Coventry commission, school board debate proposed income tax

The Financial Planning and Supervision Commission asked plenty of questions during a joint meeting between the commission and the Coventry Local Schools Board of Education.

During the July 23 special meeting, the topic of discussion was a proposed 1 percent earned income tax issue. The Commission, during a previous meeting, voted 0-5 on a resolution to place the issue on the ballot because it wanted to learn more information about the proposed levy and members didn’t like that the board combined a normal two-step process into one.

At that time, the Board of Education insisted it only passed a resolution to request the millage, but the resolution stated to request the millage and to put the issue on the ballot. During a special meeting of the commission, school board member Ron Reed blamed the local newspapers – including The Suburbanite – for getting the story wrong.

That proved not to be the case, however, as during the combined school board and commission meeting, the school board and treasurer admitted the newspapers did not get the story wrong and said the wrong resolution was distributed.

Earned income tax

Superintendent Lisa Blough said the district entered fiscal watch in 1997 and remained there until 2015 when it was placed into fiscal emergency. The district has remained in fiscal emergency ever since and one of the steps it must do to be removed is to show a positive five-year-forecast.

Throughout the last few years, the district borrowed $4.8 million from the state, which was repaid in two years; made cuts; reduced open enrollment; and reduced programs.

Blough said the district is “pretty bare-bones.”

While the district’s five-year-forecast shows a positive ending balance for all five years, the district is spending more than it is bringing in and Blough said the district needs to stop deficit spending.

“We cannot cut our way out of the problem,” Blough said.

Board of Education Vice President Josh Hostetler gave an overview of the proposed income tax and said there are two different types: traditional and earned income. The earned income tax is on earned income while the traditional income tax is on all income. Only those living within the Coventry School district boundaries would have to pay the earned income tax. Businesses would be exempt from the tax on the first $250,000 in earned income.

He said the district decided to go with the earned income tax because it will have a direct positive impact on the five-year-forecast. The district also wants to let a 2015 property tax levy drop off and not be renewed. That levy will expire at the end of this year but it will collect through 2020.

Hostetler said by letting the property tax levy drop off, it will provide some relief for those on a fixed income and retirees. He said the Board looked at several options before coming to its decision.

The first would be to renew the property tax levy from 2015, which collects $2 million annually. He said this would only maintain status quo and wouldn’t bring in the needed additional revenue.

The second option would be to place the 1 percent income tax on the ballot, which would generate $2.6 million annually and let the property tax levy from 2015 drop off.

The third option would be to place a 0.25-percent income tax on the ballot and renew the property tax levy. This would generate some revenue but not as much as the district would like.

Hostetler said with the income tax, some taxpayers will pay fewer taxes and some will pay more. Much of that hinges on property values.

Concerns

Commission member Barb Mattei-Smith asked how the district came up with the number of needing $2.6 million. Blough said that was the amount the State Auditor’s Office said was needed to end with a cash balance. Several commission members said they have never heard that and believe only requirement they were aware of was not to deficit spend and to have a positive five-year cash balance.

Blough said this was a new requirement they were recently made aware of.

Commission member Sean Fremon disagreed and said that is not the case.

Fremon also asked the district how many current levies the district has taxpayers paying.

Treasurer Sherry Tyson counted on a sheet and said eight.

“It’s nine levies and you didn’t even know that until now,” Fremon said.

He also said the district told the commission the 1 percent income tax issue was the only option.

“Do you have a better one,” board member Jeff Skaggs said.

Fremon said he believes there are a lot of options the Board didn’t bother to look at.

Commission member Holly Miller asked about renewing the property tax levy and lowering the percent on the income tax. Hostetler said that was something the Board didn’t look into.

Miller and Fremon believes the earned income tax levy lets retirees off the hook and neither believe that is fair.

Fremon also raised a question about what happens if the community becomes dominated by retirees and the tax base is eroded away.

Hostetler countered that if it were all retirees, there would be no kids to educate.

“If that is your goal, then fine,” Fremon said.

Hostetler said he believes the tax base will grow in time.

Of Coventry Schools 300 employees, 63 of them live in the district. Fremon doesn’t believe that is fair because the income tax means a 1 percent pay cut for the teachers who live in the district.

Reed, however, said their property taxes would go down.

Fremon also raised concerns about the district’s healthcare provider and why the Board is dragging its feet to find a cheaper plan. Board President Chris Davis said the Board has had several meetings with representatives about finding a different insurance provider.

“It has been four years and you are still looking at it,” Fremon said.

Miller said she wants the insurance change done within two months.

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This story was also published in The Suburbanite. www.thesuburbanite.com