Heartland School District to hold tax levy override special election

HENDERSON – The Heartland School District will be holding a tax levy override special election on Aug. 15, regarding the earlier-approved district’s expansion project.

This will be an all-mail special election.

The ballots will be mailed out, by the York County Election office, between July 24 and Aug. 4. Completed ballots may be returned by mail or hand-delivered to the York County courthouse. They must be returned by 5 p.m., on the special election day, which is a Tuesday.

According to the Heartland School District, on June 21, school board approved a resolution for the special election “for the purpose of seeking voter approval to exceed its state-certified tax request authority in the amount of $1.83 million. This additional tax request authority amount will be used to ensure the completion of the facility improvements the district and community initiated in 2021.”

The $1.83 million is over the current certified tax authority amount of $3.99 million.

New state legislation created this situation, when on May 25, the Nebraska Legislature passed LB 243, which created new limits to the tax request authority for the general fund and the special building fund in every school district. The legislature then passed LB 737 on June 1, which amended LB 243, making it immediately effective for the 2023-24 fiscal year. “As a result, the district no longer has the tax request authority to finance the previously-approved facility improvements,” the district says in a statement on the school’s website.

“The district is taking this step so it can satisfactorily complete the facility improvements project initially approved through a successful bond election in May of 2022,” the statement says further.

The majority of Heartland District voters approved the bond issue in 2022 for the following improvements: main entrance and office expansion with safety renovations; a 4-classroom elementary addition; childcare facility; agriculture/industrial technology shop connection to the main building; an activity entrance renovation; a weight room addition; locker room addition; work in the north gym with air conditioning and bleacher improvements; fire sprinklers; an updated fire detection system and control; and an upgraded electrical capacity, power distribution systems and infrastructure.

Further, the school district explains the following: “The tax request authority certified to the Heartland Community Schools for the 2023-24 budget year is $3,990,760. This represents an initial limit for the combined tax requests for both the district’s general fund and special building fund. For the upcoming budget year, the district needs a tax request authority of up to $5,821,786 combined between the two funds to finance the plans the board and the district have committed to. The difference between the two amounts — $1.8 million – is the additional tax request authority voters will be asked to approve.”

Passage of the tax request authority proposition requires 60% of the voters’ approval – not just a simple majority.

If the authority is approved, the expansion/renovation project will proceed as previously planned.

Heartland Superintendent Jeremy Klein provided the following questions/answers in an effort to clarify the information:

Q: There is a lot of confusing news out there right now involving a lot of different school-related legislation from this past year. What is LB 243? 

A: LB 243 (the School District Property Tax Limitation Act) is a new law that was passed on May 25, 2023  during this most recent session of the Nebraska Unicameral. LB 243 was also then later amended via  passage of LB 727 on June 1, 2023.

LB 243 is ultimately a revenue cap for all school districts that is applied to their General and Special  Building Funds. The legislation also then caps the additional amount of revenue that can be generated in  those funds each succeeding year. Through its mechanics, the legislation ultimately results in a new lid on  the amount of property taxes that a local school board can ask for each year in their General and Special  Building Funds.

LB243 is not the same as the $1.05 levy lid. LB 243 is a new lid that is separate from, and in addition to,  the pre-existing $1.05 levy lid.

Q: Is this the same as a levy override election? 

A: No. A levy override election takes place when a school district seeks voter approval to exceed the $1.05  levy limit. This election is asking the voters of the Heartland Community School district to approve a tax  request authority higher than what the calculations of newly enacted LB 243 provide for.

The taxing funds utilized by Heartland Community Schools that are included in the $1.05 levy limitation are  the General Fund and the Special Building Fund. If the proposed tax request authority increase is approved  by the voters in August, the combined levy for the General Fund and Special Fund is estimated to be  approximately 69.1 cents for the coming 23-24 budget year.

Q: I am confused about why this is necessary to complete the construction project(s). Didn’t the bond  election in May 2022 take care of funding the proposed construction? 

A: The bond election in May 2022 provided approximately $7 Million in construction funding. Cost increases  and the addition of required aspects of the project during the design phase (fire suppression, electrical  upgrade, etc.) pushed the cost of the comprehensive project past the funding provided by the bond election.

Altogether, we expect construction costs, direct-owner costs, and soft costs to total approximately $12.5  Million. In March 2023, the Board of Education secured an additional $5.5 Million in short-term financing to  supplement the $7 Million from the bond election in order to complete the proposed project in its entirety.

The additional $5.5 Million in financing was secured through a common, public financing mechanism called  lease-purchase financing. Lease-purchase financing is paid back over a 7-year period through the Special  Building Fund – bond financing is paid back over a 20-year period through the Bond Fund.

Q: How much of the proposed construction project(s) could be completed without the voters approving the  proposed tax request authority in this upcoming election?  

A: Approximately 50% or less of the proposed project could be completed if the proposed tax request authority  is not approved by the voters in the upcoming election.

In March 2023 the Board decided to pursue additional financing for the purpose of fully completing the  proposed construction projects as originally intended. What were some of the factors that were  considered back in March 2023 that made lease-purchase borrowing more advantageous than pursuing  another bond issuance? 

1) Securing the additional funding through a lease-purchase borrowing was determined to be the most  time-efficient and cost-effective path forward.

2) The Board of Education determined that it would be able to save months of valuable time by exercising  its legal authority to secure this financing in a timely manner through a lease-purchase borrowing. With  the original timeline already being disrupted, it was determined that expediting the process was likely in  the best interests of the district and our taxpayers.

  1. a) Pursuing a bond issuance would have required additional time due to the statutory requirement of  holding an election.
  2. b) Months of additional work related to architectural revisions would have been put on hold until after  the election had been held.

3) Interest-rate risk. It was determined that with interest rates continuing to rise, being able to lock in rates  before their rose any higher was determined to be the most financially responsible path forward.

4) Property Tax Credit eligibility. Lease-purchase borrowings are repaid through the Special Building Fund  while bonded debt is repaid through the Bond Fund. It was determined that repaying the borrowing  through the Special Building Fund would be more advantageous to our taxpayers since property taxes  paid toward the Special Building Fund levy are eligible for the state property tax credit – property taxes  paid toward the Bond Fund levy are not eligible for the state property tax credit.

Q: Because the results of this tax request authority election directly affect the construction project, why  not pursue a bond / bond election instead of a tax request authority election specific to LB243? 

A: 1) This was briefly considered, however, it was determined that continuing to move forward with repayment  of the lease-purchase financing that has already been secured is the most time-efficient and cost effective path forward.

2) The district already has additional construction financing in-hand through utilization of a 7-year lease purchasing borrowing initiated by our Board of Education in March 2023. The increase required for the  Special Building Fund that is proposed in the upcoming tax request authority election is what is required  to begin our repayment of that borrowing.

3) While a bond issuance could be done at this point as part of re-structuring/re-finance of the financing  that has already been secured, there are several reasons why that is not the preferred route to pursue. a) Dollars borrowed from an additional bond issuance, at this point in time, would be borrowed at an  interest rate higher than what was secured for our lease-purchase borrowing.

  1. b) A bond issuance would result in another 20-year debt liability. It was determined that being able to  discharge the debt repayment over the shorter, 7-year term better aligned with both our short-term  and our long-term financial goals.
  2. c) A new bond issuance, at this point in time, would incur additional, redundant fees such as  underwriter’s costs, attorney’s fees, etc.
  3. d) The tax request authority election will improve the Board’s long-term control over its management of  General Fund, as well. This benefit is not derived from a bond election.

Q: Aside from helping to fund the completion of the construction project(s), does the tax request authority  proposal provide any additional benefits to the district? 

A: Yes. It provides greater decision-making flexibility and financial security for the district into the future – well  beyond just the next few years.

The mechanisms of LB 243 provide a very broad set of limitations to each of Nebraska’s school districts.  These broad limitations will likely fail to account for the unique or nuanced needs of all of Nebraska’s school  districts – districts that range from very large to very small, and from urban to rural. Each district, including  Heartland Community Schools, will experience the transition into the LB 243 limitation process differently,  with different needs, and with different priorities.

A unique aspect of school finance is the concept of annual authority – this concept of annual authority  ultimately boils down to dollar limits (both in budgeting and in making tax requests). Very simply, this annual  authority is essentially the room or capacity that a board of education has to be flexible in its decision making based upon local circumstances, local goals, or local priorities. Because LB 243 combines both the  General and Special Building Funds in its formulation and in its year-to-year limitations, local school districts  and their boards of education are likely to experience a shrinking in their flexibility to make responsible  decisions at the local level in the best interests of their students, their schools, and their communities.  Without adjustment, this lack of flexibility will potentially grow over time and will ultimately stretch across  both the General Fund (used for general operations, programs, instruction, etc.) and the Special Building  Fund (used for cost effective capital investments). That lack of flexibility is likely to hit schools that are the  size of Heartland in a profound way, because the numbers are ultimately smaller and lack a certain margin  of safety due to economies of scale.

For Heartland Community Schools, approval of the tax request authority proposition will add a greater  degree of flexibility and increase the level of control that is exercised locally over time because of the  additional authority (capacity) that will be available to our Board and our district when needed in future  years.

The Board ultimately determined that this authority (capacity) was going to be vital to our district both now  and in the future – this determination by the Board supported their decision to move forward with a tax  request authority election.






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