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GOP bill makes schools post 10% down payment before seeking bond vote

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Iowa Legislature

The Iowa State Capitol in Des Moines.

CEDAR RAPIDS — Iowa school districts would be required to post a 10% down payment on general obligation bond referendums under a proposal from Republican leaders in the Iowa House.

Under House File 1, any school district in Iowa would be required to deposit at least 10% of the total cost of the project for which the bonds are to be issued. If the referendum is approved by voters, those funds would have to be used for the project.

In Iowa, school bond issues — basically loans that schools take out typically for 10, 15 or 20 years — require a supermajority of 60% of voters in the district to pass. In passing them, voters agree to repay the loan, with interest, through their property taxes.

Reducing taxes

Rep. Bobby Kaufmann, a Republican from Wilton who leads the Iowa House’s committee on tax policy, said the goal of the legislation is to start a conversation on ways to reduce property taxes. The proposal is co-sponsored by Iowa Speaker of the House Pat Grassley.

Kaufmann said the proposals are not set in stone, but that any school or local government leaders who have concerns should come to him with alternative proposals.

That includes the 10% payment requirement for bonding, Kaufmann said.

“When it comes to some bonding referendums, there have been some bad actors — certainly not all, by any stretch, but there certainly have been some bad actors in terms of not necessarily financing within their means,” Kaufmann said. “However, establishing a baseline for how everybody should operate on financing is important. …

“The goal is certainly not to eliminate (bonding). The goal is to make sure that it’s practical and fiscally responsible, which a lot of schools and cities are already there,” Kaufmann added. “But this is the conversation starter to say, ‘Hey, we’re going to have all the rules for everybody laid out so there can’t be any bad actors. And the overall goal is to reduce property tax burdens.”

Sen. Dan Dawson, a Republican from Council Bluffs who leads the Senate’s tax policy committee, said he is happy House Republicans have proposed something that creates a debate around property tax laws, but he fell short of endorsing the plan.

Dawson said Senate Republicans will be proposing their own property tax legislation, and that it will take a different approach than House Republicans’ proposal.

“What I really appreciate in the House bill is that we’re all talking about big ideas,” Dawson said. “We’re going to take a different track, but at least we’re talking about bigger ideas of how to reform the system.”

Educators opposed

Organizations that represent Iowa’s school boards and school administrators oppose the bill and, specifically, the portion that adds the down payment requirement starting July 1. The bill also includes an extensive notification process to voters of an upcoming bond referendum.

The School Administrators of Iowa opposes the bill because of what it calls the “burdensome expectations it puts on school districts,” Executive Director Lisa Remy said. The Iowa Association of School Boards says the proposal would limit the ability for a school district to seek an election to issue bonds.

“It is likely that districts will not have the ability to designate and deposit 10% in their current funds to be set aside to be used solely for the project,” said Shawn Snyder, the school board organization’s finance expert. “The reason to hold a bond election is to get approval from the voters to pay for the specific proposals.”

Funds schools could consider using for the 10% down payment include the Physical Plant and Equipment Levy (PPEL), an annual property tax levy that can be used to maintain school buildings, complete site improvements and purchase school equipment. And Secure an Advanced Vision for Education (SAVE) is a sales tax for school infrastructure.

But Cedar Rapids schools interim Superintendent Art Sathoff said “no school” can budget for a new elementary or high school with just SAVE or PPEL. Bond referendums are necessary to continue making improvements to Iowa schools, he said.

The Cedar Rapids Community School District plans a $312 million general bond referendum this fall. Under the GOP proposal, the district would be required to make a $31.2 million down payment before it could ask voters for the rest.

Another way districts could fund these projects is “wealthy donors,” Sathoff said. “If you’re in line for a $300 million inheritance, we’d let you share it with us,” he joked.

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