Growing Iowa School Districts Turn To Debt To Meet Demands, But So Do Non-Growing Districts

Apr 22, 2019

Several Iowa school districts have taken on debt the last 17 years, with one district owing as much as $35,448 per student, to handle student enrollment increases but also repairs to aging buildings.

Clear Creek Amana School District, in the middle of an enrollment boom, had that big debt rate — the highest per student in Iowa in 2016. That is the most recent year analyzed by the national education news organization, The Hechinger Report, for a series of stories released today.

The Panorama school district about 50 miles west of Des Moines and Riverside school district in southwest Iowa carried debt worth a little more than $26,000 per student.

While some districts taking on the debt are responding to growing enrollments in communities with growing tax bases, others are dealing with repairs and facility updates in communities that aren’t growing.

“We’re always kind of always against that debt ceiling with our bonds,” Tim Kuehl, superintendent of the Clear Creek Amana School District, said.

Clear Creek Amana district residents approved two general obligation bond votes in the last six years, for $48 million in 2014 and $36 million in 2017. These funded projects such as a new elementary school, additional parking for the middle-school and high-school, a new elementary school gymnasium, an addition to the Clear Creek High School and other renovations.

For Kuehl, the question isn’t how to pay the district’s debt back. Rather, it’s how the district would have managed if district residents hadn’t voted to sell the general obligation bonds.

“Probably the only real option would be having a bunch of portable buildings for kids at different sites,” he said.

The Clear Creek Amana School District has six school buildings and a new elementary school that is to open next fall. The district covers Tiffin, Oxford and the Amana Colonies, as well as parts of Coralville and North Liberty. The district’s enrollment is 2,588 students but district officials expect that to grow by another 1,000 students in the next five years..

“Our concern around the level of debt comes down to managing, so that we have enough debt capacity to be able to build what we need in the future,” Kuehl said.

Iowa school districts and Area Education Agencies carried $3.8 million in debt in fiscal 2018, which ended June 30, 2018, the Iowa State Treasurer’s Office reported in February. That was up 2.6 percent from the previous fiscal year.

IowaWatch used data compiled by the nonprofit news organization, The Hechinger Report, to find school districts in the state with the most debt, overall and per pupil. IowaWatch is Hechinger Report’s Iowa collaborator on Hechinger’s education-related news stories.

The data show a blend of school districts in or near urban areas taking on debt to construct buildings that keep up with growing enrollment but also rural areas in which enrollment is not growing but where aging facilities need updates.

Kuehl said his Iowa City-Cedar Rapids corridor district, whose two bonds got more than 70 percent approval, will consider another bond issue in the next few years.

Kuehl and other school administrators in Iowa interviewed by IowaWatch said general obligation debt does little to affect day-to-day classroom activity, which is supported with money from a district’s state and locally supported general fund.

Enrollment at the Clear Creek Amana district has more than doubled since 2002 when it had 1,249 students. District officials anticipate growing another 200 students a year for each of the next five years, Kuehl said.

“We’re in the minority of districts in the state who have — quote, unquote — new money each year because of that enrollment growth,” Kuehl said.

The Panorama and Riverside districts have not had that luxury. Panorama’s certified enrollment is 697 students this school year, down 43 students from the 740 students reported in 2002. Riverside’s certified enrollment has decreased by 27 students, from 723 in 2002 to 696 in the current school year. Both districts have experienced enrollment fluctuation in the last 17 years.

THE NEED TO RENOVATE

A short distance west of the Riverside district, enrollment in the Council Bluffs Community School District has dropped around 20 percent but district leaders still feel a need to renovate buildings. The district has a funding problem, though: it has hit the level of allowable bonds it can pay back using sales tax revenue. So, it floated a plan to sell $37 million in bonds that property taxes will pay off, and won approval.

This money paid to renovate the district’s 17 school buildings.

Diane Ostrowski, chief communications officer with the Council Bluffs school district, said district officials aren’t sure why enrollment has decreased. “Our speculation is around birth rates in the area…and housing availability related to families being able to find housing in our district boundaries,” Ostrowski said.

The district’s enrollment-related financial problems go beyond needing renovated buildings. Ostrowski said a lot of families in the Council Bluffs district choose to open-enroll their children into other districts, which can have significant impact on a school’s day-to-day finances.

Schools in Iowa receive cost-per-student statewide supplementary aid from the state. When a student open enrolls into another school district, the district the family resides in has to give the other school district that money.

Enrollment records filed with the state education department show 710 students leaving the Council Bluffs district this school year for open enrollment elsewhere, but only 265 coming in from other districts.

“What some have indicated is that they believe that their children would achieve at higher levels if they were in a school district with other children whose parents had means,” Ostrowski said. 

Four school districts are close to Council Bluffs: Missouri Valley Community School District, Underwood Community School District, Treynor Community School District and Lewis Central Community School District. Of the five districts, Council Bluffs has the largest enrollment.

Council Bluffs has researched and found that families open enrolling into other districts perceive the smaller schools as having smaller class sizes and more to offer.

The district has brought down the number of students open enrolling in recent years through a program called “See For Yourself” that allows families to tour the schools and see what they have to offer before making the decision of where to send their children.

Source: District data compiled by The Hechinger Report, courtesy of IowaWatch

HIGH GROWTH AREAS

The Ankeny Community School District’s enrollment increased by 91 percent from 2002 to 2016, when the district had $192.5 million in debt — the highest total debt of any district in the state. The Des Moines area district’s certified enrollment this school year is 11,977, state figures show.

But district officials anticipate an increase of 1,400 more students in the next five years, Jackie Black, the district’s chief financial officer, said. The district’s largest elementary schools hold around 750 students. It has 10 elementary schools, four middle schools and two high schools.

Growing at a rate of 400 student a year puts pressure on the district for several things, including curriculum, supplies and furniture, Black said. The district plans ahead 10 to 12 years for what it needs, including with its facilities, and how to fund it, she said.

“We are not planning to issue any more general obligation bonds providing that the SAVE fund, which is currently set to expire in 2029, is extended,” Black said. The SAVE fund, or the Secure and Advance Vision for Education fund, is supported with state sales tax revenue.

“So we’re very strong advocates for the extension of the SAVE money,” Black said. “For our district, that’s around $10.5 million this year, and about 70 percent of that is made up of debt that we’ve issued. So, we have principle and interest commitments already made for some of that money.”

The Southeast Polk Community School District issued a $60 million general obligation bond in the to build a new high school and elementary school around 2007, Kevin Baccam, the district’s executive director of business services, said.

But Baccam said the district was able to refinance to reduce that bond debt to $8.1 million seven years later.

“We took advantage of the market conditions back in the 2014-15 time frame,” he said. “We were part of a case study with our financial advisor to reduce our outstanding debt.”

The buildings were to accommodate enrollment growth in the Des Moines suburb district, which Baccam attributes to economic and housing development growth in town.

Southeast Polk has experienced a 54 percent enrollment increase since 2002, when the district’s enrollment was 4,475. Certified enrollment this school year is 6,894 students.

The district’s general obligation debt is currently $16.6 million, and Baccam said he anticipates that the district will have it paid off by 2023.

In Waukee, school district officials said the district has seen a growth in students because of population increases and housing construction.

“Because of our rapidly growing enrollment, we must keep building new buildings to house our students. Because of taxable valuation increases, we have been able to manage our debt and hold our tax levy steady,” Angie Morrison, the district’s chief financial officer told IowaWatch in an email.

The Iowa City area also is growing in population because of an increase in jobs and has responded by opening three new schools since 2010, including Liberty High School in North Liberty. Plans call for opening in fall 2019 another new school, plus a new school building that will replace an older one that already has been shuttered.

“This metropolitan area has seen a significant surge in employment opportunities leading to an influx of people, including many new families and their children,” Kristin Pederson, the district’s community affairs coordinator told IowaWatch in an email. “The area currently boasts one of the lowest unemployment rates in the state of Iowa, leading to continuous pressure on the job market and a continuing increase in population.”

OLD FACILITIES AND NEW PHILOSOPHIES

The West Branch school district is next to the Iowa City district and only 18 miles east of the Clear Creek Amana district but enrollment has not grown there. Still, it has aging facilities and classrooms that do not support modern teaching methods, school officials said.

The district has tried twice, unsuccessfully to pass a general obligation bond vote. Marty Jimmerson, superintendent of the West Branch Community School District, said post-vote surveying and advisory committee discussions revealed that the price tag may have kept voters from approving the bonds.

The school district has three buildings and a certified enrollment of 736 students. The failed bond issues were for $19.1 million in February 2017 and $19.8 million in September 2017. The district is preparing a public vote on a bond again, in August.

Bond money would allow the school to fix problems in older buildings, such as rust, heating, ventilation and air conditioning issues and building more secure entrances to ensure students’ safety, Jimmerson said.

It also would allow the school district to better adapt to more collaborative and personalized learning, he said.

Jimmerson said students currently use the school’s library as a classroom and group work room, and the school has a shared music and band room.

“In our elementary we have pods — four classrooms and then a shared space where kids can go out and work in groups. They might work individually, depending on what the projects might be,” Jimmerson said. “We really don’t have that at the middle-school, high-school level. Kids will go out in the hallway.”

“As education evolves, your facilities need to evolve as well and that’s what we’re looking for in our bond vote, is for those learning spaces,” he said.

This IowaWatch story was written in collaboration with the series Districts in Debt, by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. The Hechinger Report provided IowaWatch with data and national stories. IowaWatch reporter Lauren Wade did interviews and writing for this Iowa-based story. IowaWatch is an independent, nonprofit, nonpartisan news service based in Iowa City.