School districts all across Illinois, as well as other states who are
in the path of progress, face a similar situation. Schools in the
short-term when faced with large increases in population may need to
renovate existing facilities. They may need to add multiple
classrooms. They may need to raise bonds in order to finance
growth. And if they cannot solve those situations, they may have
no choice but to reorganize.
The second problem, even if you have adequate space, is the cost of
educating these new students in the short term. Most schools in
Illinois are primarily funded by as combination of local real estate
taxes and state aid. The formulas used for each, however, do not
provide any funding to school for as long as two years. Thus,
from the time a house goes onto the tax rolls, until the school
district receives local real estate taxes from that house two years can
pass. Unfortunately, at the time the house goes on the tax rolls,
you may already have students from that home in your school.
The same is true regarding state aid. For most district's state
aid is dependent upon Average Daily Attendance (ADA). It can take
several years for the formula to catch up and begin to pay the school
for the child.
How does a district deal with these problem? The most common way
is by reduction in services. In a large district, it is possible
to reducer services to other student sand therefore free money up to
educate the new students. However, in smaller and rural
districts, it may not be financially possible to reallocate funds in
this way.
What's the solution? You need to look to the source of the
problem You need to consider implementing fees that are levied
upon the people and the entities benefiting from the new growth as a
way of lightening the financial burden upon the existing community and
providing a means by which the district can adequately serve both
existing students and new ones. You need to work with your local
municipality to implement a series of fees (Impact, Transition, and
Capital) to at least partially address these financial needs.
IMPACT FEE
The first fee generally implemented by a municipality is known as an
Impact Fee. At the County level, it is referred to as a Land/Cash
Fee. Regardless of the name, it's function is to raise money or
set aside land for a School District to help pay for the purchase of
land to expand District capacity.
The concept and formula commonly used in the regard has been
extensively tested. Current formulas attempt to equate the burden
created by a subdivision to the cost of the fee.
“By adopting impact fees, current
residents could ease the burden of provision of incremental
infrastructure by shifting future infrastructure costs onto new
residents. Therefore, new residents are essentially buying their
way into the community.”
-Brueckner, Jan A. Infrastructure
financing and urban development: The economics of impact fees.
1997, Journal of Public Economics, 66.383-407
TRANSITION FEES
Another problem faced by schools in the unreimbursed operational
expenses incurred as a result of new students. Because of the lag
in receipt of local Real Estate Tax revenues and State Aid there can be
a delay of up to two (2) years for the District to receive revenue with
which to educate these new students.
Thus, the money that a School District has in any given year is based
upon valuation and enrollment from the past. In a sense, the
money is calculated to provide education to students who are continuing
in the District. If the District is obligated to use a portion of
that money to educate new students it may be forced to reduce the level
of services or seek other forms of revenue.
Because of these problems many communities have adopted Transition
Fees, the purpose of which is to provide a course of revenue for the
cost of educating new students until non Hold Harmless Foundation
Districts begins to receive tax revenue and State Aid for those
children.
CAPITAL FEE
The final fee, which may be necessary, is the Capital Fee. It is
designed to provide revenue to construct classroom space made necessary
by the development of a subdivision.
The additional local revenue and State Aid from a new home is barely
enough to keep ahead of operational costs. Not mentioned is the
cost of building a new school to house these additional students.
Without constructing one or more buildings it is not feasible for many
Districts to service multiple subdivisions.
Despite the charge many developers and homeowners recognize the
increased value to the subdivision as well as individual properties
because of quality school facilities.
“Renovation and construction of new
schools had a major impact on house prices. With such a powerful
draw, it is not surprising that the for-profit real estate and
home-building sectors use public schools as marketing tools.”
-Using Public School as Community-Development Tools,
October 2002
CONCLUDING COMMENTS
In a recent study of the Knowledge Works Foundation, 2004, it was
indicated that 85% of people believe that the success of a community is
tied to the success of the public school. Thus, it is imperative
for all taxing bodies that have an impact on schools to recognize that
their community will not be as attractive to people if their school
building is deteriorating, or the quality of education in their school
is not keeping pace. For the foregoing reasons, Fees should be
looked upon by the Community as an investment in its future, and not as
an expense.
Some districts need land and/or buildings in order to expand.
Others need cash in order to educate students. Some Districts
need all of these fees. Collectively these fees, which vary
greatly, can total a significant amount per home. While each
District needs to be calculated separately, it would not be unexpected
for total fees (Impact, Transition and Capital) for a four (4) bedroom
detached home to be as much as $21, 000. At the same time, it
would not be surprising to see the collectives fees for a two (2)
bedroom apartment to exceed $3,200.
There are several points to be taken from this analysis. First,
any District will incur significant increased expense as a result of
increased enrollment. Second, fees provide a way of reducing that
expense and allocating it between existing taxpayers and new
residents. Next, without significant fees most School Districts
in the long term will face potential financial hardship. Finally,
District facing residential growth should work with their
Municipalities now in order to avoid problems in the future.
This can be a win-win situation. The school district can win
through the fees. The Municipality can win through increased tax
revenues and fees of its own. The homeowner can win by more rapid
increases in the value of the property. In these times of
financial difficulty implementing fees can make a significant
difference in the financial condition of your district and the quality
of education for your students.