Will taxes go up if a district is split and how are taxes distributed?

The short answer to this question is, probably.  A study was done in 2004 when a citizen’s petition sought to create a new Pioneer School District out of the Alpine School District.  As a part of that study, the Brigham Young University Marriott School of Management predicted that “by the year 2010, the school district portion of property taxes in the proposed new school district would be approximately 40% higher than what they would be if the split did not take place.”

The board of education for a new district would ultimately be responsible for setting their own property tax rate.  The process for setting a tax rate in a school district is complicated and involves decisions on thirteen rates available by statute.  Taxes can be levied for day to day operating costs (the General Fund) or for capital improvements (the Capital Outlay Fund).  It is important to look at both types of rates to determine if taxes might increase in a newly formed district.

General Fund Property Taxes – Granite’s General Fund property tax rates are currently at or near statutory ceilings.  As a result, Granite has very little flexibility to increase tax rates for operating costs and a new district would be subject to the same limits.  The Legislature sets the Basic Rate for all districts in the state.  In addition, districts have the option of seeking voter approval for a Voted Leeway tax rate.  The Voted Leeway generates significant revenue for day to day operating costs (teacher salaries, class size, textbooks, etc.) above and beyond the funding provided by the Legislature.  Granite School District currently has voter approval for the maximum Voted Leeway rate allowed by law.  A new district would likely need to seek its own voter authorization.  It would be difficult to obtain that authorization in time for their first year of operations.  The new district would experience a significant financial hardship without the Voted Leeway property tax revenues.

Because there is very little statutory authority to increase taxes for the General Fund, the new district and the remaining district would be sharing the same revenues that existed prior to the division.  But, in order to fund new administrative costs for a superintendent, business administrator, special education director, etc. budget cuts would need to be made in other areas.

Capital Outlay Property Taxes – The property tax rates for the Capital Outlay Fund would likely increase in a newly created school district.  The new school district would need to address immediate facility needs for administration, maintenance, transportation, and school lunch.  The new Board of Education would have the authority to increase property tax revenues for capital improvements or to seek voter approval for bond financing.  The new district would also need to review school building needs in establishing a budget and tax rate for capital improvements.

 Debt Service Property Taxes - When the existing district obtained voter approval to sell bonds, it was based on the whole district and is an obligation of all the people in that district.  The best legal thinking at this point is that any outstanding debt would probably continue to be levied against the same “footprint” of the old district until it was completely paid.  This could mean an additional levy would be added to the existing one if a new district found it necessary to sell additional bonds for replacement or building of new buildings.

Overall Property Tax Rate – The Granite School District currently has a property tax rate below the state average and lower than most Wasatch Front districts.  Some of the surrounding districts have experienced rapid growth and have higher tax rates for Capital Outlay and Debt Service.  For example, Jordan District taxpayers paid $952 tax on a $200,000 home in 2005 while Granite taxpayers paid $726 – a difference of $226.  Granite has been able to maintain a lower tax rate and finance capital improvements on a pay-as-you-go basis because enrollment has been declining.  A new district would need to consider raising property taxes to provide the facilities that would be needed for administrative and support functions and to address capital improvements in school buildings.