What's on the ballot? Part II - The Sinking Fund

Ballot proposals always seem to be written so that only a lawyer could understand them. Anyway, who has time to read them while people tap their feet waiting for your voting booth? Fear not, dear reader – we’re here to help.

What you’ll see on the ballot: What it really means:

PUBLIC SCHOOLS OF THE CITY OF ANN ARBOR

PROPOSAL TO CONTINUE SINKING FUND

The following proposal would continue and extend the authority (last approved by the voters in 2004 and which expires with the 2009 levy) for the School District to levy a sinking fund millage. This proposal would also restore the prior authorization, which was rolled back through application of the Headlee Amendment to the Michigan Constitution to .9861 mill, to 1.00 mill, and would allow the use of the proceeds of the millage to purchase school buses, furnishings, equipment and technology equipment, to the extent permitted by law.

A "sinking fund" is a funny name for a building repair and renovation fund. Capital expenses, like buildings, major repair and renovation, etc., are kept completely separate from the operating budget (which pays for salaries and day-to-day costs) by law. Spending for operations is regulated by a state formula, and local taxes for the operating budgets are strictly limited by state law. Capital spending is entirely the responsibility of the local school district and its residents; the state does not contribute to this.

Schools can raise money for buildings in a couple of ways: in a large lump by selling bonds, and asking voters to pass a tax to pay off the bonds; or by asking voters to pass a tax to support a "sinking fund" which helps pay for regular repairs and renovations. A bond issue can raise more money, but oftentimes needed repairs and renovations are postponed until the next bond issue, which normally happens every 15 or 20 years. A sinking fund allows residents to give their schools a regular source of funds to make ongoing repairs and renovations, without having to go into debt (issue bonds). This also means that the schools don’t have to dip into their limited operating funds to make urgent repairs.

Special provisions in the state constitution (the Headlee Amendment) force property tax rates to be cut if property values are growing faster than inflation. This “Headlee rollback” reduced the existing sinking fund millage from what had been approved by voters last time; as a result, the district was not getting the full amount voters had supported. The new rate would be reset to a full 1 mil if this proposal passes.

Shall the Public Schools of the City of Ann Arbor, County of Washtenaw, Michigan, be authorized to levy 1.00 mill to create a sinking fund for the purpose of the construction or repair of school buildings and the purchase, improvement and development of sites and, to the extent permitted by law, the purchase of school buses, furnishings and equipment, including instructional technology equipment, by increasing the limitation on the amount of taxes which may be imposed on the taxable value of taxable property in the School District for a period of five (5) years, being the years 2010 to 2014, inclusive? It is estimated that 1.00 mill ($1.00 per $1,000 of taxable valuation) would raise approximately $8,503,000 in the first year that it is levied.

(Under state law, sinking fund proceeds may not be used to pay teacher or administrator salaries.)

__ YES

__ NO

Once the current tax, last approved by the voters in 2004, expires, the “limitation on the taxes that may be imposed” returns to zero. So we are replacing the expiring tax with an identical new tax. State law does not allow the district to call this a renewal, even though that’s exactly what it is.

Right now, districts are not allowed to use sinking funds to buy school buses, or technology hardware (computers), even though they can use bond issues to buy those things. Bills pending in the legislature may allow schools to use sinking funds for these things. Mentioning them in the proposal allows the school do take advantage of that option if state law changes.