Fund Board debates reserves as sales tax renewal vote looms
February 17, 2008
Steamboat Springs — Education Fund Board members are questioning how to best manage the fund’s reserves in light of the possibility that voters reject an extension of the city’s half-cent sales tax for education in November.
Because the sales tax is dependent on approval by Steamboat Springs voters – approval occurred in 1993, 1996 and 1999, and will be on the ballot this year – the Fund Board traditionally has kept a large reserve in case the sales tax is rejected and its revenues disappear.
But some board members advise spending more of the reserves, citing a concern that large reserves send a message to the public that the Fund Board has deep pockets. All board members agree that a plan must be crafted to gradually administer remaining funds if the sales tax expires Dec. 31, 2009.
Board member Denise Connelly, who also is a Steamboat Springs School Board member, said she is hopeful, but not confident, voters will extend the sales tax.
“I’m cautious and I’m fearful what that will mean to our community if it doesn’t pass,” she said. “I don’t take it for granted – it just means too much to our district.”
The half-cent sales tax revenue distributed in 2007 to the Steamboat Springs School District increased from $1.9 million to $2.9 million, or 47 percent, since voters renewed the tax in 1999. In 1993, when voters first approved the tax, $1.1 million in sales tax revenues were gifted to the school district.
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“In the beginning, $1.1 million was enough to cover pretty much everything we thought we could cover,” said board member Kristi Brown. “Now, in 2008, we don’t have enough money to fund everything requested.”
School district administrators asked the Fund Board in December for $4.4 million in contributions next year, seeking money to support small class sizes, improved security and computer equipment, and completion of delayed construction at Steamboat Springs Middle School.
Through the years, the tax revenues have allowed the district to purchase computers, offer an elementary Spanish program and hire a director of curriculum and instruction, among many other programs, upgrades and staffing needs.
“Capital expenditure costs far more than it did in even 2001,” Brown said. “It’s not keeping up with the needs of the district. What I find more amazing than the increase in the fund is the increase in the need.”
Planning for expiration
The Fund Board’s projected 2008 revenues are about $3.1 million, well short of the $4.4 million requested by the school district, according to former city councilman Paul Strong, the Fund Board’s accountant.
Strong said if all of the $4.4 million is granted, eating into the Fund Board’s reserves, those reserves would then stand at just more than $1.3 million. The board traditionally has reserved a full year of sales tax revenues.
“I don’t see this as a financial issue as much as a political issue,” Strong said. “If I was a school district person, I’d push for higher reserves so you have the money to wean yourself off this in case it doesn’t pass.”
Connelly noted there is no easy way to wean the district off of cash revenues that pay the salaries of 16 teachers and much of the district’s technology department.
Board member Michael Loomis said he would like to build up reserves to help teachers likely to be cut if the sales tax money transitions out of the school district.
“I would say that, in the past, I’ve been in favor of keeping a lower reserve of what we normally have, but in this point in time, with the sunset two years away, we should be conservative and build at least one year’s budget worth of reserve,” he said. “I would not want to see people drop off suddenly. I would like to see a soft landing, so to speak.”
But Loomis also is optimistic the sales tax will be renewed.
“If people understand the amount of salaries and benefits that comes out of that for small class sizes, teachers, and pretty much the entire tech staff – and that those people would go away or be funded by the district – then I think they will vote for it,” he said.
Board member Jim Kurowksi said he is less concerned about building reserves than planning the budget through the end of 2009.
“We need to focus on finishing the projects we have and funding those projects so they are not undercut by shortages and we don’t get the full benefit of them,” he said. “There are technology programs, the curriculum programs and lots of money now going into capital.”
Last year, board members debated whether to include the sales tax renewal on the November 2007 ballot. According to a survey conducted of potential voters, released in May 2007, there was not enough public support needed to pass the initiative.
The poll by Texas-based Hill Research Consultants determined that because of the negative public perception of the school district, which was indicated in the survey, waiting until 2008 seemed a good decision for a successful sales tax renewal.
But escalating property tax revenues have many board members worried that a new concern could emerge among voters and derail a renewal.
“I think that everybody is tax weary right now,” Brown said. “Do we play it safe and keep reserves high and alienate voters who are already upset with paying so much in taxes, or do we throw the dice and spend it down while crossing our fingers it passes?”
In an effort to promote the benefits of the sales tax to the district, the Fund Board has hired Peggy Gonder, of Denver-based public relations firm Gonder and Associates, for $36,000 to assist in promoting the sales tax.
To come to some sort of decision about what to do with Fund Board reserves, Connelly advised Fund Board President Tom Ptach to include a “philosophy talk” at the board’s March 5 meeting.
“We have so many people on both sides of the issue,” she said. “Whichever it is, building it up or spending it down, and there are pros and cons for doing either one, we need to be clear on both sides of the argument and let the public know that’s why we are doing whatever we are doing.”