Michigan Property Tax Valuation Appeals and School Funding
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Announcer: Welcome to Inside Michigan Education, a weekly show featuring interviews with community leaders, school administrators, school business officials, and individuals, who are passionate about the future of Michigan education. And now, here is your host for Inside Michigan Education, Rob Huisingh.
Rob Huisingh: Welcome to Inside Michigan Education. This week we are joined in the Foxbright Podcast Studio by Debra Reese. Deb is the Assistant Superintendent of Grandville Public Schools, and she is here today to talk to us about the growing problem of Property Tax Evaluation Appeals, and what this will mean for public schools in Michigan. Welcome Deb, it's great to have you on the show.
Debra Reese: Thank you very much, I am glad to be here to share information.
Rob Huisingh: I always like to ask people about -- tell us a little bit about your background. How did you come to be in the position that you are in, and what do you do?
Debra Reese: Well, currently I am the Assistant Superintendent of Schools at Grandville Schools. I oversee all the business services which includes the business office, and all the finance portion, but I also oversee the transportation, food service, custodial maintenance group. So it's kind of a wide variety. We have supervisors that oversee each of those departments individually, and they do a wonderful job, but I decided, I believe in High School, that I wanted to be in finance of some type, and I went to Davenport College, got my Associates Degree. Actually started working for school right out of college, stopped for a while, took a couple of years off to have some kids, and then went back. Went and got my Bachelor's Degree at Davenport, moved to Northview Schools in 1995, and became the business manager there, and then in 2004, moved to Grandville Schools as the Assistant Superintendent. I love Grandville Schools, it's close to where I grew up, and it's a great place to work. I have my Master's Degree in Educational Leadership from Grand Valley State University.
Rob Huisingh: Tell us a little bit about Grandville Public Schools.
Debra Reese: Well, it's a district of about 6,000 students. We are a K-12 program, we have currently eight elementaries, although that will be seven elementaries next year; we are closing one, and a middle school and a high school. Grandville has been around for a long time. It's a nice suburban area with people who really care about their schools, they are dedicated, they want what's best for their kids. We work extremely well with our local townships and cities. We are mainly in the city of Grandville, but we also actually reach into Ottawa County and Tallmadge Township, the City of Walker, and parts of the Wyoming Panhandle, so we are pretty widespread.
Rob Huisingh: One of the reasons why we had wanted to have you on the show today is that there is a -- among other financial issues that are going on with Public Schools, there is one issue afoot, which is having to do with property taxes, and I was just wondering if you could just sort of share that with our listening audience, what is the nutshell of the issue?
Debra Reese: Well, the nutshell of the issue has to do with property values, and now when -- actually, we are seeing it more because of the larger businesses, and they are disputing their taxable value. It came to light for Grandville actually, when Metro Hospital was built at 54th Street and M-6 right in there. We got a call from the City of Wyoming that said, you need to know currently because it's in progress of being built, that Metro Hospital has a taxable value of $39,000,000. However, in 2008 when they actually become housed there and they are working there, they will probably ask for Tax-Exempt Status, and we as the City of Wyoming that call said, we would grant that status to them. So you need to know for 2007 you are collecting taxes, but that you will have to repay when they can finally request the status, because it probably will be granted, and I said, okay, not a big deal, thanks for the heads up.
Looking at it, then in 2008 they did request that status, they were granted that status. What happened then was Grandville Schools got a bill for a million dollars, in taxes that we had received, that we would have to pay back. When you look at it, as far as the general fund and the operating fund, that was okay, because the way the foundation -- the student foundation works, is that we get so much per student. We collect some of it in non-homestead property tax value, and for Grandville we collected it all in the summer taxes, so that's in August and September. When you take the foundation amount, they take -- the state computes what you are collecting in local taxes, and deducts it, and then pays you the rest over the 11 payments. Well, so when you have a large entity or the taxable value change with Metro Hospital, that money was made up by the state. So as far as Grandville schools, there was not an impact, but at the state level there is an impact, because all of the sudden the taxable value has gone down, and so they have to make up more of their foundation amount.
So as far as the general fund, when this taxable value changes happen, we do okay, because they are made up at the state level, but the state doesn't do okay. But what happens for Grandville, is we have a debt levy on buildings that we have built. All of a sudden, my taxable value went down $39,000,000, so I had to redo my calculations about how much I could levy from my debt millages, so that I could collect enough to make the payments. That also happens for us with-- we have a sinking fund that the voters have approved, and all of a sudden, 39,000,000 is no longer taxable, and so that fell. So money I was counting on having, I no longer had.
Part of the problem now that we're seeing with the makeup of Grandville is, we have the RiverTown Crossings Mall in it, which the RiverTown Mall itself is one taxable unit, but then each of the large anchor stores is another taxable unit. So now currently what we have seen is those large stores have all filed for their taxable value appeals. Understand why they are doing it, from a business perspective if they pay less taxes, they would have to charge less, but what it means to us, is we have currently about another $40,000,000 in taxable value, that's under appeal, and it has to work its way through the system. If those appeals are approved, and the taxable value goes down, I have to again go back and pay back money that we have already received, and it will again on the general fund, it will make an impact at the state level, but on my debt fund and my sinking fund levies, all of a sudden I have less money than I planned on.
Rob Huisingh: Now it seems strange that you would receive money, and then have to pay it back, and literally, this is the case, that if there are significant malls that are within the geographical region of your school, that this might be something that you would have to be looking into?
Debra Reese: Yes, it's you who have to watch your taxable value, and what makes up that value. For us it's the mall, but I don't want to sound like I am picking on the mall, because there are multiple businesses that have appeals going on. So it's any large business or even small businesses that are asking for tax appeal adjustments. The way the system works is, as of June 1, any taxes that you haven't received, the county funds us the money, so we will get bills typically they use to range from Grandville anywhere from $12,000 to $80,000 for a year, for either taxable value appeal changes or things that happened.
But I also understand why they want to give us the money upfront, because some of these appeals, they are not just for the current year, they are for previous years, and that's what can impact us. Kent County had forwarded to us a nice spreadsheet that showed the taxable value changes from 2005 through 2008, just to give us an idea of what was happening. What we saw, is changes that were made in 2005 effected tax years all the way back to 2000. And so, if you've got a large corporation and quite frankly, I don't know the rules; I haven't checked that far into it yet. But when you file an appeal, you can file an appeal for the current year and previous years. I do know there is another neighboring district in Kent County that is looking at a major tax appeal that goes back to I believe, 1994, and they are looking at having to pay back millions of dollars. The other part of that is, they have to pay back the interest, and we are going, hold it, we weren't really getting interest, we spent that money on expenses, but so you are hit not only with the money you have to give back, but then interest on that also.
Rob Huisingh: Now I saw recently an email which was just talking about, I believe it's the Michigan Chamber of Commerce is putting on a class, which is talking about how to actually go and get your taxes adjusted, and I trust you have heard about that?
Debra Reese: Yeah, and in fact, I have in front of me the copy of that email. The seminar is, reduce your Michigan business property taxes, and it's put on by local attorney's office, and it is, it's how to use some programs which are tax abatements, and you know, Renaissance Zones and Brownfield Zones, and stuff like that. But it's also how to file an appeal, how to go through that process, how to win that process. And so it's almost like we are fighting against each other, because some people are saying, let's help them lower their taxes, and help the economy, but the schools are going, hold it, we have a problem, because we have been given this money, and now all of a sudden we are being told we have to give it back.
On a county level also, we levy within Kent County's Special Ed millage, and so, like when Grandville sees these changes, it affects not only Grandville, it affects the whole county, because the county's total tax value changes and drops. And so special aid money that we were planning on getting through the ISD, we are also not getting, because that money is not coming in. So it has multiple layers of impact.
Rob Huisingh: And if we look at this from a -- right now, I am pretty comfortable that if I went out to try and sell my house, that I would not be able to get my house sold for the kind of money that I currently would think it's worth. And this is a realistic issue throughout all of Michigan, and not only just Michigan, but throughout the United States. Property values have sunk tremendously, and what is the potential for this to have long term and broad reaching effects on our Public Schools?
Debra Reese: I think in the long term it's going to have a big impact, like I say, we have been doing, you know the Property Tax Appeals, we have seen those since Proposal A was in existence, even before Proposal A, I think what right now what's compounding it is because the true taxable values are not rising, they are going down. I believe the preliminary numbers that I have heard within Kent County is that the property tax value within Kent County for next year will drop by about 2%.
So not only are we seeing, already, as far as schools are concerned, the property tax values are going down. Now we are seeing people, because they are going down appeal those, and so we are almost getting a double whammy all at once. And like I said, with the fact that they can go back multiple years, it's almost like, hold it, what we planned on three years ago, was not really true, it's not in existence, and so we are seeing the double whammy of the current values falling and businesses and residents, just the average Americans going, hold it, I can't sell it for what it's worth, so I need to fight this value, and they should.
I mean, if they are paying more property taxes than what their house is worth, as a logical cost saving measure, they should be appealing those, with the double whammy hitting the schools, and the ISD, and then in turn hitting the state, is creating a real economic problem. The state, the school aid fund, the projections that we just had the Revenue Consensus in January, the school aid fund is projected to drop about 1%, and so when you are looking at the drop in value, revenue is coming in, and then this double whammy of the Property Tax Appeals happening, and people wanting more, we are seeing that the 1% drop might be more, which means schools get less money, which means we will not see an increase in our foundation, probably a decrease in our foundation. So it's all kind of -- it's kind of like the perfect storm all coming together, and quite frankly, I don't think we are prepared for that yet.
Rob Huisingh: You know, most schools in Michigan are declining enrollment schools, so you are already faced with an issue of losing students which accounts for a reduction in your foundation. If you couple that with the decreasing property value, decreasing foundation amount for the school aid fund, and in addition we had David Martell in here talking at the last interview about the new Kindergarten rules, where you are looking to fund full day Kindergarten now at the same rate that you use to be able to get for half day Kindergarten. I can see the pressures must be quite, quite daunting.
Debra Reese: Well, and when you look at it, again at the January Revenue Consensus, Michigan has about 1.6 million students. There are -- they project that there will be just over 30,000 less students in Michigan Schools next year, kind of a two part reason, and Grandville truly reflects this, to right to what's happening. We are graduating classes of about 450 students. Our incoming Kindergarten classes are about 400 students, and that is mainly just due to the birth rate, the number of people having kids, when you compare the birth rate over those years, it's just not as many kids there to have.
But when you couple that with the economy, and we are seeing people move out of Michigan, you are seeing additional loses in kids. And so it's kind of-- okay, there is a double whammy going on, and like you say, with a Kindergarten language for 2010, the way the language currently reads, we either have to offer a 60% program, which is more than half day, or accept reduced funding for those kids. And so in Grandville you are looking at, we have 22 sections of Kindergarten currently this year.
We are looking at -- we either have to hire 11 new teachers, because right now a teacher can teach two sections of Kindergarten in a half day. Well, if it's a full day program, we can't do one teacher for two sections, so you are looking 11 teachers, which should be good for the economy, hire 11 people. However, we are not getting any additional funding for hiring those 11 teachers. So you are looking at an added cost of about $600,000-$700,000, or decreasing your revenues by about $1.6 million.
It kind of seems like a slightly logical choice right there, but when you are looking at a budget that is already in deficit of a million dollars, adding $600,000 of expenses is not an option that we like to look at. We don't have enough to fund our current program. So the struggle is, what choices do you make for those programs to disappear, so that you can do the full day kindergarten? That's a decision that we have looked at to some degree, we will look at it further next year, we put together a study committee to look at it, to come up with some options, and we will work through that process, but it's not something that just Grandville is facing, it's every district.
Rob Huisingh: Yeah. What strategies would you recommend for school districts that aren't aware of this, that are finding out about this for the first time, and for those even that are somewhat aware of it? What strategies do you recommend that people start thinking about?
Debra Reese: Well, we have been working with Michigan School Business Officials, MSBO, because like I say, it came on our radar screen when we had a big thing happen, and we were given a heads up on that.
I have to believe that most business managers, if they have been paying any attention, know about this. We've started talking about it in our regional groups, and statewide, about what an impact this has on us, and so we are trying to study and come up with some options, but quite frankly, there aren't a lot options out there to come up with.
It's kind of -- it comes down to, we are going to have to ask our Boards of Education and our public to make some very hard choices about what they feel the priorities are. And unfortunately after being at the January Revenue Consensus, I don't see Michigan coming out of this for probably another 18 months at least. So we are at the beginning, well, midway, into some real hard choices of what we have to do for Michigan Education.
Rob Huisingh: Well Debra, I want to thank you for being on the show today. It hasn't been good news, but it's certainly is an opportune time for us to talk about the issues that are up foot, and we appreciate you being here.
Debra Reese: Thank you. I appreciate being able to share, and my goal is just to educate people so that they understand some of the choices, and decisions that we have to make. Nobody likes it, when you see a district cutting programs or cutting positions, but we need to educate the people so that they understand why we are doing these things. So thank you very much for allowing me to come and share my knowledge.
Rob Huisingh: Thank you. If you would like to learn more about the Grandville Public Schools, I invite you to visit their website at www.gpsk12.net. Again, that URL is www.gpsk12.net. If you would like to contact Debra directly, please call 616-254-6550. Again, that telephone number is 616-254-6550. Do you have a story about something interesting that concerns Michigan education?
Well, if you do, I invite you to share your thoughts with us. You can find us online at www.insidemieducation.com. Again, you can find us online at www.insidemieducation.com. Until next week, this is Rob Huisingh with Inside Michigan Education.
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