116 3rd St SE
Cedar Rapids, Iowa 52401
CEDAR RAPIDS — The Cedar Rapids Community School District would be required to post a 10 percent down payment on its planned $312 million general bond referendum — $31.2 million — this fall under a proposal from Republican leaders in the Iowa House.
Under House File 1, any school district in Iowa would be required to deposit at least 10 percent of the total cost of the project for which the bonds are to be issued. If the referendum is approved by voters, those funds would have to be used for the project.
Such a requirement would not be possible for the Cedar Rapids district, said Karla Hogan, executive director of business services for the district. Instead, the district would be forced to piecemeal the projects, possibly taking smaller bond referendums to voters every two years.
“That’s really difficult because one part of the plan impacts the other,” she said. The 10-year facilities plan proposed by the district is more “fiscally responsible,” she said.
Reducing property taxes
Rep. Bobby Kaufmann, a Republican from Wilton who leads the Iowa House’s committee on tax policy, said the goal of the legislation is to start a conversation on ways to reduce property taxes. The proposal is co-sponsored by Iowa Speaker of the House Pat Grassley.
Kaufmann said the proposals are not set in stone, but that any school or local government leaders who have concerns should come to him with alternative proposals.
That includes the 10 percent payment requirement for bonding, Kaufmann said.
“When it comes to some bonding referendums, there have been some bad actors — certainly not all, by any stretch, but there certainly have been some bad actors in terms of not necessarily financing within their means,” Kaufmann said. “However, establishing a baseline for how everybody should operate on financing is important. …
“The goal is certainly not to eliminate (bonding). The goal is to make sure that it’s practical and fiscally responsible, which a lot of schools and cities are already there,” Kaufmann added. “But this is the conversation starter to say, ‘Hey, we’re going to have all the rules for everybody laid out so there can’t be any bad actors. And the overall goal is to reduce property tax burdens.”
Iowa Sen. Dan Dawson, a Republican from Council Bluffs who leads the Senate’s tax policy committee, said he is happy that House Republicans have proposed something that creates a debate around property tax laws, but he fell short of endorsing the plan.
Dawson said Senate Republicans will be proposing their own property tax legislation, and that it will take a different approach than House Republicans’ proposal.
“What I really appreciate in the House bill is that we’re all talking about big ideas,” Dawson said. “We’re going to take a different track, but at least we’re talking about bigger ideas of how to reform the system.”
Iowa educators opposed
Organizations that represent Iowa’s school boards and school administrators oppose the bill and, specifically, the portion that adds the down payment requirement starting July 1. The bill also includes an extensive notification process to voters of an upcoming bond referendum.
The School Administrators of Iowa opposes the bill because of what it calls the “burdensome expectations it puts on school districts,” Executive Director Lisa Remy said. The Iowa Association of School Boards says the proposal would limit the ability for a school district to seek an election to issue bonds.
“It is likely that districts will not have the ability to designate and deposit 10 percent in their current funds to be set aside to be used solely for the project,” said Shawn Snyder, the school board organization’s finance expert. “The reason to hold a bond election is to get approval from the voters to pay for the specific proposals.”
Funds schools could consider using for the 10 percent down payment include the Physical Plant and Equipment Levy (PPEL), an annual property tax levy that can be used to maintain school buildings, complete site improvements and purchase school equipment. And Secure an Advanced Vision for Education (SAVE) is a sales tax for school infrastructure.
But Cedar Rapids schools interim Superintendent Art Sathoff said “no school” can budget for a new elementary or high school with just SAVE or PPEL. Bond referendums are necessary to continue making improvements to Iowa schools, he said.
Another way districts could fund these projects is “wealthy donors,” Sathoff said. “If you’re in line for a $300 million inheritance, we’d let you share it with us,” he joked.
Why use bonds?
In Iowa, school bond issues — basically loans that schools take out typically for 10, 15 or 20 years — require a supermajority of 60 percent of voters in the district to pass. In passing them, voters agree to repay the loan, with interest, through their property taxes.
Marion Independent School District Superintendent Janelle Brouwer said Iowa schools would “never” be able to take a school bond referendum large enough to “maintain adequate facilities” under the proposal.
“The reality is we would never be able to bond the amount necessary,” she said.
Marion Independent voters approved a $31 million bond issue last March, enabling the district to move forward on a facilities plan that includes building an elementary school, auditorium and outdoor activities complex at Marion High School and making repairs to other district buildings. The measure passed with 84.6 percent of the vote.
“Given a district is expected to spend about 100 percent of the general fund annually … we would not ever have the capacity through (the Physical Plant and Equipment Levy) and (Secure an Advanced Vision for Education) to go for a $30 million plus general obligation bond,” Brouwer said.
The Cedar Rapids school district is proposing a $312 million bond referendum — possibly being taken to voters in September — to fund 10 years of improvements to its middle and high schools.
The district is using SAVE money to fund improvements to its elementary schools. A 2018 facilities master plan includes building 10 elementary schools and renovating three over the next 15 to 20 years in the Cedar Rapids district. This process included the closure and repurposing of eight schools.
Mount Vernon schools Superintendent Greg Batenhorst said the proposed legislation is “another barrier to districts and communities to get the work done that they feel is needed to run a district effectively. … This is just another sign of a lack of trust I just do not understand.”
For a 1,400-student school district like Mount Vernon, 10 percent down on a $15 million — which would be $1.5 million — is a “tall task,” Batenhorst said.
“Where does this down payment come from? I don’t understand what problem this legislation is trying to solve,” Batenhorst said.
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