Strapped schools are wheeling and dealing with municipalities

May 17, 2014

It’s a conundrum for the ages: Suburban communities count on good schools to drive economic development, but rapid growth strains school-district operations.

Now, state-mandated tax caps are putting additional pressure on public budgets—and spurring local governments to take unusual steps to help their cash-strapped schools.

The Westfield City Council agreed this month to contribute $2.5 million toward construction of a football stadium at Westfield High School, for example, freeing up the existing athletic fields for commercial development.

The Fishers Town Council, meanwhile, is weighing a proposal to buy property from Hamilton Southeastern Schools in hopes of resolving an expected $3 million budget shortfall.

And Zionsville officials have promised to share property tax revenue generated by the town’s new Creekside Corporate Park with Zionsville Community Schools, which used leftover bond money to acquire the property from Dow Chemical Co. last year.

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“A lot more of these discussions are happening now,” said Denny Costerison, executive director of the Indiana Association of School Business Officials. “I see it as very positive. We should be working together. If something helps the schools out, it helps the municipalities and other units of government.”

State Sen. Luke Kenley also is encouraged by the big-picture thinking taking place. School districts have collaborated with local government for years on cost-saving arrangements such as bulk purchasing agreements, but he said it makes sense for them to deepen the conversation and address how best to serve the community.

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“Eventually, they have to cooperate with each other,” said Kenley, a Noblesville Republican who oversees the Senate Appropriations Committee. “We’re starting to see that now.”

Good schools critical

The stakes are high. Suburban communities are scrambling to attract commercial investment to diversify their tax base and boost total assessed value. But businesses follow rooftops, and residents are drawn to quality schools.

Schools do more than drive economic development, Fishers Town Manager Scott Fadness said. They also cast a long shadow over the quality of life on a community.

“Most people choose a city to live in based on the ability to educate their children in a safe and productive way,” said Fadness, who won the Republican nomination for mayor in this month’s primary election. “If you do not have that core element in your community, it becomes very challenged and starts to spiral downward.”

He pointed to the examples in other communities where schools have struggled: Residents flee, housing values drop, tax revenue declines, and core services suffer.

Fishers and Hamilton Southeastern already share a fuel depot for their public vehicles, and for years the district has saved money by hiring the town to handle its grounds maintenance and snow removal.

Even so, HSE recently cut $2.8 million from its budget and still is facing a shortfall next year. So Councilor Stuart Easley last month proposed the town spend $3 million from its general fund reserves to buy school property for future public use.

A committee composed of representatives of the council, the school board and the township trustees is expected to discuss the proposal this month before making a recommendation to the full council.

Fishers resident Brad DeReamer appreciates the value of education, but he said the town—which becomes a city Jan. 1—should focus on shoring up its infrastructure.

“Don’t take $3.1 million in city tax money and give to another taxing unit … when our roads are falling apart,” said DeReamer, who opposed Easley in the council primary. The incumbent won by 25 votes.

The mayor of Greenfield from 2008 to 2011, DeReamer said he met regularly with the Greenfield-Central Schools superintendent to make sure the community’s growth didn’t outpace the schools’ capabilities. They also shared some expenses and traded property.

But he draws the line at the cash exchange, which he said won’t solve the long-term problem, anyway.

Working together

Kenley acknowledged the state funding formula has flaws, but said legislators took notice this session when Hamilton County municipal leaders joined forces with their public school districts to lobby for changes.

A problem that threatened school-bus transportation was temporarily resolved, and Kenley said lawmakers are working to address funding-formula concerns.

The Legislature also passed a Kenley-backed bill that increases oversight of redevelopment commissions, which control the tax revenue generated by development in so-called tax-increment financing districts. The measure set an expiration date for many such districts, making more revenue available to schools and libraries.

Kenley praised Zionsville’s “voluntary” TIF deal, which calls for Zionsville Community Schools to receive half of the increase in property tax revenue from Creekside—expected to be more than $1 million per year once construction is complete.

The school district used $3.4 million from an old bond issue to buy 91 acres of prime land along 106th Street east of Zionsville Road last year, then turned it over to the town. A subsequent land swap left the town with control of Creekside and a 10-acre future park property. ZCS gets the cash and the Jennings Field athletic facilities.

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“We all worked together to come up with a solution,” said Zionsville Town Council President Jeff Papa, adding that the deal would not have been possible without buy-in from the district, and the Zionsville Redevelopment Commission.

Since school districts have no control over community growth, they rely on local government to be both gatekeeper and cheerleader, he said.

“We’re clearly eating from the same trough,” said schools Superintendent Scott Robison.

Their long-standing relationship has taken many forms—the town’s IT department is tied into ZCS’ fiber-optic network, for example. Papa said the town, the schools and Whitestown also are talking about sharing a salt barn to conserve cash.

Westfield leaders also have promised to share TIF revenue with Westfield-Washington Schools once commercial development picks up.

In the meantime, they’re directing $2.5 million from the sale of the city’s water utilities to WWS’ “Build the Rock” campaign to replace the aging and inadequate football stadium. Construction of a new facility will clear the way for a $40-million-plus commercial project planned for the intersection of U.S. 31 and State Road 32.

Mayor Andy Cook said all the utility sale proceeds will be reinvested in the community—“whether that means building a roundabout or helping the schools get out of a decrepit stadium.”

Although such arrangements aren’t yet widespread, observers expect more communities to see the advantages of collaborating with their schools.

“In some cases, the relationship can be very adversarial, especially with” tax caps, said Mike Reuter, Hamilton Southeastern’s chief financial officer. “We’re essentially competing for tax dollars, and that can become very territorial. We’re trying to work beyond that.”•


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