Palos Elementary District 118 voters face a referendum on the March ballot asking to transfer future property tax money to the district’s operating fund, but officials say the move won’t increase property taxes.
Voters will be asked to allow the district to transfer the levy of $4.35 million, which has been collected annually for the district’s debt service fund, to its operating fund in coming years to address budget shortfalls, according to a district news release.
Superintendent Anthony Scarsella said voting yes to the referendum won’t increase or decrease property taxes because the proposed increase in the operating tax rate will be offset by a decrease in the debt service tax rate.
“School districts don’t often get opportunities like this to address financial challenges without increasing or decreasing the tax burden on local homeowners,” board President Pam Paris said in the release.
If approved, $2 million will go toward budget deficits and avoid cuts to existing programs and services; $2 million will go toward maintaining school facilities and end reliance on short-term borrowing; and $350,000 will pay for the state mandated, free full-day kindergarten starting in the 2024-2025 school year, according to the release.
Scarsella said Monday the district issues debt bonds every five years or so to cover the cost of capital projects. The $2 million portion of the referendum that would go toward school facility maintenance would be reoccurring and allow the district to become less reliant on issuing bonds to pay off debt, he said.
“That’s really important to us right now because when we issued debt a couple years ago the interest rates were a lot lower and they are a lot higher now,” Scarsella said. “We’re hearing that those rates may be coming down, but that’s not a certainty. If we have to continue relying on debt we’re going to be borrowing at higher rates, which is going to cost our taxpayers more.”
The property taxes school districts collect are divided into two rates: a debt service tax rate and an operating tax rate, Scarsella said. The district has historically issued debt bonds to pay for maintenance, he said, and would like to pivot to using its operational fund, which wouldn’t require using the bond market.
The district is paying debt on two debt bonds, Scarsella said, one issued in 2020 and the other issued in 2023. Those bonds paid to renovate classrooms, boiler repairs and roof replacement, he said.
By December, the district will be debt free, Scarsella said, which means the district will no longer have to collect the taxes to go to debt services.
“What we’re asking our taxpayers is to allow us to shift, or transfer, that $4.35 million, that we’re already collecting now, to shift it over to our operating bucket. That’s the other bucket where we collect money, and that pays for everything else that operates the school district outside of paying off debt,” Scarsella said. “We want to shift that over to operating when we make that final payment this year on our outstanding debt.”
Since 2017, the district has been spending down cash reserves to maintain services for students, Scarsella said, but that is no longer feasible.
The two largest mandates, special education and English-language learning, has grown from about $2.4 million in 2012 to $6 million in 2023, Scarsella said. While the state has increased investments into K-12 education, District 118 only received $34,000 in the past year, according to the release.
If the referendum does not pass, Scarsella said the district will have to continue to issue debt to maintain school buildings and to pay for operational costs.
“If the referendum fails, it’s not that tax rate is going away and then it’s going to be a tax decrease to our community, because we’re going to have to issue more debt,” Scarsella said. “It does not mean that there’s going to be a tax decrease to our homeowners because we’re going to have to go to the bond market. We’re going to have to continue to issue debt, except the difference will be we’re going to be even more reliant on that debt. We don’t want to issue debt to do things like put gas in the buses and make sure that the classroom lights are on.”
If the referendum doesn’t pass, Scarsella said the district won’t be debt free by December, as projected.
The district will host a virtual community forum Jan. 11 and in-person forums at 6:30 p.m. on Feb. 6, at Palos East, 7700 W. 127th St., and at 6:30 p.m. Feb. 8, at Palos West, 12700 S. 104th Ave.
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