For the second year in a row, the Lowndes County School District has declared a shortfall in local tax revenue for its fiscal year.
In a special-call meeting Wednesday, the board declared a more than $2.1 million shortfall in its operating budget for Fiscal Year 2022, which ends today. Last year LCSD declared a shortfall of more than $3 million.
A shortfall is the difference between the amount of money the school district requested from the Lowndes County supervisors at the beginning of the fiscal year and the amount of money the supervisors actually approved the district to receive. It does not mean there is a deficit in the district’s general funds.
In declaring a shortfall prior to June 30, the end of the district’s fiscal year, LCSD can borrow the $2.1 million and repay it over the next three years by raising debt millage specifically for that purpose like the board did with last year’s shortfall.
Each year, county supervisors approve LCSD’s ad valorem tax allotment, collected from property owners based on their property’s assessed value. The district asks for a certain amount of money, and the county sets the number of mills, or the tax rate, necessary to collect it.
By law, the district is allowed to request an increase of up to 4 percent from the previous year’s fund request for operations. An increase of more than 4 and up to 7 percent requires a potential reverse referendum, meaning citizens can sign a petition to get the tax hike on the ballot. More than 7 percent requires a direct referendum.
In each of the last two years, county supervisors have shorted the school district’s request, claiming it exceeded the amount it could legally obtain. LCSD has challenged those decisions in court, claiming what they are asking for is within the parameters of state law. The case is still pending on appeal.
Declaring a shortfall allows for the supervisors to see that the district did need the funds, and the district can request 4 percent up from the final amount the district requested last year.
“Our request is only based on the year before,” LCSD Superintendent Sam Allison said. “We can’t ask for a certain amount more, we can only ask for what we asked for the year before plus 4 percent. … In order to ask for the same amount next year, you have to declare a shortfall. If you don’t declare a shortfall, then you can (base the request on) the amount collected (in ad valorem taxes). In order to keep that in our request, this is why we have to declare a shortfall now.”
There is not a deficit in the general funds, Allison said, but he has routinely added the funds the district is not receiving would help with deferred building maintenance.
“We only requested what we needed, and we didn’t get it,” Allison said.
The district requested roughly $28 million total from ad valorem tax collection for FY 2022 — which includes operations and debt service — but the county approved just less than $26 million.
LCSD lawsuit limbo
LCSD sued the supervisors in 2020 for not fully funding its tax request by more than $3.4 million in property tax revenue. LCSD had claimed roughly $50 million in added assessed value in its tax collection area as “new property,” which can be counted before the 4-percent increase for operations is added to the funding request.
The “new property” LCSD claims comes from fee-in-lieu agreements that have expired. Those agreements allow industries that invest more than $60 million to pay one-third of what their assessed value of taxes would be for up to 10 years. For 2020-21, multiple fees-in-lieu reached their expiration date, and the school district claimed it was entitled to the full collections as new property since it had never been on the tax rolls.
Chancery Court Judge Rodney Faver ruled with the school district in August, saying LCSD could acquire the taxes from expiring fee-in-lieu agreements as new property — meaning it did not count against its 4-percent increase — because those properties had never been on the tax rolls.
However, supervisors have appealed the ruling, and the appeal is not likely to be resolved before mid-2023, according to Tax Assessor Greg Andrews.
“I hope that until a resolution is made. They ruled in our favor in the chancery court, (and) we’ll do whatever we need to do until we get a ruling from the (Mississippi) Supreme Court,” Allison said. “We don’t know when that will be, but we hope it’s before we have to decide (declaring shortfall) again.”
Allison told The Dispatch the district would hold onto the funds until the lawsuit is settled.
For FY 2022, LCSD had 37.19 mills designated for its operating budget, and each mill is worth $520,000. For property owners, one mill means $10 per every $100,000 in assessed property, so four mills would equal $40 per every $100,000.
There will likely be an increase in taxes by the district declaring a shortfall as the millage increased for FY 2022 to fulfill the budget and cover the district’s $3 million shortfall note the school district issued for Fiscal Year 2021.
For the past year, the ad valorem tax rate for LCSD patrons was increased by 5.11 mills to a total of 49.87, meaning property owners paid an additional $51.10 in taxes for every $100,000 of assessed property value.
On Wednesday, the board took no action other than declaring a shortfall, and it will address how the district will move forward with the shortfall within the next few meetings, Allison said.
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