School Levy Discussion

• The School District's informational prospectus on the bond
• The Board of Education's August 2008 press release
• The School District website
• Citizens for Beavercreek Schools website
• Presentation to Beavercreek City Council, 13 October 2008

• The district spent significantly less per student, with a higher proportion spent on direct education and a lower proportion spent on administration, than local and state averages (click here for a table comparing 13 Dayton-area school districts.)
• The district kept total spending below total income with no changes to Beavercreek school tax levies since 2003, even though student enrollment has continually increased.  (Sooner or later, of course, it will be impossible to continue serving a growing population without also increasing income, and an additional operating levy will be required.  Tax laws prevent existing levy income from keeping pace with growth in student enrollment.)
• The district significantly improved its financial credit rating, enabling it to refinance the remaining debt on the 1995 construction bond at a lower interest rate, directly reducing both the short-term and long-term taxpayer costs for that bond.

Income Tax Discussion

My view

• Beavercreek's reliance on property taxes, while we are surrounded by cities that levy income taxes on many Beavercreek residents, in effect subsidizes the operation of those neighboring towns at the expense of Beavercreek citizens.

• Current and reasonably foreseeable city revenues are insufficient to meet requirements.

• Short-term levies are an inefficient means of funding expenses which are primarily long-term.

• The lack of a local income tax reduces the city's ability to attract balanced growth.

• Beavercreek as a city gets the short end of the stick, because our residents pay local income taxes to all the surrounding cities but none of their residents pay local income tax to Beavercreek.  The other cities are getting a good deal, because they collect income taxes from Beavercreek residents and from their own residents who work in Beavercreek.

• Everyone who pays property tax in Beavercreek, either directly or through their rental payments, pays extra to make up for the tax revenue not collected from residents of other cities.

• Beavercreek residents who work in any surrounding city get the worst deal of all, because they pay that city's income tax and Beavercreek's higher property taxes.

• Beavercreek residents who work in town or on Wright-Patterson have been getting a great deal, since they pay no local income tax.  They still have to pay Beavercreek's higher property taxes, but since all the other residents are paying those taxes also, they don't have to pay as much as they save on income tax.  (For the record, I am in this category).

If Beavercreek adopts an income tax, it would eliminate those inequities.  Beavercreek as a city, and taxpayers in general, would be better off.  If you're currently one of the people getting a bad deal, you'd be better off.  If you're currently getting the great deal, you could be worse off.

• If you live in Beavercreek and are retired, work in a city with an income tax, or are in the military, a Beavercreek city income tax would cost you zero additional dollars and lower your property tax bill.
• If you live in Beavercreek and work in town or on Wright-Patterson as a civilian or contractor, a Beavercreek city income tax would cost you 1.5% of your earned income and lower your property tax bill.  Your income tax bill could be higher than the amount you save on property taxes.
  

My questions:

• What would be the actual wording of the tax ordinance?
• How exactly would the dollar value of income taxes collected compare to the dollar value of property taxes reduced?  
• What is the specific procedure by which property taxes would be reduced? 
• How specifically would an individual's earned income be reported, without requiring any reporting of investment income, pensions, Social Security, 401(k) or IRA distributions, or any other exempted category of revenue?
• What specific forms and procedures would be required to file the local earned income tax return?
• For individuals who are already paying local earned income taxes to another community, what would guarantee their ability to have their Beavercreek income tax withholding set to zero, so they wouldn't have to wait for a refund of what should never have been collected in the first place?

Your comments?  E-mail me at comment@beavercreektax.net.

My view:  Local governments, school officials, or any other organization using public funds must demonstrate good management backed by public visibility over budgeting decisions, spending decisions, and assessments of how well the organization provided the expected levels of service.

In most public organizations, just as in most personal households, the vast majority of expenses are required for routine, recurring obligations, and are very constant and predictable.  They're costs of doing business, and aside from the managers' responsibility to minimize costs over the long term, they're largely beyond the control of the organization.

• For example, the city can choose where, when, and how to maintain the streets, but cannot choose whether to maintain them (assuming that voters want the streets to generally be in decent condition year after year).  The school district can choose when to replace textbooks and when to replace school buses, but cannot choose whether to do so.  There is almost always a very predictable life cycle for these kinds of things, with a reasonable and predictable way to optimize the service life of the asset and minimize the life cycle cost, and it usually involves continual routine maintenance and an ongoing, phased replacement schedule.  Public officials should plan for, budget for, and carry out that kind of thing, with full public documentation of the life-cycle cost analyses underlying their plans and budget requests--and the public should require them to do so, and be willing to pay for it.

• Costs of fuel, heating, cooling, water, sewer, trash removal, insurance, and so on are just as large a part of a public organization's budget as they are of your personal budget, and they are just as difficult to control.  Public officials should negotiate with suppliers to the extent allowed by law and market forces, and should include these types of costs in all decisions about long-term capital investments in more-efficient equipment or better-designed facilities.  The public should require them to do so, and understand that in the short term those costs are almost always must-pay bills.

• Costs of labor make up another big chunk of any organization's budget, and again the organization has only partial control over it.  Public officials should limit hiring to only those positions truly required, and should work to keep costs in line with the desired level of performance.  The public should require them to do so, and understand that collective-bargaining agreements, state-mandated student-teacher ratios, market forces, and other external constraints limit the organization's control.

Discretionary expenses usually cost only a small fraction of the total budget, but generate most of the controversy.  Personal household budgets often work the same way:  There's likely not much debate about whether to pay housing, utility, insurance, and grocery bills, which may add up to thousands of dollars every month, but spending the last $50 on a new power tool instead of a nice dinner out might generate some real discussion.

A public organization's periodic budget development and spending reviews should be detailed and accessible to the public.  Reviews should include assessments of how well the organization provided the expected levels of service, and of any external events which caused expenses to be significantly above or below the planned amount.  Financial data should be presented in comparison to planned life-cycle cost benchmarks, and in comparison to appropriate benchmark data from other cities, and in comparison to past Beavercreek data.  For recurring, predictable requirements, as long as satisfactory service is provided within the budgeted cost I would not expect much controversy.  For any discretionary use of public funds, I expect a rigorous internal review and approval process backed by clear and publicly visible accounting.

Your comments?  E-mail me at comment@beavercreektax.net.