South Routt School District readies for financial worst

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At a glance

■ Proposition 101 would reduce taxes and fees, mostly vehicle taxes — called specific ownership taxes — that help fund school districts.

■ Amendment 60 would force school districts to slash their mill levies in half by 2020 and repeal voter-approved tax increases, such as mill levy overrides.

■ Amendment 61 would require local governments to get voter approval to borrow and to repay debt in 10 years. The amendment also prohibits the state from borrowing.

— The South Routt School District is preparing for a challenge and bracing for something worse.

With Amendment 61 looming at the November polls, the Colorado State Treasurer’s Of­­fice temporarily has suspended the interest-free loan program for schools, Colorado Treasurer Cary Kennedy said last week.

“We’re presented with a challenging circumstance right now where we’re going into the academic school year and we don’t know what the outcome of Amendment 61 will be when presented to the voters,” she said.

The interest-free program allows districts, such as South Routt and Hayden, to borrow interest-free until their property tax revenue is remitted in the spring. South Routt has said it wouldn’t be able to pay its bills without the loan.

Amendment 61 would prohibit the state from borrowing and incurring debt. It would require that local governments seek voter approval to borrow and would require them to repay loans within 10 years.

If it passes, the interest-free loan program will be eliminated — forcing districts such as South Routt to find alternative means of funding to manage cash flow.

Voters also will consider Amendment 60, which would impose stricter limits on property taxes and require school districts to cut their mill levies in half by 2020. They also will consider Proposition 101, which would reduce taxes and fees, mostly vehicle fees called specific ownership taxes, which help fund school districts.

Should Amendment 61 fail, districts that rely on the interest-free loan program will begin receiving payments after the election in November.

At the July 22 South Routt School Board meeting, Finance Director Dina Murray said the district has taken steps to pay the bills until November, a month after it usually receives its first payment — if Amendment 61 fails.

She said the district had spread out its workers compensation insurance payments throughout the nine-month school year instead of paying one lump sum. Murray said the district also has not released its annual payment to the Northwest Colorado Board of Cooperative Educational Services, which provides special education services to six districts, including South Routt.

But with BOCES’ own cash flow issues last school year, Murray said she didn’t know whether the cooperative would allow South Routt to defer payments.

She said South Routt also has talked to the county about the possibility of receiving property tax revenue before March, May and June, when payments come in. But Murray said the idea wasn’t well-received.

Murray said the district requests $2 million to $2.2 million annually to pay bills, about 70 percent of which are staff salaries and benefits.

“We’re exploring what options we have, cutting back spending and spreading out payments, at least for the early months,” she said last week.

“Right now, we’re looking at our options and trying to identify as many as we can.”

Supporters of the measures at Colorado Tax Reforms referred questions about Amendments 60 and 61 and Proposition 101 to their website, www.cotax reforms.com.

Kennedy said House Bill 1013, which Gov. Bill Ritter signed into law in June, would allow the Colorado Department of Education to provide state equalization payments — the per-pupil funding for school districts that isn’t generated by local property taxes — to the districts in the fall. She said the accelerated payments would help districts that annually participate in the interest-free loan program — 14 districts received funds last year — pay their bills.

It will help Hayden, which expects to receive about $1.2 million in state equalization payments in 2010-11.

Hayden Finance Director Jnl Linsacum said the possibility of Amendment 61 passing is less of an issue for the district than it is for others. She said if the district couldn’t borrow, the equalization likely would allow Hayden to pay its bills until it receives the majority of its property taxes in May.

“If it does pass, and we aren’t able to borrow interest free, I think we’re fine up to $1.2 million in state equalization,” Lin­­sacum said, but added, “if we need more than that, we’ll have to find another way to borrow that money.”

HB 1013 won’t help South Routt, which expects to receive only about $30,000 in equalization payments next school year.

“South Routt is a unique circumstance,” Kennedy said. “I think we only have a couple districts in the state that still have cash flow concerns even with the acceleration of equalization payments. We are working here and working with the CDE for solutions for them to address their cash flow through Nov. 2. If after that, if Amendment 61 fails, we will be able to advance interest-free cash loans to districts as we always have.”

Kennedy said Senate Bill 205, also signed into law in June, would allow districts to propose a bond issue to local voters in which revenue would be placed in cash-flow reserve.

Because South Routt will ask voters to consider a mill levy override, Murray said it couldn’t do both. If approved, the override will generate an estimated $349,317. It would help, but not solve, the district’s cash-flow problem.

“We’re all working together to explore what options are available to districts and what ones are available to us specifically,” she said.

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