School District Summer Levy Surpise
by Kathy Rose
While most people will be vacationing and otherwise enjoying the summer, tax payers in the Lake Pend Oreille School District will have an unanticipated election on August 30th.
LPOSD employs the explanation that it has no choice but to put the $55 Million Plant Levy to the voters during the summer, or they will have to wait another year before beginning projects. Yet, most people will not be expecting another election before the general in November. Rest assured, the education community will be motivated to vote, and vote in favor of their own interests.
It will cost tax payers approximately $30,000 just to run the August election. The school district’s levy could be the only item on the ballot.
So let’s look at some facts around school levies.
School districts have two options when funding for capital improvements, a bond or a plant levy. Bonds have to be approved by a 2/3 vote, while a plant levy can pass with a little as 55%. Bond funds can be acquired in full, up front of the project, while plant levies fund projects as the tax monies are collected – a pay as you go scenario.
In October of 2015, the Idaho Supreme Court made a ruling that a renewable lease agreement is not considered debt and therefore does not violate the State Constitution. This opened the door for some creative finance utilizing the plant levy and effectively disenfranchising the voters. In other words, the school district can enter into a lease agreement with bond holders, getting all the funds upfront, with only a 55% approval, not the 67% required for bonds.
The way this works is simple, and circumvents the original intent. Upon a successful levy passage, a ground lease is created for the project(s). There is an intermediary between the district and the certificate/bond holders which could be a bank or non-profit.
A non-profit could be created if necessary. The school district does have a non-profit foundation in place – Panhandle Alliance for Education. Payment of the lease starts as soon as the first structure is complete.
“My big fear is that the right of citizens to weigh-in on public debt will forever be compromised by this ruling, opening the door to local governments to never seek voter approval for bonds, opting instead for ‘annual leases,’” wrote watchdog David Frazier, on his Boise Guardian blog.
LPOSD is one of the first districts in the state to seek this funding mechanism. If they are successful, watch it spread like wildfire and expand the heavy hand of government.