ELKHART — It's a bit more expensive to live in Elkhart due to recent sewer rate hikes in the city.
With the Elkhart and Concord school district property tax hike proposals on the ballot Tuesday, May 6, the cost of living could go up even more.
Some sewer, school referendum background
Here are some basics:
Sewer rate hike history: Elkhart city officials in 2012 approved an ordinance to gradually increase the sewer rate in the city through 2015, a bid to generate the funds needed to cover the $135 million, multi-year upgrade of the city's sewer system. The upgrade, including installation of several massive underground stormwater holding tanks, aims to prevent discharge of untreated sewage into the waterways, per heightened federal rules.
The rate hikes: The first sewer rate increase, 27 percent, went into effect in January 2013, followed by a 7 percent hike in January 2014. The final increase per the 2012 ordinance, 12 percent, is set to go in effect in January 2015.
School referendum basics: The property tax rate hikes proposed in the school referendum questions, two in Elkhart schools and one in Concord, aim to generate funds to help offset losses brought on by property tax caps. The new tax caps, per 2008 state legislation, have hit Elkhart and Concord schools hard, reducing funding for transportation, among other things.
The Elkhart schools referendums: One of Elkhart schools' two referendums, if approved by voters on Tuesday, May 6, would increase the property tax rate by an estimated 13.15 cents per $100 of net assessed valuation, generating around $4 million for seven years, or around $28 million in all. The funds would be used to help cover busing and other transportation costs.
The other Elkhart schools' referendum question, if approved, calls for an increase the tax rate by an estimated 5.45 cents over nearly 20 years, enabling the district to take on $19.03 million in debt for a range of capital projects.
The Concord schools referendum: The Concord referendum, if approved, would increase the tax rate by an estimated 40.5 cents per $100 of valuation, generating around $3.9 million per year for seven years, or about $27.3 million for school functions.
Elkhart residents living in the Elkhart Community Schools boundaries, depending on home value, could end up paying around $209 per year in new sewer fees and school property taxes by 2017 if the two Elkhart schools referendum questions are approved. Most of that, $148, is attributable to sewer fee increases, while $61 would come from increased school taxes.
City residents in the Concord Community Schools district could see increases of nearly $281 in sewer fees and school taxes if the Concord question is approved. Of the total, $148 stems from sewer fee hikes with another $133 in school tax hikes.
Still, calculating the potential increase isn't a black-and-white proposal.
Numerous factors figure in the exact magnitude of any spike in expenses at the individual level, like home value and amount of water used. The $209 and $281 estimates cited above are based on average household water consumption and homes with assessed valuations of $100,000.
Complicating things further, bond payments for projects started years ago in the Concord and Elkhart school districts will start phasing out in years to come. That will reduce expenses for the school systems, potentially helping offset, at least partially, property tax hikes that result from the referendum questions, if approved, according to officials from the two school districts.
Also of note, the Elkhart Community Schools Board of Trustees passed a resolution in January making a commitment to freeze the overall 2015 property tax rate for the district at the 2014 level, $1.2861 per $100 of net assessed valuation.
Thus, even if the two Elkhart school referendums are approved, the overall tax rate won't increase, at least next year. That should help keep the school portion of impacted homeowners' 2015 tax bills flat compared to 2014.
The expected end in 2015 of bond payments on high school upgrade projects dating to the late 1990s will reduce upward pressure on the tax rate and may even create downward pressure, explained Doug Hasler, executive director of support services for Elkhart Community Schools. It will help offset the impact of new taxes resulting from the referendums, enabling school officials to hold the overall district tax rate steady, at least in 2015.
If that all sounds complicated, it is. But nothing about taxes ever seems simple.
NO LINK BETWEEN SEWER HIKE, SCHOOL REFERENDUMS
To be sure, the sewer rate hikes and school referendum questions aren't linked.
City officials in 2012 approved the ordinance increasing the sewer rates to help cover the costs of planned and coming upgrades to the sewer system. Officials in the Elkhart and Concord school systems seek the property tax rate hikes outlined in the referendum questions to help offset losses to property tax caps. (For more, see the sidebar.)
But for Elkhart homeowners who pay bills, they are related. They'll result in new out-of-pocket expenses, taking money that might be spent on something else.
The sewer rate increase — not applicable to homeowners who have septic systems and don't rely on city service — is a bit more cut-and-dried than the change brought about by the school referendums, if they're approved.
Per the change, average household sewer customers in Elkhart — those who use 700 cubic feet of water per month — experienced a $6.36 per month hike in their bills in 2013, according to Laura Kolo, utility services manager in the Elkhart Public Works and Utilities Department. In January 2014, another $2.09 per month increase went into effect, and a $3.85 increase will go into effect in January 2015.
The end result will be a $12.30 per month increase in fees for average water users, from $23.51 in 2012 to $35.81 in 2015. Annualized, the upshot in 2015 will be a $147.60 increase in sewer fees compared to 2012. Those who use more water than the average will see a larger increase, while those who use less won't see as big an impact.
The school property tax hikes, if approved, would have varying impacts on homeowners depending on the value of their homes.
Using the example of a home with an assessed valuation of $100,000, the two Elkhart schools rate hikes, if approved, would increase annual taxes by roughly $43 in 2015, $52 in 2016 and $61 in 2017. That's factoring homestead, supplemental homestead and mortgage deductions on the home and taking into account that part of the tax hike probably wouldn't be completely phased in until 2017.
The Concord school system seeks only the one tax hike, which would go into effect in 2015, resulting in the $133 tax bill increase for the owner of a $100,000 home.
The more expensive the home, the bigger the tax increase in the two school systems. A less expensive home will see a smaller increase.
Other factors bear on the potential impact over the years. Hasler notes that new development in the Elkhart school district — new homes and businesses — would help dilute the impact for others whose homes are already on the tax rolls. The tax burden would be spread over a larger pool, reducing individual impact.
Changes from year to year in assessed valuation of individual homes would also have an impact.
Notably, Elkhart schools has additional bond payments phasing out in coming years, aside from the high school bonds, according to Hasler. Bond payments that helped pay for upgrades to Bristol Elementary School and the Elkhart Area Career Center will phase out in two to three years, reducing obligations and creating yet more potential downward pressure on the tax rate.
Concord schools, too, has several bond obligations ending starting in 2017, said Janet Gruwell, business manager for the district. All told, they could reduce overall capital project debt from around $9.9 million a year currently to around $6 million by 2021, putting downward pressure on the tax rate.