Monday, March 20, 2017

School District Economics - One more time

Each year, the Ohio Department of Education publishes a spreadsheet of enrollment and financial data gathered from every public school district in the state. The latest version has just come out.

I pull a subset of central Ohio suburban school districts from this spreadsheet to gather comparative numbers. Those districts are: Dublin, Grandview Heights, Hilliard, New Albany, South Western, Upper Arlington, Westerville, Worthington, and Olentangy.

Given the frequency of this conversation in our community, let's get this number on the table right away - the property tax rates (all taken from sample properties within the suburban city limits):

Effective Property Tax Rate:
Hilliard: 97.93 mills
New Albany: 96.07
Westerville: 95.42*
Dublin: 90.74
Worthington: 83.20
South Western: 82.31
Olentangy (Powell): 79.99
Grandview Heights: 77.90*
Upper Arlington: 75.04*

So yes, Hilliard has the highest property tax rates of this set.  But note that in three of these communities - Westerville, Grandview Heights, and Upper Arlington - the local Fire/EMS services are funded from sources other than property taxes.

What about just the school property tax:
Hilliard: $1,942 per $100,000 of market value
New Albany: $1,891
Olentangy: $1,850
Westerville: $1,812**
Dublin: $1,778
Worthington: $1,543**
Upper Arlington: $1,500**
South Western: $1,433**
Grandview Heights: $1,429**

Hilliard tops the list again. In this case, note that five of the six lowest** on this list don't participate in a Joint Vocational School district like Tolles, whose tax collection I've included in the list above.

How about spending?
Grandview Heights: $15,818/student
Upper Arlington: $14,957
Worthington: $12,863
Dublin: $12,620
New Albany: $11,900
Hilliard: $11,338
Westerville: $10,741
South Western: $10,274
Olentangy: $10,102

Whoa -- what's going on here?  Why does Hilliard have the highest property tax rates, while being 6th on this list of spending? How does Grandview Heights and Upper Arlington have the lowest school tax rates, yet spend significantly more per student than the rest of us?

The answer is in this equation:

.......Revenue = Tax Rate x Total Property Value

In particular, the Total Property Value per Student. Here's how that list stacks up:

Upper Arlington: $297,696
Grandview Heights: $284,657
Dublin: $204,201
New Albany: $192,329
Worthington: $187,984
Olentangy: $182,277
Hilliard: $154,930
Westerville: $154,829
South Western: $103,924

On this list, we're near the bottom. And that's not good. What should we do?

So from the spending side of the equation, the operating costs of a school district are 85% compensation and benefits. That's what we should expect - our "product" is delivered by teachers and staff in the classroom. Our cost is a function of how many folks we employ and how much we pay them.

Here's the average classroom teacher salaries:
Upper Arlington: $78,954  (66%)
Hilliard: $73,858 (68%)
Grandview Heights: $73,128 (57%)
New Albany: $72,477 (73%)
Dublin: $72,088 (46%)
Worthington: $71,183 (54%)
Olentangy: $65,959 (52%)
Westerville: $63,422 (38%)
South Western: $62,229 (53%)

Again, we're near the top of the list. But it's not because our teacher pay scale is higher than the others. Every district has a pay scale which increases compensation based on years of service and degree obtained. While each is unique as a result of years of negotiations with the individual teachers' unions, all fall within a small range of each other.

The difference in average salary from district to district is mostly because of the seniority of the teachers. Fast-growing districts like Olentangy hire large batches of new, young teachers each year, bringing down their average. That was Hilliard 15-20 years ago.

Districts with stable or declining enrollment tend to have higher average salaries, as their teachers move up on the seniority steps and few new teachers are being hired. That's the case for UA and Grandview. The number in parentheses in the average salary list is the percentage of their faculty with 10+ years of experience. Note the strong correlation between average salary and this number.

And when districts have a big spurt of hiring, there tends to be a "bulge" in the pay distribution, with a cadre of teachers moving up and up until they retire and are replaced with a batch of new teachers. We saw a little of that a few years ago when changes to the State Teacher Retirement System (STRS) rules gave many of our more senior teachers reason to retire then rather than wait.

Those STRS rule changes will also cause current teachers to stay on the job longer, which will in turn cause the average tenure of teachers to increase across the state. In our case, many are in that "bulge" of teachers we recruited 15-20 years ago.

On the revenue side, it's back to that Assessed Valuation per Student.  We need to drive that number higher as fast as we can.

One way is to increase the average value of a parcel. If all that's getting built in our community is apartments, condos and houses, then they need to be priced pretty high - on the order of $350,000 for a single family home, because those housing units also bring more students.

Apartment developments that attract families with kids aren't helpful as they drive down the Assessed Value per Student, essentially causing the rest of us to subsidize that housing with our higher property taxes.

The better solution is to recruit much more commercial development to our community, and restrict new residential development until that happens. We certainly shouldn't be annexing more land to build more houses.

And that new commercial development has to generate property tax revenue for the school district and the township, not just income tax revenue for the City.

TIFs and abatements which redirect school and township property tax millage to the City are not helpful. This is the reason many of us fought so hard for Issue 9 - which prohibits the use of TIFs on residential development. It doesn't prohibit residential development, but requires that all the school tax generated by a new development actually goes to the school district.

I look forward to your comments and questions.