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Tuesday, February 17, 2015
Shortchanging our schools
Undertaxed properties plague some of Kentucky’s poorest districts.
“I hate to describe it like this, I
hate to use this word, but it's really a welfare mentality. People just
don't want to pay anything for their schools. They figure someone else
will send them the money, so they don't have to do anything.”
Superintendent Arch Turner left Breathitt County's schools in a
shambles three years ago on his way to prison for vote buying. The
Kentucky Department of Education has taken over the district to repair
lagging student performance and dilapidated buildings while somehow
trying to balance the budget with layoffs and program cuts.
Apart
from his shoddy leadership, Turner undermined local schools in a more
subtle fashion, as did many of his neighbors, possibly without realizing
it: He paid less in property taxes than he should have given his
house's fair market value.
Undervalued property, and the
diminished tax payments that result, is a problem that plagues some of
Kentucky's poorest school districts as they search for more revenue from
their own communities because of wavering support from the state and
federal governments.
Turner owns a two-bedroom house on Main
Street in Jackson, the county seat. In 2012, state Department of Revenue
appraisers examined his house and valued it at $49,000. But Breathitt
County's property valuation administrator said it was worth $40,400,
nearly 20 percent lower. Based on the PVA's assessment, Turner paid $212
in annual property taxes, about $45 less than he would have on the
state's appraisal.
Forty-five bucks isn't a huge loss, but it adds
up. From 2008 to 2012, on average, Breathitt County's residential
property was assessed at 89 percent of fair market value, as determined
by sales prices for homes that sold. That ranked it at the bottom of
Kentucky's 120 counties, according to a Herald-Leader analysis of state
data. The statewide average was 96 percent. Anything under 90 percent
accuracy concerns state revenue officials who monitor the PVAs'
performance.
Breathitt County farm land was assessed at an average of 61 percent
of its value during that period. Not enough commercial land sold in most
years for an accurate sales analysis, but state appraisals in 2012
suggested that some businesses along Ky. 15 in Jackson — an apartment
complex, a gas station, an office building — were assessed at 75 percent
or less of what they should have been.
“All we do is value their worthless
property. And it's always worthless - just ask them - until they get
ready to sell. Then it's made of pure gold.”
Ervine Allen Jr. Breathitt County PVA
Low assessments mean less money for Breathitt's cash-strapped schools, which doesn't surprise the people who work in them.
"I'm
sure our assessments aren't where they need to be," said Derek
McKnight, principal of Breathitt County High School. "I can tell you
personally that I would not agree to sell my house for as low as it's
assessed at. And I'm sure that's true for other people here, too."
In
Breathitt and other Eastern Kentucky counties, the trouble goes even
deeper. A $36,900-a-year state tax break for people who collect federal
disability benefits, as thousands of people here do, shields millions of
dollars in residential property from taxation. Values also are reduced
when property owners appeal PVA assessments because coal companies'
surface mining scarred their land.
Overall, Breathitt County's anemic property tax
structure bleeds hundreds of thousands of dollars every year from the
city and county schools, local governments, the library, the health
department and other public services. It leaves one of the nation's
poorest places even more dependent on state and federal aid — on other
people's money — to survive.
And yet, there does not seem to be
much interest in facing the situation, said Larry Hammond, a longtime
educator whom the state Education Department has installed as
Breathitt's acting school superintendent.
Breathitt Co Supt Larry Hammond
Hammond's attempts to
squeeze more school revenue out of Breathitt County have been met by
loud protests at public hearings, outraged newspaper editorials, even a
lawsuit filed against him by area residents. This month, anticipating
another decline in state aid, Hammond is looking for ways to chop
$712,916 from the district's 2015-16 budget so it will balance. More
layoffs seem possible despite crowded classrooms, he said.
"The gaps between Kentucky's school districts have widened again, not
just on their ability to support their local schools but also on their
willingness to support them," Hammond said. "I hate to describe it like
this, I hate to use this word, but it's really a welfare mentality.
People just don't want to pay anything for their schools. They figure
someone else will send them the money, so they don't have to do
anything."
'What we're given'
"We're used to
getting by on what we're given, which isn't much," said Jason Fugate, a
teacher at Breathitt County's Marie Roberts-Caney Elementary School.
The school is the hub of Lost Creek, a tiny community about 10 miles
southeast of Jackson.
"The air conditioning went out last spring
when it was pretty hot," Fugate said. "We got by with box fans. It was
bearable, though you are sitting there and sweating, and it can get
uncomfortable for the kids, who are trying to concentrate on taking
their tests."
Jamie Mullins-Smith, who has a daughter in the school, said kids and teachers were becoming ill.
"They just couldn't take that kind of heat all day," she said.
In
2013, as the Breathitt County school district postponed long-overdue
building repairs for lack of money, local taxpayers provided only 11
percent of the district's $25 million in revenue, down from 14 percent a
year earlier. Most of the money to educate the district's 1,820
students comes here from Frankfort and Washington.
Acting as manager of the district, Hammond and the state Education
Department chose to overrule Breathitt's elected school board and raise
the countywide property tax rate enough for a 4 percent revenue
increase. That's the most the law allows without a chance for voters to
repeal it.
School taxes barely had been touched in five years. The
higher rate brought in just $76,938 more. But it was enough to anger
several dozen residents, who sued Hammond to demand that taxes be
lowered again and their money refunded. They claimed "immediate and
irreparable injury, loss and damage." The case is pending in Breathitt
Circuit Court.
A Herald-Leader review of land records shows that
at least 16 plaintiffs in the lawsuit don't own land in Breathitt
County, so they don't pay property taxes here, an observation that
Hammond's lawyers also made in court filings. Most of the remaining
plaintiffs pay between $50 and $300 a year in school taxes. Some pay
nothing. As disability check recipients, they get tax breaks that exceed
the assessed value of their homes.
Jason Bailey, director of the
Kentucky Center for Economic Policy in Berea, sympathizes with poor
school districts — up to a point. Bailey supports redistributing money
from wealthier communities to places like Lost Creek. Kentucky is
constitutionally required to provide "a system of common schools," which
makes the state responsible for equitable funding regardless of where
students happen to live, he said.
Still, Bailey said, not enough effort is made in parts of Kentucky to collect money from local sources.
"I
do think the poorer counties should do what they can," he said. "Their
elected officials should be doing what they're supposed to do to raise
adequate revenue for schools and other services."
Relying on outsiders
If Breathitt County wants a better education for its children, then it must pay for that, Hammond said.
"Historically,
undervalued properties here combined with low tax rates have left us
reliant on outside funds. And obviously, in recent years, those outside
funds have not kept up very well," Hammond said.
The schools need
$29 million in repairs with only about $1.1 million in bonding authority
to tackle it, Hammond said. Roofs leak. Heating and air conditioning
systems malfunction. Old ventilation systems produce moldy, dusty air
that causes problems for some students and teachers. Crooked external
doors don't close tightly enough to be safely secured. The area's only
public swimming pool, behind Sebastian Middle School, is filled with
scummy rainwater that pours through the shredded ceiling above it. The
pavement on every campus is pockmarked with potholes.
Classrooms are crowded to the maximum sizes allowed by law. There is
little money available to expand innovations as Hammond wants, such as
electronic tablets in the hands of students, gifted learning courses,
dual enrollment programs that provide college credit, and advanced
instruction in math, science and engineering. The best and brightest
don't get the same opportunities here that they do in a wealthier school
district, such as Fayette County's, he said.
Photo by Charles Bertram | Staff
Jayce Walker taught geometry at Breathitt Co
"I don't see
anything on the horizon to make me think the funding situation in
Breathitt is going to change dramatically," Hammond said. "It's a
tremendous challenge. If we doubled the local tax bills, it would be a
different situation. But the reaction — it would be very bad. They would
take it poorly. It just wouldn't happen, not here."
Dependence on
outsiders is nothing new in Breathitt County. It has a "mailbox
economy" based on government checks. Sixty-one percent of the county's
personal income consists of public assistance payments rather than
salaries and wages from jobs. The collapse of Eastern Kentucky's coal
industry in recent years only aggravated this.
Local property owners say they simply can't afford the taxes that higher assessments would bring.
Brenda Shouse owns one of Breathitt County's better homes: 2,128
square feet, brick exterior, tucked behind a gated fence on 11/2 wooded
acres several miles south of Jackson.
In 2010, state Revenue
Department appraisers examined Shouse's home and valued it at $109,500.
The county PVA assessment was $73,800, just two-thirds of the state
appraisal. Based on the PVA, which prevailed for several years, Shouse's
county tax bill was $669. The schools got $304.
Shouse said she
was unhappy last summer to open a letter from the PVA and learn that her
property assessment finally was rising to about $90,000 — a belated
compromise between the PVA and the state.
"I understand they need
more money for the schools, I do understand that," Shouse said. "But
it's gonna be very painful for me if my taxes go up. I'm in the coal
business. I own tractor-trailers that are supposed to be hauling coal,
and it's a struggle already."
'It's always worthless'
Ervine
Allen Jr., 69, a former land manager for Eastern Kentucky coal
companies, has been Breathitt County PVA since 1997. He was re-elected
without opposition to another term last year.
To determine what
property is worth for taxation, Allen said, he and his four employees
check sales prices, physical improvements, mortgages, business income
and other factors that help decide a parcel's fair market value.
"Nobody understands what the PVA does," Allen said in an interview at
his courthouse office. "I always tell people, we don't set the tax
rates and we don't collect taxes. All we do is value their worthless
property. And it's always worthless — just ask them — until they get
ready to sell. Then it's made of pure gold."
By all accounts, Kentucky is better at assessing property than it used to be.
In
the late 1980s, the General Assembly began to give the state Revenue
Department more authority over PVAs. A 1988 state report showed that
property assessments were roughly half of what they should have been in
two dozen counties, mostly in Eastern Kentucky, which could ill afford
the lost revenue. The Elliott County PVA not only got his assessments
wrong most of the time, he refused to install a telephone in his office.
"Some
PVAs have expressed the belief that one of their functions is to
'protect' the citizens from 'the state,'" the report said. "Others have
stated that their primary concern is to get re-elected."
Today,
state revenue officials expect PVAs to assess residential property at no
less than 90 percent of its fair market value, on average. The closer
to 100 percent, the better, because even 10 percent off-target squanders
a lot of money.
One:
It compares real estate sales prices against PVA assessments for each
property that is sold, to see how near the mark the PVAs hit. If a house
sells for $120,000, for instance, what had the PVA assessed it at?
$118,000, which is close? Or $75,000, which is not? This is the source
of the "sales-ratio analysis" that the state typically uses to measure
each PVA's accuracy.
Two: Every two years, it sends teams of
professional appraisers into each county to randomly select a handful of
properties, examine them and estimate their fair market value. Then it
compares the appraisals to the PVA assessments for the same properties.
This is the source of the state appraisals that found low PVA
assessments for the homes of Arch Turner and Brenda Shouse.
Breathitt County does not always do well in these evaluations.
"The
residential and commercial property classes fell below the established
guidelines," the Revenue Department warned Allen in a 2010 letter. "You
might want to place a greater emphasis on the residential and commercial
properties when doing future reviews."
In an internal note after
the state's 2008 appraisals in Breathitt County, one state revenue
official wrote sympathetically of Allen: "Same as a lot of counties
where the sales are down, it's hard (for him) to get a true assessment
on property. Ervine is always polite to me and does have an election to
run this year."
When Breathitt or any other county turns in
assessments that are less than 90 percent, on average, the Revenue
Department can urge the PVA to go back and reassess some parcels to
raise its numbers. Or it can supplement the initial PVA scores from the
first category (sales prices) with scores from the second category
(appraisals) if doing so will boost the overall numbers.
One way
or another, the PVAs should clear the 90 percent hurdle before their
assessments can be certified for tax purposes, said David Gordon,
executive director of the Revenue Department's Office of Property
Valuation. But some counties have a harder time than others, Gordon
said.
"I believe that they don't have a lot of sales in
(Breathitt) County, especially commercial sales, and that's a problem
for them," Gordon said. "Sales is one of the ways they base their fair
market value, on what their property is actually selling for. When
there's not a lot of sales in your county, it's hard to do. So we've
been working with (Allen) and his staff to make sure their assessments
are acceptable."
Graphic by Chris Ware | Staff
Allen summed up: "It's a very imprecise science, and we do the best we can do."
Spiraling downward
He said he faces many obstacles.
Thirty-nine
percent of Breathitt County's housing is mobile homes, some isolated in
mountain hollows, all but inaccessible from a paved road. The
predominance of mobile homes is a big reason why Breathitt County's
median home value is only $47,400, compared with a median of $120,400
for homes statewide.
"Many of these trailers are not in very nice
shape. I'm not sure how some of them can even be lived in, to be
perfectly honest with you," he said. "You can't cause much revenue to be
generated from trailers as your property tax base. And their value is
not going up. Trailers don't gain value over time, like regular houses
do. Their value is spiraling. At best, we can only hope it's spiraling
slowly."
Also, Allen said, there is constant pressure on his
office to keep assessments low for the county's 13,545 residents,
one-third of whom live in poverty.
"They will come in here with
tears streaming down their faces and tell us their house isn't worth
half of what we assessed it at," Allen said. "Then a few years later,
they go to sell the house and they demand twice what we had it assessed
at. So suddenly, mysteriously, it just gained a lot of value."
Photo by Charles Bertram | Staff
Breathitt Co HS needs $29 million in
repairs
Money
also gets wiped off the tax rolls when property owners go before the
county's Board of Assessment Appeals. The board is composed of three
local property owners: one appointed by the county judge-executive, one
by the county fiscal court and one by the mayor of the county's largest
city — in this case, Jackson. It can overrule Allen's decisions and
reduce assessments at taxpayers' request.
At the board's Aug. 9, 2013, hearing, for example, eight property
owners appealed. All won reductions. With a few strokes of a pen, the
board erased $558,500 from Breathitt's tax base — the equivalent of
nearly a dozen houses at the county's median value.
In most of that day's appeals, property owners cited environmental damage from coal companies' surface mining.
"This
property has been mined for coal extensively over 60 years," Harris
Howard wrote in his appeal on behalf of Howard Land Management, a
Prestonsburg company that owns 8,147 acres of timber land in Breathitt's
Big Caney community. "Most of it is not suitable for agriculture due to
erosion from mining and hauling, mountaintop removal and surface
mining."
The PVA had valued Howard Land Management's property at
$1.04 million. The company insisted that it was worth only $514,285. The
appeals board split the difference at $763,000.
Whatever coal
contributed to Breathitt County's economy in the past, it scarred this
land enough to hurt its value for future generations.
Eleven percent of the county's 316,971 acres either have been
surface-mined or hold coal slurry ponds. In May 2009, scores of homes,
stores, farms and an elementary school were wrecked in the Quicksand
community east of Jackson after poor reclamation of surface mines
exacerbated flooding from heavy rains, according to a lawsuit filed by
91 residents. Four coal companies reached a confidential settlement with
the residents.
Disability checks
Another hole is cut in Breathitt County's revenue net by state-authorized tax exemptions.
Kentucky
awards tax breaks to homeowners who collect federal disability benefits
or who are 65 or older. If they fall into one of these categories, they
can write off part of their home's value. The size of the exemption
grows over time. In 2013, it was $36,000 — three-fourths of Breathitt's
median home value. This year, it's $36,900.
As it happens, several
thousand people in the county get disability benefits, and 14 percent
of the population is 65 or older. So a whopping 28 percent of the value
of residential property — $54 million — is shielded from taxation by
those exemptions, with the disability exemption being more common. By
comparison, only 7 percent of the value of residential property across
Kentucky is covered by those exemptions.
Graphic by Chris Ware | Staff
Disability checks are so sought-after in Breathitt that school
officials say parents sometimes keep children home for fear that
attending class could make them ineligible for benefits.
Plenty of
locals "drawing disability" would "suddenly get better overnight if
they had a shot at a good job," said Allen, the PVA.
"I see people
act all crippled up when they're really capable of working," Allen
said. "That's a real challenge for us. All of the taxing districts lose
out, the school districts lose out, anyone that relies on public money,
because of those exemptions. It's very frustrating."
Among the
five Breathitt County school board members last year, one claimed a
disability exemption and therefore had no tax liability on a home
assessed at $34,000. Another has alternatively used disability and
old-age exemptions over the years to cut her home's taxable value from
$51,500 to $15,500, reducing her county tax bill to $146. As taxpayers,
they gave little toward the schools they ran.
'A real dilemma'
Rose
Wolfe is mayor of Jackson. She owns a brick ranch house — three
bedrooms, two bathrooms — on Panbowl Lake, a solidly middle-class
neighborhood just north of downtown.
Wolfe's home is worth
different sums depending on where you look. Wolfe and her husband,
Arthur, who died last month, paid $97,500 for it in 1991. It's
mortgaged at Citizens Bank & Trust for as much as $175,000 to secure
a 2009 loan. The PVA assessed it at $126,700. And thanks to exemptions,
it's taxed at a reduced value of $90,700, less than the Wolfes spent on
it 24 years ago.
The Wolfes claimed the disability exemption on
their home until 2011, when they switched to the old-age exemption.
(Arthur Wolfe, a disabled Vietnam War veteran, suffered from prostate
cancer, his wife said.) Their 2013 county tax bill was $852, of which
the schools got $374. Wolfe said she also paid about $270 in city taxes
to Jackson on top of that.
It's unrealistic to expect Breathitt
County residents to dig deeper, the mayor said. The only major employers
around town are the county and city school systems, a state Department
of Highways district office and a small hospital, and none are hiring
much, she said.
"People here want what's best for their children. But you have to
remember, we are an impoverished part of the state," she said. "I don't
know how much more of the load people can carry. Forty percent of the
people here work for minimum wage if they're lucky enough to have a job
at all. The burden of heavier and higher taxes is more than they can
bear."
Yet somebody must pay for Breathitt's schools. Unless the
state and federal governments decide to send far greater sums, which
seems unlikely in this period of fiscal austerity, the schools will
continue to struggle as many people here give nothing and even the nicer
homes generate only a few hundred dollars a year.
"It works very
poorly," said Allen, the PVA. "I literally grieve that the tax base is
so small, and it is, in my opinion, inevitably going to dwindle. We're
faced with a real dilemma, and I don't know what the answer is."
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Read more here: http://www.kentucky.com/static/Shortchanging/index.html#storylink=cpy
1 comment:
Anonymous
said...
Unfortunately, the answer is to close the school system down it would seem. Folks either don't have funds or don't want to spend funds on their schools. Population is getting older. Nothing there to draw folks to the community in an economic or social sense. It is the "hollowing out" you hear of across rural America.
As a Kentuckian, the saddest part for me is the growth in dependency (expectation?) on social welfare without much sense of regret or remorse by recipients. Between drugs, absentee parents and corrupt officials - those kids don't stand a chance.
1 comment:
Unfortunately, the answer is to close the school system down it would seem. Folks either don't have funds or don't want to spend funds on their schools. Population is getting older. Nothing there to draw folks to the community in an economic or social sense. It is the "hollowing out" you hear of across rural America.
As a Kentuckian, the saddest part for me is the growth in dependency (expectation?) on social welfare without much sense of regret or remorse by recipients. Between drugs, absentee parents and corrupt officials - those kids don't stand a chance.
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