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Prior to the governing board’s special meeting and work session on Wednesday, Herald/Review reporter Cindy Skalsky submitted questions to Sierra Vista school district officials regarding the recent tax issue.
At the meeting, district business manager Michelle Quiroz answered some of those questions and addressed related issues in a handout made available to the public. The questions and answers follow.
The district says anyone having further questions can contact Quiroz, Superintendent Renae Humburg or Assistant Superintendent Bill Roach to set up an appointment to get answers. The phone number at the district office is 515-2700. The district’s Web page — www.sierravistapublicschools.com — also has information.
Q. When and how did you first discover you had made an error in calculating the property tax rate for the 2006/2007 fiscal year?
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A. In early March, 2007, I was reconciling our revenue and expense accounts for the month of February, as I do every month, against the monthly reports provided by the Cochise County treasurer. I discovered a negative cash flow. At this time, I noted immediately that something was wrong and I started looking for the error.
I discovered that in August, 2006, when I was calculating the district’s property tax rate, I had manually divided the total assessed valuation by $100, which then resulted in a calculation of $3,016,293. I entered this amount into the computerized accounting program. This program automatically divided that number by $100, again. This is where my error occurred.
The total assessed valuation amount of $301,629,434 should have been entered, NOT the numbers I had calculated manually: $3,016,293. This error affected the amount of State Equalization Revenue the district was to receive.
When I entered the lower assessed valuation amount of $3,016,293, the computer program automatically calculated a much higher State Equalization Revenue amount of $26,506,477. That was incorrect because what I had entered was incorrect. (State Equalization are the funds the state provides school district over and above the district property tax revenues to assist school districts in meeting their funding needs to meet their budgets for the school year.)
In actuality, if I had entered the correct assessed valuation amount of $301,629,434, the district would only have been entitled to receive $22,170,746, a difference of $4,336,401.
Since I then used the higher amount of State Equalization Revenue, $26,506,477, to calculate the school district property tax, it automatically reduced the property tax rate and the amount of revenues to be provided by the primary tax levy (local taxpayers) for 2006-2007.
Q. On what document did the clerical error occur and why didn’t the state catch it?
A. The error occurred on the district’s 2006-2007 budget worksheet J, equalization base and assistance document and the school district property tax calculation worksheet. This computer program automatically calculates most of the data, after we enter the base numbers, and completes the form automatically. We do our proposed worksheet in June each year and we are allowed to make revisions and adjustments on Dec. 15 and May 15.
The Arizona Department of Education does not double check property assessed values for any school districts. It is the district’s responsibility to set the school district tax rate and submit it to the Cochise County Board of Supervisors for approval.
Q. What did you do after you discovered the error?
A. The first thing I did was to call the Cochise County treasurer and the Arizona Department of Education. The county treasurer expressed their support and offered their assistance. They suggested we utilize our line of credit, which we have used previously. That line has a low interest rate. We also were approved for a slightly larger line of credit. The treasurer worked very closely with us over the next several months, monitoring our bank accounts, and we kept in continual communication. This continual contact was to ensure the district would have sufficient revenues to cover budgeted expenses.
The error I had made caused a shortfall in revenues to cover the 2006-2007 adopted school district expenditure budget. Close monitoring was necessary to ensure the district did not overexpend the 2006-2007 budget, and we were successful in not over-expending the budget for 2006-2007.
The Department of Education finance office was contacted on March 7, and they advised us to ask for our Sudden Growth Increase earlier than we usually do. Normally we request this in May along with the district’s final budget revision, so we requested it in March, and received this $393,352 allotment.
The department also suggested we ask for an advance on our proposed revenues. We requested $6 million, but the state gave us $5.2 million until we could receive taxes in 2007-2008 to recover from the shortfall.
As soon as I discovered the error and shortfall, I began closely monitoring, for the rest of the school year, every request to spend money. I stayed on top of the finances in great detail so that we did not go into the negative again at any time.
We cannot just quit spending. The state will not let us. If we do, they actually take away the next year some of our state allotment, which could mean even higher property taxes. Actually, because our district’s property values have risen so much, the state is actually giving us less money to equalize the revenues.
Q. Did you think at the time you figured the new 2007-2008 property tax that this would be a shock to the taxpayers to have their taxes almost double from the low error tax rate last year?
A. During the budget process, I calculate the school district property tax to determine the revenues necessary to support the district’s adopted budget. I do not calculate the impact the tax rate would have on each taxpayer. My main focus has always been to balance the budget, expenses and revenues. Impact of the tax is not something, as a business manager, you are expected to do.
Q. Has the administration inquired if there are any legal means to mitigate the current rate?
A. I contacted the Cochise County Board of Supervisors office on Oct. 2, 2007, and explained the upset taxpayers situation and asked if there was some action they might take to help us. They stated that the school district tax rate could not be changed.
Q. Will this higher tax rate continue the following year or will taxpayers get some relief?
A. The projected tax rate for the school district for 2008-2009, assuming revenues, budgets, and assessed values remain steady, is expected to decrease by approximately $1.36 for a calculated rate of $5.2128 per $100 of assessed value. For example, a residential property valued at $200,000 could receive a decrease in taxes of approximately $270.
The state of Arizona, unlike many other states, pays schools a very small amount per student to support education. We are second from the bottom in state support.
Q. How many state audits of the district finances were there during the 2006-2007 fiscal year, who did them, and what were those results?
A. The district is required to be audited each fiscal year. The final audit visit for fiscal year 2006-07 will take place the week of Oct. 22. The final audit reports will be completed in December 2007. The district’s approved audit company is Heinfeld, Meech and Co.
Q. When did you first notify the district administration and governing board about the error?
A. I notified Dr. Bill Roach, my immediate supervisor, on March 7, 2007. Over the next several months, I kept him informed of the necessary steps I was taking to address and correct the situation, and what I was doing to ensure we did not enter a negative fund balance. There is a district chain-of-command procedure and I did follow the approved procedure.
Dr. Roach and I informed the superintendent at a 4 p.m. meeting on Sept. 28, 2007, after the tax bills had already been mailed. The assistant superintendent then notified the governing board that same afternoon.
Q. Why were they not notified when the tax rate error was first detected in March?
A. I notified my supervisor. The chain-of-command procedure is to notify your immediate supervisor. After notifying my immediate supervisor, my main focus was to work with Cochise County treasurer and Arizona Department of Education to ensure the district would have sufficient revenues to cover expenses and not register warrants.
Taxed Out wrote on Oct 24, 2007 11:31 AM: