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6B - Information Item: Policy statement on the use of Education Excise Tax (EET) funds~ CITY OF BOULDER ~~~~„~ Planning and Development Services ~ ~ 1739 Broadway, Third Floor • P.O. Box 791, Boulder, Colorado 80306-0791 ~ phone 303-441-1880 • fax 303-441-3241 • email plandevelop@ci.boulder.co.us www.ci.boulder.co. us/pwpian/ To . Planning Board From : Peter Pollock, Planning Director Ruth McHeyser, Long Range Planning Manager Susan Richstone, Senior Planner Date : May 15, 2003 Subject : Information Item: policy statement on the use of Education Excise Tax (EET) funds The City Council will be considering a proposed policy statement on the use of EET funds. There will be an opportunity for Planning Board to comment on the proposed policy under "Matters" at the May 22 meeting. BACKGROUND The Education Excise Tax was approved by voters in November, 1994. All new residential units are currently taxed at $1.04 per square foot of floor area, up to a cap of 6000 square feet. The amount of the tax increases each year by the Consumer Price Index. Since its inception in 1995, a total of $3,291,217 has been collected as of January 1, 2003. In March, 2004 the City Council approved spending $1,880,000 for a joint facility needs assessment with the school district and to install synthetic turf at Boulder and Fairview High School fields. This was the first time City Council approved the expenditure of EET funds since the fund's inception. At the March meeting, City Council members requested that staff return to Council with options for use of the funds in the future and an analysis of the tax rate. s:\plan\pb-items~nemos\sr5-03aet.mem 1 ANALYSIS Use of EET funds The EET is a general fl:~ ~; revenue. The intent of the tax, as stated in the city code is for the "development of public education facilities and services..." Please see the memorandum from the City Attorney's Office in Attachment A for more discussion of this issue. Policy guidelines for future EET expenditures The EET was originally envisioned as a tax on new residential units to offset impacts to schools. At the time the EET was put in place the expectation was that a new school would be needed in North Boulder to accommodate new residential growth. Since that time, declining enrollment combined with open enrollment have resulted in North Boulder student growth being accommodated through available capacity in existing schools throughout the city. The key school issue facing the city in recent years has been school closures and consolidations. The school issues task force convened by the city in 2000 recommended that EET funds be used to maintain the viability of Boulder High by using the funds to help in developing the fields at the Valmont City Park. City Council has expressed an interest in exploring the potential for using EET funds to help prevent school closures. Some principles that could help in guiding expenditure of EET funds include: 1. EET funds should be used for capital expenditures only, and not for operational expenditures. It is a one-time revenue and therefore should be used for one-time and not ongoing expenditures. 2. EET funds may be used to help fund facilities needed to serve new growth. The tax was originally envisioned as a tax to offset the impacts of new growth that would be utilized for facilities needed to serve new growth. Currently there may not be a need for new facilities in light of the excess capacity in several existing facilities. However, there may be new facility needs in the future. New facilities would require significant funds through either a bond issue or sale of existing facilities. However, the EET could provide a source for some funding. 3. EET funds may be utilized to improve or renovate existing facilities. Several of the districYs existing facilities in the city are aging. It may be beneficial to use EET funds to improve existing facilities. This could include improvements to recreational facilities, such as the recent expenditure of funds to install artificial turf at Fairview and Boulder High Schools. 4. EET funds may be used to enhance the viability of existing facilities. This could include recreational facilities, such as fields at Valmont City Park that would enhance the viability of Boulder High School. It could also include using funds to help address closure and consolidation issues if there are opportunities to enhance facilities to meet current school disirict needs. I s:\plan\pb-itemsUnemos\sr5-03eet.mem 2 , 5. EET funds should be expended in a manner that supports both Boulder Valiey School District and city of Boulder needs and objectives. Since EET funds are one- time revenues, are limited, and will have competing demands for their use, it wili be important to prioritize use of the funds. Therefore, uses of the fund that not only serve the Boulder Valley School DistricYs educational purposes, but also provide additional benefits to the city should receive priority. Uses such as fields at Valmont City Park would fit this criteria as would other uses of the funds that improve the viability of existing neighborhood schools. Future uses of the fund The only other expenditure of EET funds that has been discussed with school district staff is for fields at Valmont City Park. This use of the funds would meet several of the criteria outlined above. Just as the use of the funds to install artificial turf was not contemplated until recently, suggestions for use of the funds will change in the future. Therefore, the intent at this time is to put in place some policies that can help in the decision-making process for use of the funds in the future. Projected fund revenues At the current rate of $1.04 per square foot (adjusted annually to the CPI), the EET is projected to generate an additional $3.5 million through the end of the year 2010. The City Council has the ability to increase the tax up to $3.43 per square foot. If the Council were to increase the tax to its maximum, this could generate an additional $6.8 million over the same time period, for total additional revenues of approximately $10.3 million. Today, a new 2000 square foot home pays $2080 in Education Excise Taxes. If City Council were to raise the tax to the maximum, the EET for the same 2000 square foot home would increase to $6,860. Process for programming expenditures The city's annual Capital Improvements Programming (CIP) process is used to program capital expenditures by the city, including the use of Development Excise Tax Funds (DET). The CIP process is an annual process that evaluates the amount of funding available and earmarks funding for specific projects in the future six years. The annual CIP process provides an existing city process to program the use of EET funds. Staff believes that it will be important to include policy guidance that EET funds are intended to be used for large capital expenditures and programmed for expenditure infrequently. STAFF RECOMMENDATION City Council approval of the following policy guidelines for future use of Education Excise Tax revenues: 3 s:\plan\pb-items~nemos\sr5-03 eet.mem 1. Shall be used for capital expenditures only, and not for operational expenditures. 2. Shall be used to: • help fund facilities needed to serve new growth • improve or renovate existing facilities • enhance the viability of existing facilities, including recreational facilities 3. Shall be expended in a manner that supports both Boulder Valley School District and city of Boulder needs and objectives. 4. Shall be programmed for expenditure as part of the city's Capital Improvement Programming process. The intent is that funds will be used for large capital expenditures that exceed $1,000,000 and will be programmed for expenditure on an infrequent basis. ATTACHMENTS: Attachment A: Relationship between Education Excise Tax and Consolidation Discussion s:\plan\pb-items~memos\sr5-03eet.mem 4 CITY OF BOULDER, COLORADO OfGce of the City Attorney MunicipalDuilding 1777 Uroadway Post Office ~ox 791 Boulder, Colorado 8030b Telephone(303)441-3020 ~acsimile (303) 441-3859 ATTACHMENT A MEMORANDUM TO: William R. Toor, Mayor Members of the City Council Prank W. Bruno, City Manager / w ~ ( ~ ~~~', ~ // ~ ~ ~/ ~ ~• Tl~ FROM: Joseph N. de Raismes, III, City Attorney SUBJECT: Relationship Between Education Excise T~ (EET) and Consolidation Discussion DATE: Mazch 4, 2003 On February 28, Mark Ruzzin asked for a response to: "how EET funds might relate to the B VSD consolidation discussion." Council has already received a copy of the agenda materials dated February 20. In those matarials, the first paragraph under Analysis indicated that: "The Education Excise Tax (EET), adopted by Ordinance No. 5689, approved by the electorate on November 8, 1994, and codified by Ordinance No. 5662, is a general fund revenue. However, the City Council has indicated its intent that EET be used for the purpose of `promoting the development of public education facilities and services' and for `education related purposes, including without limitation development of public educational facilities and services or tax refunds or set-offs relating thereto."' The full text of Section 3-11-1, B.R.C. 1981, is as follows: 3-11-1 Legislative Intent. It is the purpose of this chapter to promote the development of pubiic educational facilities and services in the city. Revenues from the ta~c, together with any earnings thereon, shall be deposited in a designated account of the general fund and shall therefore be available to pay for the general expenses of government. However, although the city council recognizes that it cannot bind future city councils, it nonetheless declares its intantion that the revenues generated by the education excise taac be appropriated by future city councils only for education related purposes, including without limitation development of public educational facilities and services or tax refunds or setoffs relating thereto. This language needs to be interpreted in conjunction with the issues that have been raised in the school consolidation discussion. The issues primarily concern the cost of maintaining small schools, when the same or even improved educational services might be delivered in consolidated school settings. This means that the principal use of education excise tax which might affect the S:~PLAMPB-ITEMSVdGMOS~r-cetane.wpd consolidation discussion would be to find some method of "subsidizing" the maintenance of smaller schools in Boulder, thus equalizing the cost of such schools with the cost of providing services to developing azeas, with more children per school and newly-constructed, more efficient school facilities. There appeaz to be four approaches to doing this, with differing impacts: (1) Direct Subsidy. The EET could be used to subsidize operating expenses in "inefficienY'schools, to equalize the cost to the school district. This would require a direct payment to the school district, which would be at least risky under the Colorado School Finance Act. This is principally an issue for Dick Bump, general counsel for the school district, to deternune. But discussions with Mr. Bump indicate that there would be a significant legal issue in paying money to the district, in addition to the issue of principle raised by different levels of support for people in different portions of the school district territory. (2) Indirect Subsidy. The same effect could be reached by an indirect subsidy, with the City undertaking to perform school district functions itsel£ The school interventionists funded in part by City general funds aze a good example of suesa ar~ indirect subsidy. These seems not to have raised School Finance Act questions. Thus, the issue is to deternune what indirect subsidy might be considered that meets the City's public purposes and how to link that to consolidation -- or rather, to avoidance of consolidation. The EET is a problematic revenue source for this purpose, since it is a one-time tas, and thus inappropriate for an ongoing expenditure, but perhaps it could be used for a transitional period. The issue of equality across the district would remain. (3) Capital Facilities. Alternatively, operating costs could be offset by the construction or renovation of capital facilities which in turn would reduce operating costs. A prime example of this would be the installation of artificial turf on the two fields at Fairview and Boulder High, which would offset the expenditure of funds by the school district under the current situation. At Fairview alone, the field has had to be replaced three times in the last five years, which results in an annualized maintenance cost for restoration of turf alone of $7,000. Additional maintenance costs at Fairview are now $25,600 per year. Maintenance costs at Boulder High are $12,000 per yeaz, not including turf replacement. In addition, annual watering costs on the two fields could be up to $8,550. And, of course, the current drought situation may make it impossible for the district, at any cost, to maintain adequate natural turf fields for its sports and physical education programs. Thus, on the high end, the operating costs savings that could be attributed from the installation of fields at both Fairview and Boulder High would be up to $60,000 plus per year. Such annual savings will help address the financial issues that the school district is facing. In order to deternune the potential for avoidance of consolidation, the savings would have to be compared with the amounts that the school district believes to be required to keep open particulaz facilities. In a similar vein, school buildings and equipment could be funded with the EET, and the lower cost of maintaining renovated facilities would cut the funding shortfall that the school district faces, as well as funding deferred maintenance that the school district would not be able to fund. It should be noted that both Don Orr and Dick Bump have stated that Fairview remains the school districYs priority, and the 3istrict would not install artificial turf at Boulder High alone. It should also be noted that the cost of restoring natural turf at Fairview is substantially more than the $7,000 annual number over the last five years. The sub-base is in such poor condition that S;NLAMPH-TTEMS~MEMOS~Sr-ee~etta.wpd it would be necessary to import 8-12" of topsoil. The track would need to be raised to accommodate the raised field level. This makes sense in that the track is in poor condition and should be replaced. The track should also have an aco-drain installed on its perimeter. The `D' areas at the ends of the field would be paved and surfaced with all-weather track. The irrigation system would need to be modified to suit the raised level. The school district estimates the costs as follows: Re-sod, including removal, scarifying, new topsoil, regrading and modifying the irrigation system. 79000sf x $2/sf = $158,000 Aco-drain installed on inside of track: $30,000 New asphalt track and `D' areas surfaced with latex all-weather coating: Asphalt: $90,000 All weather surface: $132,000 Total: $410,000 (4) Lease/Purchase. The EET could also be used to deal with the consequences of a consolidation, as by leasing a school or even participating in the purchase of a school site, to avoid having the site sold and the school permanently closed to educational functions. This needs to be balanced against the relatively small resources of the EET fund, the ongoing nature of the lease costs and the high cost of actually buying a school building. However, the memorandum of understanding between the school district and the City dated Apri19, 2002 provides for a process for the City to consider such a purchase, and the EET would inevitably have to be considered as a source -- through probably not the only source -- of funding for such a lease/purchase. Evaluation of the need is the other issue with a leaselpurchase, especially for historically designated schools which are unlikely to change very much or to become unavailable for subsequent school use. Again, any of these expenditures is legally appropriate under the ordinance. The only question is which best satisfies the needs of the school district and which produces the best spin-off benefits for the City, which, after all, serves the same student population as the school district. Recreational facilities are a good choice that satisfies both goals. Thus, Broomfield and Louisville have spent $617,000 and $921,000, respectively on recreational facilities and equipment (mainly on gymnasiums) out of their education sales and excise taaces. The oniy non-recreational expenditure was L.ouisville's dedication of $85,000 for technology projects at Louisville schools. After the school district request for the two artificial turf fields is addressed, the additional expenditure suggested by the staff negotiating group between the City and the school district includes a 2003 study of alternative recreational sites on which City/school district cooperation could be pursued, which would appear to be the first thing that should be done in any case to attempt to reconcile the recreational missions of the City and the school district. Staff also is suggesting potential expenditures of funds in Area Five at Valmont Park. Valmont was suggested by the School Issues Task Force appointed by the City Manager as the first priority for use of EET funds and appears to be an ideal way to jump-start the development of Valmont, which, as Council will recall, was funded only for land acquisition, with the hope that cooperative ventures such as this might provide the needed funds for development. The first step in pursing a joint venture with the school district at the Valmont site is a new site design, which would be scheduled in 2004 if Council approves the expenditure of EET funds for this purpose. But there is obviously no need to make that decision right now. ~ S:NLAMPB-TTHMSVv1EMOSlsneelatta.wpd MEMORANDUM May 29, 2003 MATTERS FROM THE PLANNING DIRECTOR TO: Planning Board FROM: Peter Pollock, Director, Planning Department Robert O Cole, Director, Land Use Review Robert Myers, Case Manager SUBJECT: This memorandum constitutes official notice, as required by Section 79 ofthe City of Boulder Charter, of a request far an ailey right-of-way vacation. The City of Boulder is initiating vacation of approximately seven inches of a public access sidewalk easement located at 5035 Chaparral Court. PLANNING BOARD ACTION REOUESTED: No action required. If any Planning Board members wish to comment on this item, the comments will be forwarded to City Council. See attached memorandum to be sent to City Council.