Salem public schools will hold a special school election May 27 to restructure the debt in order to meet the requirements of Amendment 74, Salem Superintendent Bob Foster said.
Amendment 74, passed in 1996, requires that all public schools dedicate 25 mills to maintenance and operations, Foster explained.
The Legislature passed Act 1300 in 1997 which allowed schools to count excess debt service mills toward the 25 mill maintenance and operations requirement. Excess debt service mills are those mills required by lending institutions as insurance that schools will have enough revenue to make their debt payments each year.
Foster said a prime example is if a school district needed 10 mills to pay its debt, the lending agency could require an assessment of 11. If the value of the property in the district were to decline or if officials were not able to collect a normal percentage of the district's property taxes, the extra mill would be used to pay for the deficiency, Foster continued.
The Arkansas Supreme Court ruled in the Lake View decision that the Legislature was wrong to allow these excess mills to be counted toward the 25-mill requirement under Amendment 74. All but a few districts have to restructure their debt to be in compliance with the ruling.
Foster said it is possible to get lower interest rates if the school district is able to complete the transaction early instead of proposing a special election during the regular election in the fall.
"We are fortunate because we can restructure our debt in such a way that will allow us to lower our debt payment thus allowing us to transfer mills dedicated for that purpose to maintenance and operations. This proposal will allow us to do this without having to ask our patrons for a property tax increase. Because we will be able to lower our debt payment, this proposal will not have a negative effect on the district's present income," Foster said.
Voters will have a choice to vote for the proposal and see no increase in property taxes or to vote against the proposal and realize an 8.4 mill increase in property taxes, Foster said.
Because Salem schools only have 16.6 mills dedicated to maintenance and operations, the proposal needs to pass or the quorum court is required by law to increase the taxes to meet the requirements of Amendment 74 no later than Jan. 1, 2004, Foster said.
Foster said the election is an effort by the Salem School Board to keep property taxes as low as possible. He said he hopes the public will vote May 27 because a vote for this proposal is a vote to keep property taxes the same while a vote against it will require the quorum court to increase the property taxes.