"They say we offer simple answers to complex problems. Well, perhaps there is a simple answer--not an easy answer--but simple.” Those were the words of Ronald Reagan on the topic of fiscal conservatism, all the way back in 1964. Those words ring true even in this town.
Osage High School is currently considering a $9.9 million dollar municipal bond and the increase in property taxes from that bond has been estimated to increase by $1.80 per each $1000 in property value. The bond tax implication calculates itself as a $200-$400 tax increase for most homeowners, and from a financial and economic standpoint, I advise all citizens to block this referendum at the voting booth. A comprehensive financial analysis follows.
It is logical to assume that with school modernization, ceteris paribus, business revenue in Osage would increase. It is clear school updates could provide for a profitable business opportunity. New additions, such as a new preschool, are assumed to attract citizens to Osage, especially those who work in numerous factory jobs in Osage.
Iowa is also very centered on high school athletics, and the new opportunities to host school athletics and events will positively impact our local economy.
Nevertheless, the taxation that is imposed on our citizens is a negative effect which will presumably never allow the bond to pass. Considering there are many farmers in and around Osage, including eleven farming property transfers in 2016 which ranged from $300,000 to $1.2 million, I understand the wariness and reluctancy of supporting this objective. Farmer’s lands are currently taxed at $25 an acre; this bond plan would account for an increase in approximately $2,000-3,000 in tax for our farmers, assuming most farmers own 600-1,000 acres. By supporting this plan, the local farmers are strained with funding the project. Solely based on the taxation solution and funding plan that was created, I urge all citizens of Osage to oppose this bond.
School improvements should be done in phases, with the most critical problems solved first, such as fixing ceilings, boiler systems, and improving science classrooms. These changes could be done with what we have in PPEL (Physical Plant and Equipment Levy), and not a single bond or loan would have to burden the citizens of Osage. Naturally, that is not going to happen. I completely support the renovation and construction of new assets, including those gyms. But I am astonished that a 20-year bond, which at a current average market interest rate of 3.75 percent, is the solution. In twenty years, the bond is not going to cost $9.9 million. In fact, interest alone will cost an extra $3.5 million dollars, with the total cost rising to about $13.4 million.
Inflation alone is estimated to add about $396,000/year to the costs. Nevertheless, this amount is still less than the interest rate that is compounded on the bond every year. The worst occurrence possible is the combination of inflation and interest (from the bond), adding a total of $720,000 to the project every year. This, which the current bond plan allows for, is simply outrageous.
After consulting with the Mitchell County Economic Development Committee, I have come up with a plan which could minimize as many costs as possible, and most importantly minimize the property tax and even dissolve the bond completely. The proposed plan would include a two part system, divided into internal and external revenues:
1. Sell the naming rights and advertisement opportunities for all stadiums and fields to private companies. After talking to Mr. Smith, Osage’s athletic director and Mrs. Schwamman, our school superintendent, the school could gain close to $100,000 each year from private naming agreements over a 10-year period from these transactions.
2. Apply for a School Improvement Grant from the US Department of Education, which can range from $500,000 to $2 million.
3. Alumni donations. Osage has had numerous alumni who have generously donated back to their own community. One of the most notable is Robert Kern, who has already donated millions to numerous projects in Osage. Through alumni and private donations, an estimated $2-3 million could be gathered.
1. Increase the local sales tax from two percent to three percent. Currently, Osage receives $45,930,037 dollars in sales tax revenue from 3,819 taxpayers. By increasing the sales tax by one percent, a revenue of $459,000 dollars could be earned every year. In twenty years, the longevity of the current school bond, over $9,186,000 million dollars could be raised. An increase into a sales tax just for Osage would be able to continuously cover the periodical school improvements. This means no property tax, no bond, no outrageous burdens on property, and no pressure on the farmers.
2. Redistribute revenue from state-sponsored casinos to all school districts. Currently, there are 20 casinos in the state of Iowa that are government-regulated. Since people from all counties, including Mitchell, travel to these casinos, the state should create legislation to divide and redistribute the money to school districts across Iowa. One casino, in nearby Worth County, generates and donates $8,000 to each student in the county after they graduate.
As illustrated above, there are many unique ways of funding this project besides a property tax and bond. Because of the illogical and impractical method of funding this project, I advise everyone to block this bond from passing until we can figure out a better way to fund this ordeal.
Until then, the PPEL can take care of any emergency, regardless of the severity of the problem. We have to be extremely careful of monetary projects, especially in the size of this town, because fewer people cover the costs of the project when compared to a larger city. Conservatism through smart money management is invaluable. We’ll get those new gyms, new cafeterias and classrooms; I believe there is just a better and smarter way to do it. I firmly believe Ronald Reagan would have agreed with this difficult, but simple answer.