new roofs and mechanical upgrades are planned, too.

Other districts: Ankeny, Johnston

The Ankeny school district received $60.3 million from the local sales tax. The money paid for building Crocker Elementary School and renovations or additions at other schools and athletic facilities. The district also used the revenue to buy land and pay down the district’s debt.

Ankeny officials estimate the new statewide sales tax will generate $197.6 million over 20 years, with the ability to borrow $60 million against the projected revenue. That money will be used to build Ankeny Centennial High School, which is expected to open in August 2013.

The district’s new Ankeny High School, which opens in August 2011 in the Prairie Trail development, is being built with proceeds from a 2007 bond referendum.

Approximately $43.8 million came to Johnston from the local option sales tax and went toward a new elementary and middle school and to offset the property tax obligations from $36.5 million in bonds issued to build yet another elementary school, buy land and renovate and expand school buildings.

The sales tax "is a tremendous savings to our property taxpayers in the long run," Superintendent Clay Guthmiller said.

About $88 million is projected to reach Johnston from the statewide sales tax. The district is studying how to use the money.