Calculating the Cost of Closing Schools: Tax Revenue

I’m not a numbers guy. In fact, as dangerous as this is to mention in an engineering town, I hate math.

Hate it. That’s why most of my postings avoid mathematics. I’m an English guy, a philosophy guy, a religion guy, a liberal arts guy, but I’m not a math guy.

But sometimes, you’ve got to tread into the abyss to fight battles. So, “Once more, unto the breach, dear friends, once more.”

For some inestimable reason, the Board of Education, and particularly the itinerant consultants they’ve hired to provide them political cover, seem unconcerned that there is no educational justification being offered for the closing of our schools. Additionally, they seem unconcerned about any costs whatsoever excluding that those schools will save us $300,000, $500,000, and $700,000 per year if we close them. These are estimates that Richardson has pulled off the state department of education’s website. Probably took his secretary about 10 minutes to google. For this we’re paying him $600.00 per day. To get general, state averages, we’ve paid him $12,445.91. I hope the political cover is worth it.

(Of course that doesn’t come close to the $75,000 we’ve paid Dr. Salmon and Dr. Wilson to produce a PowerPoint from slides developed by BRAC, the Chamber, and the City, who, according to Wilson, were “amazingly helpful in providing us with data” that will help us close these schools.)

They are offering no educational justification for the closings. This alone should be enough for the city and the board to laugh them out of town. Sadly, it isn’t.

In addition to this oversight, these highly respected former superintendents are refusing to offer any specific financial justification for closing schools. Richardson believes that the 300, 500, and 700 numbers are “conservative” enough to convince us that he’s telling the truth. Never mind that we have already seen schools closed in this town and the promised savings have not come close to that amount. Richardson repeatedly claims that specific data cannot be developed until after the Board has made their decisions of which schools to close.

If we weren’t talking about the very future of our communities and our children’s lives, this keystone cop routine on display every Tuesday and Thursday for the next two weeks would be the greatest show on earth.

It would seem that Richardson’s only concern in this process is summed up in the following quote he offered a local news channel on Tuesday, June 7th: “I’ve never closed a school where somebody didn’t think it was a bad idea, but in this case we’re saving about two to three million dollars.”

“Two to Three Million Dollars”

That’s what we’re being promised. No specifics. Just a nice round figure.

Let’s assume for a moment that our past experience with the closing of Stone Middle and Lincoln Elementary are not valid. Let’s assume that Richardson’s estimates are completely trustworthy. Does saving 2-3 million dollars justify closing 21% of the schools in the system (9 of 42)? Richardson certainly seems to think it does, yet, as we’ve already seen, he doesn’t seem to like details. They would, as he said to Dr. Robinson on June 2nd, simply confuse us.

I’m not a numbers guy, but these numbers weren’t that hard to come up with. Since Richardson does consider himself a numbers guy (who hates specific numbers), I offer the following information concerning the impact closing a school has upon a community.

“How Much Is a Neighborhood School Worth?”

In 1999, two researchers at Case Western Reserve University in Cleveland, Ohio published the follow study: “How Much Is a Neighborhood School Worth?” in the Journal of Urban Economics. Bogart and Cromwell make the case that closing a neighborhood school reduces property values by nearly 10%.

Ten percent of your home gone based upon the recommendation of a man who’s own home remains unaffected by his recommendations.

The median home value in the city of Huntsville in 2009 was $155,500. The recommended closings affect nearly every area and region of Huntsville City. Thus, these recommendations will cost nearly 10% of the value of the homes in nearly every region of the city.

According to the City of Huntsville there are approximately 75,000 homes in Huntsville. Assuming that 21% of the homes (15,750) are affected by the school closings, Huntsville City home values will drop by a collective amount of $244,912,500.00. [For the record, I have no problem showing my work: (15,750 x $155,500) x 0.10 = $244,912,500].

As the tax rate on property within the city limits is calculated at a rate of $5.80 per every $100 that means that the city of Huntsville will see a drop in tax revenue of approximately $14,204,925.00. [$244,912,500/$100 x $5.80 = $14,204,925]

Note: It has been pointed out to me in one of the comments below that the rate is actually $5.80 per every $1,000 rather than $100. As I read the Madison Co. Tax Assessor’s site I’ve linked to above, I didn’t think that was correct. However, I was wrong. Thanks to the comments below for helping me see it. So the lost revenue drops from $14,204,925 to $1, 420,493 per year. Which would potential mean that if Richardson’s numbers are correct, then the “savings” are at least cut in half.

I apologize for posting incorrect numbers, and I appreciate having them corrected. See, when you show your work, as the demographer should also do, the truth is revealed. Again, I apologize for my incorrect understanding of the tax rate.

That alone tends to wipe out a savings of two to three million fairly quickly, dontcha think?

And they wonder why we’ve lost faith.

PS. Quick note to Mayor Tommy Battle: You might want to ask Dr. Wilson to stop thanking you and the city for your help in collecting the data to close our schools. It’s not going to help you get re-elected.

 
Russell
"Children see magic because they look for it." --Christopher Moore, Lamb: The Gospel according to Biff, Jesus' childhood pal.

9 Comments

  1. I love it! My favorite line was “For the record, I have no problem showing my work.” Isn’t this exactly what we are asking? When we were in grade school weren’t we always reminded to show our work and not just give an answer like the demographer did? We want our board to do the work and show us how this all makes sense. Thank you for all you are doing for the children and families of Huntsville!

  2. I garee with Ann! VERY good post! Something I don’t think they are considering is the decline in home values and hence property taxes which fund our schools. Another EXCELLENT point to bring up to them! Kudos!

  3. Thanks y’all. I tend to be a bit of a smartypants when I get angry. I doubt that I’m going to speak Tuesday, so if y’all want to borrow these ideas and ask questions about them, feel free! 🙂

    Thanks for reading!

  4. Thanks for the analysis! There have been many different ideas proposed as to why closing the schools is not a good idea. From a financial standpoint, they can’t even show us a breakdown, just a mythical claim of savings from the state… that doesn’t have any data behind it that we can locate… and their numbers are directly contradicted by the current savings generated from last years closings.

  5. Math error or fact error? Millage is calculate at $1 per thousand, not per hundred. Most people in Huntsville are 155,000/1000*5.48= 849.50 in taxes. With your math that would be $8495 per year. Therefore your cost in property taxes is 1.4 million dollars if there is a drop in property values at all.

    If they close bad schools that need repair and updating and rezone houses into better schools property values might actually go up.

    I agree with you the school board has failure for many years because they didn’t manage the finances and were afraid of rezoning to keep schools balanced. Painful cuts need to be made to balance the books. I’m just happy to see they are considering the options.

    1. Steve: Thank you for posting your response and for taking the time to read.

      My numbers for calculating the tax average come from the Madison County Tax Assessment website at http://www.co.madison.al.us/services/taxc/.

      This site claims, and I quote, “Per $100 Assessed Value Huntsville $5.80.” It also states, “Per $1,000 Assessed Value Huntsville 0.058.”

      Neither figure as I read them works out to meaning $1 per $1000 as you claim.

      So, did I make an error? Well it’s certainly possible. I took the numbers and did with them what I thought was correct. I agree that 155,000/1000*5.80 is an amount much closer to what I expect to see every year in my tax bill.

      I’ve linked to one study that shows that there will be a drop in property values of 10%. I tend to believe that number is actually low, but it’s what the study shows. Do you have any evidence to show that property values are not effected by the closing of a school as you seem to be claiming with your statement “if there is a drop in property values at all?”

      Concerning your “close bad schools that need repair” claim, do you have any evidence or studies that show that closing a building and leaving it vacant (as they have done with Stone and Lincoln just to name two) ever increases property values? Have the property values around Stone or Lincoln benefited from having empty buildings sitting next to them? Do you have any evidence to support this?

      Buildings that are occupied are repaired regularly. Buildings that are unoccupied are not. No one is discussing demolishing the existing closed buildings. Dr. Richardson stated on Thursday that he did actually look into that and found it to be cost prohibitive.

      Finally, concerning your “painful cuts need to be made to balance the books” statement: According to Dr. Richardson himself, the cuts he has already made (not counting the closing of schools) will have the system in the black next year and have the necessary month’s reserve by the second year. His presentation to the board on April 21, 2011 did not include any school closings and resulted in a savings of $23,089,027 per year. You can see a picture of this slide at: http://www.geekpalaver.com/2011/04/22/where-are-the-central-office-cuts/

      If you believe that additional painful cuts are necessary, as I’m asking Dr. Richardson to do, back up your claims with evidence and details.

      Even if your math is correct and mine is wrong the numbers still show that the closings will result in basically a wash.

  6. Assessed value for residential is 10% of the appraised property value; thus $155,500 x .10 =$15,550(assessed value). The mill rate 58.0 (i.e. $58/$1000 or $5.80/$100). Tax is $901.90.

    See below– that was taken from tax assessment website:

    In Alabama, property is classified as follows:
    Class I Utilities 30%
    Class II All Other Property 20%
    Class III All agricultural, forest and single-family owner- occupied residential property and historic buildings and sites. 10%
    Class IV Motor Vehicles
    (Assessed in License Director’s Office) 15%

    Property taxes are determined by applying the proper millage rates to the assessed value. In order to determine assessed value, multiply the appraised value by the proper classification.

    Huntsville
    State Tax 6.5 Mills*
    County Tax 11.0 Mills**
    City Tax 13.0 Mills
    School Tax 27.5Mills
    TOTAL TAX 58.0 Mills
    $5.80 for each $100 assessed value

    1. Bob,

      Thanks for the detailed formulas. So it would seem that if the property values dropped by 10% then the loss in tax revenue would be $1,420,492.

      So, Steve was correct. I was incorrect.

      Assuming that the consultant’s averages are correct and that we will save 2-3 million, the actually savings have just be at least cut in half.

      Did I mention that I hate math?

      r

Comments are closed.