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Interest rate pause could save Lakewood taxpayers nearly $4 million

By Charles Prince

(Editor’s Note 4/23/19: This story has been corrected and updated after a reader pointed out that Northridge Local SD does NOT have a school district income tax.  Lakewood’s financial consultant David Conley explained that he got his tax data from the Ohio Municipal Council that showed the district with a one percent income tax. When he checked with the Ohio Department of Taxation, he confirmed the error.  The net effect means Lakewood currently has the second lowest school district tax burden in Licking County and Northridge has the lowest tax burden in the county.  If voters approve the proposed Lakewood bond issue, Lakewood would still have the third lowest school district tax burden in Licking County.  Both charts included in the original story have been replaced. 

HEBRON – Lakewood’s financial consultant had some good news for school board members at their April 10 meeting.

David Conley, president of Rockmill Financial Consulting, LLC, said interest rates have declined 0.48% since last November’s election which would save almost $4 million in taxes needed to repay the $39.8 million in bonds for the new K-5 school and some critical repairs at the middle school over the next 28 years. “I would run like heck to get these bonds sold,” Conley told board members. Of course, first voters would have to approve the bond issue that they rejected by a 3483 to 2454 vote in November.

The estimated bond interest rate if voters had approved the issue in November was 4.5 percent that set a tentative tax rate of 5.1 mills. The rate turned out to be 4.36 percent according to Conley. The estimated interest rate early this year based on voter approval in May was 5.25 percent. Interest rates were increasing at year-end due to the Federal Reserve Bank’s decision to increase them throughout 2019. As rates increased, stock prices fell significantly in December, creating fears that the economy would slow too quickly. The Fed’s decision early this year to pause interest rate hikes and moderate future increases accounts for nearly 0.05% decline.

“We’re now $4 million better than we were in November,” Conley explained. “Interest rates have unexpectantly gone down and we don’t know how long they will stay down…If we get this done while the rates are down, the tax rate will be less than the 5.4 mills on the ballot.” The tax rate (millage) on the November ballot was 5.1 mills. If the current interest rate stays level into May, Conley believe the tax rate could be “five mills or maybe slightly less than five.”

The tax rate is set after voters approve the bond issue and the bond underwriter sets the rate required to sell the bonds.

Conley also had some good news on construction cost increases. Late last year, school construction costs were expected to be 11 to 15 percent higher in 2019 than 2018. Now that estimate has dropped to about seven percent which had already been built into the architect’s estimate. That reprieve will likely be lost if voters reject the bond issue again in May. Even if voters would approve the bond issue at a special election in August, construction would have been pushed back a year from the original plans.

Conley’s report is called a Community Status Review. The numbers there were good news too. Currently, Lakewood is making $900,000 annual payments to retire the bonds that financed the construction of the high school. Those bonds will be paid off after 2026 and the current 1.70 mill tax will no longer be collected after 2026.

Conley also used the U.S. Census Bureau’s American Community Survey to update Lakewood’s community demographics. The data for 2017 was released about two months ago. He compared 2017 with 2010. The factors included:

Demographic                     2010                 2017        % Change

Median Family Income  $57,234             $67,679          18.25%

Median Home Value       $140,000          $152,500          8.93%

Housing Units w/mortgage  68.10%            68.40%         0.44%

% Bachelor degree or higher 14.40%            16.60%            15.28%

% Poverty                                    12.00%            8.90%           -25.83%

Renter Occupied Housing       25.60%            22.40%           -12.50%

Number of Families                  3,943               4,050                 2.71%

Average Family Size                  2.88                 3.03                   5.21%

Total Population                      13,664               14,665                7.33%

Conley said all the trends are positive even the modest increase in housing units with mortgages. He explained that a decline in the percent of mortgages indicates an aging community that isn’t attracting younger families. The large increase in the median family income means the area has recovered from the so-called Great Recession. The increase in incomes also significantly reduced the percent considered living in poverty. “We have some encouraging trends that are beginning to emerge in the community,” Conley concluded.

His review also accessed Lakewood’ financial condition compared to the other nine school districts in Licking County. His measurement is the balance in a district’s general fund at the end of fiscal year 2018 compared to the district’s expenditures in 2018. Johnstown-Monroe lead the list with a balance covering 87.26% of its expenses. Lakewood was second at 68.99%, followed by Northridge – 53.56%; Heath City – 53.02%; Newark City – 48.57%; Licking Valley – 48.23%; North Fork – 43.84%; Southwest Licking – 38.12%; Licking Heights – 21.37%; Granville – 13.89%. Conley told board members, “You have been operating this district very conservatively.” He explained that Lakewood needs higher carryover balances in part because it is one of the three Licking County districts without an income tax. The other districts are Heath and Licking Heights. Conley said two Lakewood levies account for $6 million a year of the $25.6 million the district spent in 2018. Higher carryover balances are needed to account for the risk that a levy isn’t renewed, Conley said.

He also calculated the district tax burden for the 10 Licking County districts. Lakewood’s numbers were based on a median home value of $152,500 and median family income of $67,679. Lakewood’s total cost is $1,834.87 per family and is the second lowest in Licking County. Six districts were under $2,000 per family beginning with Northridge, then Lakewood, North Fork, Newark City, Licking Valley and Heath. Two more were between $2,000 and $3,000 per family starting with Licking Heights and then Johnstown-Monroe. Southwest Licking was $3,009 with Granville the most expensive at $5,655.

Lakewood’s tax burden is also the second lowest in the county as a percentage of income at 2.711%. Northridge is the lowest at 2.048% and North Fork at 2.936% is the only other district below three percent. Six other districts ranged from 3.143% to 3.695%. Granville’s burden at 4.959% was the highest.

Conley then calculated the impact should voters approve the bond issue. Lakewood’s average property tax would increase from $1,835 to $2,123, moving the district from being the second lowest in the county to the third lowest. Lakewood’s tax burden as a percentage of income would also move from the second lowest in the county (2.711%) to the third lowest at 3.137%.

Conley’s review also found that Lakewood’s businesses will pay nearly a third (31%) of the property taxes needed to repay the new bond issue.

In other business, April 10, Jason Campbell, a Class of 1986 Lakewood graduate, presented an original Mac Worthington metal sculpture to the high school. Campbell said he hoped the sculpture entitled “Together” would inspire

. students and others as it has at his firm for the last 10 years.

Board members were thanked by Hebron Elementary principal, Nikki Henry, teachers and reading specialists and some young students for the district’s recent purchase of reading books. The new books have made implementing the Reader’s Workshop program possible. The new program allows students to read for extended periods of time.

In her report, Superintendent Mary Kay Andrews said both community forums about the proposed bond issue were well attended. She said all the questions raised during the both forums have been answered and available on-line at www.lakewoodlocal.k12.oh.us/Facilities.aspx – under “Facilities” on the district’s website top menu bar, then select “Facilities Improvements.”

Board members also unanimously approved the employment of three new teachers for the 2019-20 school year: high school science teacher, Daniel Ornstein; Hebron/Jackson intervention specialist, Haley Chamberlain; and Jackson intervention specialist, Mary Guliano.

Two volunteer coaches were approved for this school year: Diana (Kelli) Cramer as varsity girls track assistant coach and Christopher Lothes as varsity baseball assistant coach.

Non-coaching supplemental contracts for the 2019-20 school year were approved for: Julia Raymond, middle school guidance counselor; Derek Shell, middle school band director; Ryan Grubb, middle school vocal music/chorus director; Martha Fickle, middle school drama director; Pamela Hundley and Michelle Vayanski, sharing the middle school student council advisor position; Jeanine Fairburn and Katie Brehmer, sharing the middle school yearbook position; Zachery Brenning as middle school spelling bee advisor and middle school geography/history bee advisor; Pamela Hundley and Lisa Hawthorn, sharing the middle school STEM Club advisor position; Pamela Hundley, as middle school Future City advisor; Jeanine Fairburn, as middle school honor society advisor; Laura Nice, as high schools student council advisor; Laura Nice and Valerie Kieffer, sharing the position of senior class advisor; Sharon Smith, as high school National Honor Society advisor; Mark Vukovic, as high school Quiz Bowl advisor; Lindsey Fawcett, Candace Haudenschild and Ryan Bergeman, sharing the position as high school STEM Club advisor; Martha Fickle, as high school play director fall and spring; Janessa Castle, as high school yearbook advisor; Ryan Grubb, high school vocal music/chorus; Janessa Castle, as high school athletic program manager; Brittany Baker and Michelle Duncan, as junior class advisors; Deborah Coffey and Erin Wolford, as high school auxiliary drama; Terri McKenzie, as high school FCCLA advisor; Lauren Domenick, as high school band director; Derek Shell, as assistant high school band director; and Phil Sikorski and Valerie Kieffer, as high school guidance counselors.

Board members also approved the job description for a new position as high school study hall monitor. The 189-day per year position will free teachers from study hall duty.

The board’s next regular meeting has been pushed back two weeks later to 6:30 p.m. on Wednesday, May 22, at the high school library.

Lakewood’s school district tax burden is the second lowest in Licking County. Courtesy Rockmill Financial Consulting LLC.

If Lakewood voters approve the proposed bond issue for a new K-5 school and critical repairs at the middle school, district taxpayers will have the third lowest school district tax burden in Licking County. Courtesy Rockmill Financial Consulting LLC.

 

One response to “Interest rate pause could save Lakewood taxpayers nearly $4 million”

  1. Jessica Corum says:

    Great article! Thanks.

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