(Editor’s Note: Following the printing of David Curha’s first Letter to the Editor, we were contacted by David requesting he be allowed to re-submit his letter, with a few minor wording corrections along with the addition of sources for some of the information contained in his letter.
Here is the second version of his Letter to the Editor, regarding the upcoming school bond referendum on Tuesday, April 4, 2017, along with the first letter he submitted.)
¨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 increases in property taxes from that bond have been estimated to increase by $1.80 per each $1000 in property value. The bond tax implication calculates itself as a $100-$300 tax increase for most residential 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. 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.¹ Farmer’s lands are currently taxed at about $25 an acre; this bond plan would cause an increase of $0.16-$0.19 of new tax per acre, which calculates itself as a $2000-$3000 tax increase for our farmers, assuming most farmers own 600-1000 acres.² 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, 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%, is the solution.³ 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 is estimated to add about $396,000/year to the costs.⁴ 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.⁴ This, which the current bond plan allows for, is simply outrageous. After briefly consulting with the Mitchell County Economic Development Commission, I have personally come up with a plan which could minimize as many costs as possible, and most importantly minimize the property tax and even potentially dissolve the bond. My 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 Osage athletic faculty, the school could potentially 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 2% to 3%. Currently, Osage receives $45,930,037 dollars in taxable sales.⁵ By increasing the sales tax by 1%, 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. I would recommend a referendum to increase the sales tax by 1%, with a high percentage of the revenue directly financing school renovations. If this is not attainable under current local tax laws, then it is time to change our laws so it is an attainable goal. Many cities and counties across the United States, including Hancock County in Illinois, Tampa, Florida, and Santa Rosa, California, have all held referendums to increase the sales tax to directly help their local schools.⁶
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. The possibilities, no matter if they are feasible or not, are endless. All I want is for all ideas to be taken into consideration, not just the one plan being pushed by the school. 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.
¹ “Mitchell County Sales Report 2016.” https://www.mitchellcoia.us/wp-content/uploads /mitche ll-county-sales-report-2016-1.pdf, 2016.
² “Summary Tax Impact.” Osage Community Schools District. Piper Jaffray. 20 Mar. 2017.
⁴ “Osage Community Schools Budget.” Dean Snyder Construction. 07 Jan. 2017.
⁵ “Retail Sales and Use Tax Annual Report Fiscal Year 2015.” Iowa Department of Revenue (2015). https:/ /tax.iowa.gov/sites/files/idr/Annual%20Sales%20%26%20Use%20%20Report%2 0FY%202015_0.pdf.
⁶ Parrott, Jason. “Voters to Decide Hancock County School Sales Tax.” Tri States Public Radio. 30 Mar. 2017.