It's been forever since I've posted. There is plenty of Oyster River School District news. The Lee school tax news turned into an apportionment essay, so I put that last. The main culprit turned out to be the 10% change in Lee's Equalization Ratio; which is the number the state calculates every year that estimates the ratio of assessed value to market value. Lee is hot, taxes go up.
Middle school cost doubles
|Dates of construction of various bits of ORMS|
The board adopted the middle school committee's report to build a new school, either on the current location or the Goss property, northeast of where Main Street intersects Route 4. It's down Technology Drive where the UNH Interoperability Lab used to be. The Goss property was always a red herring; it wasn't actually for sale and would need major infrastructure and permitting work to make new roads etc. that would have added years and millions. Plus it's a bad location, away from the high school, UNH and downtown. The Interoperability Lab has moved to Madbury Rd, a stone's throw from the middle school. The board decided to build a new building on the current location, with only member Michael Williams voting NO. Williams liked the expansion possibilities at the new space. Michael is emerging as the rebel on the board, the sole NO vote on a few interesting things.
The current number they're throwing around for the new middle school is $46 million. Let's say that the taxes go up because we have to finance $21M of that beyond the $25M we're already carrying for the high school. Back of the envelope, a 20 year amortized loan of $21M at 3% takes annual payments of say $1.3M. At our current $45M budget that's a 3% increase; not that bad. Assuming there are no outside funds offsetting it, the tax impact will be about 9/7 of that, so maybe a 4% increase on the School Tax line. Depending on your town and the year, the school tax is between half and two thirds of your total tax, so the increase nets out to 2% to 3% on your total bill. That's compared to a slightly bigger reduction in your tax bill if the high school bond is paid off with no new project.
The plan is to build the new building on the current footprint, while students still attend school at the old building. When the kids are in the new building, the old one comes down to make room for fields again. There is the possibility that Durham might want part of the old building as a community center; no decisions there yet.
Finances aside, it's an exciting project. I'm only sorry my youngest is currently in eighth grade and so my kids won't get to attend the new school. Grandkids maybe.
The board changed Columbus Day to Indigenous Peoples' Day in time for last Columbus Day, pardon Indigenous Peoples' Day. This follows Durham, which changed it a year ago. It took two meetings; both times local and regional Native Americans spoke at the board meeting. They were dissing old Chris pretty good: he wasn't the first to discover America, there were already people here, he personally ordered tortures, enslavements and mutilations, and the whole smallpox blankets and subsequent few hundred years of genocide were bad.
Orchard Drive Sale
A few years ago, the voters approved the sale of district property, 25 acres on Orchard Drive. The original idea was to help finance the new field; the hope was to get a few hundred thousand dollars. The property went out to bid and I think the best bid was $150,000. Some residents and the Town of Durham floated the idea of purchasing the property and developing a recreational area. Durham's plan involves fundraising, and the school district agreed to sell the land for $150,000 to Durham if the funds are raised. Both Durham and the school district have committees attending to this issue. I zone out whenever this comes up so I'm a little hazy on whether the district is severing the buildable 8 acres from the 17 acres of wetlands.
On November 29, 2018 the district held a Mental Health Forum in the ORHS cafeteria (video). It was modeled on the diversity forum held a year before. The Student Mental Health and Wellness Committee ran the event; their supervisors are Counseling Office Director Heather Machanoff and school psychologist Dr. Ryan Long. It is part of a district-wide effort to focus on student mental health, generally under the banner of Social and Emotional Learning. I can't find my notes, but I recall around 150 community members attended. Though I don't think the district says this, I would venture that the precipitating event was the very public suicide of a student last April.
There were three sets of presenters: Professor Erin Sharp on adolescent neurobiology, Grace Smith and her mother on mental health challenges in their family, and Michele Watson & Laurie Foster from NAMI, the National Alliance on Mental Illness. After each speaker the audience was given discussion questions which each table considered for a few minutes and reported out. A wide variety of community service groups set up tables; I got an Ally button from an LGBTQ group based in Portsmouth and a Strafford Country Public Health Network water bottle among other swag.
Parents Push for K-12 World Language
I haven't been as lonely as usual at some recent board meetings because community members have been coming to advocate for World Languages to be taught all grade levels. Currently the elementary schools and early middle school grades have no foreign language instruction. The board seems willing, at least for middle school, the main concern being finding the time in the schedule. They've added a sixth grade world language goal to their board goals this year, to be discussed at the May 9, 2019 meeting. Mark your calendars.
Deliberative Session February 5
The Deliberative Session is February 5th, 7pm, ORHS. It's a real election where a majority of the typically 50 to 120 voters who show up can amend the March ballot questions. There may be some irate folks from Lee upset about the tax increase. Unfortunately, I'll be at sea and won't be able to attend. Member Howland is tasked with explaining the budget including the Lee millage; I'll be tuned in.
Here's the warrant that will be presented at Deliberative Session and eventually go to the voters in March. Really the only possible amendment to make at DS is to lower the $47.4M (!) budget by some amount; usually no one makes that motion so likely the warrant questions will appear on the March ballot unchanged.
Oyster River Youth Association Mini Audit
The ORYA saga continues. The original concern surrounded a coach declaring to other coaches that he'd get a pitcher to bean the sole girl in the league if she was on his team. This made national news and Major League Baseball, which apparently has some supervisory role over little league, got involved.
Fosters reports Durham will only provide $28,000 to ORYA this year, and that only after an audit. That's down from $41,000 last year. I checked Lee's current budget; Lee is fully funding ORYA at an amount larger than Durham even though Durham has around 40% more children.
I couldn't help but notice the next line where the Board of Selectman cut $7,150 out of the Lee Rec budget despite the recommendation of the Advisory Budget Committee to fully fund. I went to a couple of Lee Rec events last year with my kids which were really great, especially model rocket day. Much care was taken to keeping everyone safe. To my knowledge none of adult supervisors plotted to injure any of their charges.
I'm not really sure what an audit has to do with the other stuff. Athletic associations tend to form as 501(c)(3) non-profits, so have public tax returns. We can conduct our own mini audit, comparing the tax returns of similar nearby Youth Associations. The smaller ones only have to file a postcard return; we'll skip those. I googled NH Youth Associations and picked out some nearby ones:
Oyster River Youth Association
Hampton Youth Association
Concord Youth Hockey Association
Dover Youth Hockey
Barrington Youth Association
It's the 2015 ORYA return, which seems to be the latest available; the other are 2016. I made a spreadsheet picking out some of the relevant boxes, amounts in thousands, click to enlarge:
There are rumors of lawsuits and retaliation so I will endeavor to make only factual claims. When I looked for comparable youth associations, I found most in New Hampshire are smaller than ORYA, many small enough (under $50,000 revenue) to file the postcard tax return. Lots of towns get by with their own Recreation departments doing the heavy lifting.
ORYA has the largest municipal grant by far. ORYA grants are 18% of revenue, compared to 2% to 13% for the other YAs.
ORYA has the largest salary expense by a large amount. Most YAs get by with no salary expense at all. Dover Hockey salaries are split among a dozen employees; OYRA reports seven but they left blank the form where the key employees are named. The 2013 return shows two program directors making $52K and $56K respectively, about a $7K raise each from the previous year.
ORYA has a huge accounting expense. Concord and Dover hockey have similar sized programs but get by with $2400 and $8600 accounting expense respectively. Here's Manchester Regional Youth Hockey, $2000 accounting expense on $812K of revenue. ORYA's accounting firm is in Durham and the preparer is also the treasurer of ORYA, so this is pretty similar to a wage paid to an officer. I presume that doesn't need to be reported in part VII of the return where $0 is reported paid to the treasurer. On the other hand one point of the return seems to be the disclosure of conflicts, so I'd need to ask an accounting professional.
ORYA has outsized cash and non-cash assets. They list as an asset $358K of leasehold improvements (less $155K depreciation) which means improvements to a space they don't own. I'm not sure what all that is about but these are huge numbers so I'd like to know more. I didn't notice more than a few thousand dollars of leasehold improvements on any of the other returns. ORYA doesn't seem to have much in assets like athletic equipment as far as I can tell from the return.
In summary, ORYA has substantial cash and non-cash assets. It has outsized salary and accounting expenses which exceed the large grant they get every year. It appears a few people in Oyster River are getting paid a total of $128K or so whereas most other youth associations around us rely on volunteers.
My preference as a taxpayer is for none of the towns of Oyster River to grant ORYA money. They seem well on their way to being a viable business without direct taxpayer support; let's help them take that final step. We'll still let them use the fields.
[Note added 1/22: Tonight the Lee Board of Selectman cut the ORYA line from $28,700 to $15,000 as part of additional cuts in response to the ORCSD millage prediction.]
From this little mini-audit we did I can understand why Durham wants a professional audit. The finances of ORYA look a bit different than that of other youth associations. I look forward to the audit report.
[Edit 1/26. Someone send me a link to this IRS site and a 2017 return for ORYA. The return shows more of the same: $97K grants on $523K revenue (18.5%), $134K salary, $35K accounting, $502K assets. The link makes it easy to find all the charities in the state with YOUTH in their name, here sorted by income. This makes it much easier to choose comparables than the guessing I did. Just to spot check, Wolverine Youth Football has revenue of $421K (not sure where $2.8M in the table comes from) on a grant of $0, salaries $0, accounting expense $1095.]
Lee School Tax Up 10%
The district met its budget goal of a tax impact (change in budget less revenue) of 3.5%, impressive in this difficult budget year. Below is the table of major drivers. The big ticket items include $800K toward preliminary work on the new middle school. The school can't go ahead without voter approval; this money gets the project to the point where it can be presented to the voters. $755K goes to yet another construction project, fortifying and expanding Moharimet's entrance. The federal matching funds are available, so it's now or never, and the board chose now. Mast Way's construction, including a new entrance and four new classrooms, is reportedly complete, though I think the construction fence still lingers.
The budget hearing for school year 19/20 was Monday, January 8. Superintendent Morse broke the news that the millage will be increasing $0.52 in Durham, $1.91 in Lee and actually going down $0.20 in Madbury. On the slide it appears the more we spend the more Madbury's millage goes down; I have to meditate on that one.
I'm overdue for another extensive post on apportionment in the cooperative so I guess this is it. We're all familiar with getting a tax bill twice a year; exactly how that Amount Due line gets calculated is a bit involved. At its simplest, it's the product of two other numbers on the bill, your total tax rate, also known as the millage, tax per thousand dollars, and your property's net value, also called the assessed value. The total tax due is divided into two payments, due July and December. Actually the calculation for this year's tax isn't done until the December bill; the July bill is always half last year's total tax.
The total tax rate is the sum of four millages: County, School, Town and State Ed. The school district isn't involved with the Town and County lines. The State Education tax goes to the state, which metes it back to the towns according to their need. The district has no say in that particular millage but the so-called adequacy aid each town gets from the state goes to lower the town's School millage.
Though it's unstated, the millage impacts on the slide are only talking about the School line. Here are the current amounts from the New Hampshire Department of Revenue:
So in context we see the School (Local Ed) millage increase are .52/14.93 = 3.5% for Durham, 10% for Lee, and -1% for Madbury.
As I write this I don't know why Lee's estimate is so large. Keep reading and we'll try to find out together. After the superintendent reported it he didn't try to justify it, he backpedaled. He gave a lecture about how poor the predictions have been over time. He presented a slide with the sum of the state ed and local ed over the years, confusingly called that the increase each year, and showed how the predictions were often off.
This was odd for several reasons. We don't actually predict that total, we predict the change in the State Ed line. And it misses the point that the intent is not really to predict the change in millage; the intent is to give us all a number which we can each multiply by our assessment to estimate the change in our taxes. It's that estimate in dollars which we want to know is accurate or not.
The predictions are assuming assessments are constants, the same as last year. So the millages are really proxies for the change in the amount of school tax. If the town's valuation goes up (it's tied to the real estate market) it's liable for more school tax even though its millage would go down. The positive estimate more accurately reflects the change in the tax you'll have to pay which makes it a more useful indicator than a correct prediction in the millage without a corresponding prediction in valuation. What I mean is Lee's millage could actually go down but we still might be paying 10% more tax like our predicted millage told us.
The superintendent is right that some alarming predictions we've seen have regressed in actuality, appearing smaller than predicted. But presumably a big predicted change in general means a big actual change, otherwise why would be bother to make predictions?
How Apportionment Works, continued
Let's talk about how we pay for schools. We're only talking about the School (Local Ed) tax.
The top line for us today is the amount to apportion, let's call it B for budget. Each fall the district prepares a budget which the voters approve in March. The budget has a total amount of expenses E and some non-state revenue R. E is all the spending, including operations and debt service. R is the expected revenue, including grants from the federal government, income from renting facilities, last year's fund balance (unspent money), and tuition income. The amount to apportion is B = E - R. Simple.
Not so fast. There's Keno Kindergarten Aid to each town and this year Durham got $97K in a column marked "National Forest or Town Impact Fees." There is also a small adequacy aid adjustment which is different for each town. All of that seems like it was counted as part of R. That's backed out by adding it back to B because it will be accounted for later as part of the state aid to each town. Let's call the sum of the backouts S, so now B = E - R + S. (When the equations spell out "BEERS" it's time to start drinking.)
Here's how B is apportioned, split among the towns. Half of B is split proportional to the student population from each town. There's a measure called ADM, Average Daily Membership. For each student in public school it's the fraction of the year they're enrolled, so 1 for a student enrolled all year. It's added up for each town and the result is the ADM for each town, the number of students from each town. There are rules to count students which the district pays tuition to send elsewhere and other unusual situations.
The other half of B is split proportional to the equalized assessed property values for each town. Then each town receives adequacy aid computed as $3700 per student, with around $2000 extra for each special education and free-and-reduced-lunch student and $700 for each ESL and poor third grade readers. Let's call the amount A; there's a different A for each town.
Call the result of the apportionment f, the percent of B that a given town owes the school district. There's T=fB-A left to split among the property owners in town. That's done in proportion to the net assessed value of their property. Each lot has a certain value L including land and buildings; the sum of all of those is the total valuation of the town V. (UNH buildings and government buildings don't count.) The millage for the school tax line is T/V and your share in dollars is LT/V.
This is a very complicated system that in the end works out to approximately a pizza with 9 slices; Durham buys 4, Lee 2, Madbury 1, and the state 2. The 4:2:1 is pretty close to the equalized property values of the three towns so pretty much works out to the same as if we were one big town. 4:2:1 is 57%:29%:14%; in current school year FY19 equalized valuations D:L:M is 59%:27%:13%, final local tax assessments 57%:28%:15%.
There are some straightforward reasons why these numbers swing from town to town, so pretty often it seems like one town or another is bearing a disproportional burden. Most obviously, the number of students from each town varies as new students enroll in Kindergarten, old students graduate, some leave for prep school, and some move in or out of town. Half of the bill is split according to the average number of enrolled students from each town.
The other half is split according to the equalized town valuations. So if more real estate is built in a town, its share of tax goes up. If real estate becomes tax exempt in a town, that town's share of the school tax decreases. Assessments occur constantly, so these numbers fluctuate.
Less straightforwardly, it's equalized valuation. Each year the state does a calculation that compares sale prices to assessments in each town and determines the factor for your town. That's the number which when multiplied by the market value of your house gives your assessment. Sometimes there aren't very many sales so there's some randomness in these numbers. The factor is called the Equalization Ratio. Assessed values tend to be lower than market values, so the equalization ratio is usually less than one.
Equalization makes your tax bill a financial derivative where you're short your own town's real estate and long the other two towns. When home sale prices go up in your town more than the other two your tax bill goes up as well.
If that's not complicated enough, there is the timing. Let's talk about the current school year, 18/19, known as FY19 in the budget. The district prepared the FY19 budget in fall 2017, presented it to the public in January and February 2018, and the voters approved it March 2018. The state calculates the apportionment and associated tax rates by the first half of October, 2018 in time to be reflected in the tax bills which are due December 1, 2018.
That October 2018 report is calculated using the 16-17 school year attendance for each town; i.e the FY19 apportionment uses FY17 attendance data. It also uses the 2016 valuations and equalization ratios. So the data which goes into the calculation is two or three years old. That should make it easier to predict next year.
OK, a lot of words and we still don't know why Lee's up 10%. It's probably because it's its turn. We see how as the numbers slosh around from year to year the burden appears to fall unequally on the towns, but it evens out over time. Lee's been lucky lately and its luck just ran out.
Let's make a spreadsheet that tries to capture the calculation for the last few years and see if we can gather the data for the prediction. The data comes from NH DOE and NH DRA, 1 2 3 4 5 etc.
[somehow this reverted to an older version, along with many text edits. The world will just have to live without those edits, but I have the updated table.]
For the FY20 prediction, I used the $47.45M top line off the warrant. I didn't find the predicted revenue in the budget so I fudged the FY20 revenue until I got about 3.5% impact. I made it a bit higher because of the Keno, which I left the same except for removing Durham's tree grant which looked like a one time thing. I used the enrollment data the superintendent showed at the budget hearing because I couldn't find a more official report. I left the current assessments unchanged and got the latest version of the equalized value which generally matches the one on the apportionment calculation.
The result wasn't that close to the forecasts from the district. Lee's millage went up $1.82, not quite the $1.91 but pretty good. Durham is up $0.49, again not quite $0.52. Madbury is predicted up $0.52 as well; I didn't see the downward -$0.20 rate change as predicted by the district. The district may predict or get guidance on the state aid as well which they incorporate.
The reasons for Lee's rise are apparent. The main driver is the equalized value that went from $473.69M to $530.86M, a whopping 12% increase, leading to a 6% rise in taxes. Actually the effect is not quite so big because Durham and Madbury saw increases as well, though less than half as big. The modified raw assessed value only changed from $446.75M to $451.76M, a 1% increase. So the change is almost entirely in the Equalization Ratio, which went from 94.3 to 85, a 10% change. In other words from a few sales in Lee in 2017 the state determined all real estate in Lee was worth 10% more than in 2016. That's why Lee's taxes are going up this year. Attendance-wise Lee's share of the students went from 33.94% to 34.64%, an increase of 2%, adding 1% to the tax (because it's half the apportionment formula). The remaining component of the increase is the increase of the budget itself, adding another 3%.
We can try to predict the future beyond next year. The 2018 equalization ratios come out on May 1, 2019. Assuming no surprises, we might expect Durham to see a spike in their fraction of the FY21 apportionment as the 2018 spike in real estate gets incorporated into the apportionment formula. Until then the more raw real estate in Durham the more property to split the bill, so a lower millage. But a few years later the additional real estate is incorporated into the apportionment so the millage goes up again, but only half as much as it went down because equalized value is only half the bill.
This is a long post I've been composing for a week or so now, so I think it's time to let it go out. I'll write more after the deliberative session.