The cash-strapped Akron Public Schools took an unexpected budget hit this week with news that the district must repay more than $3 million it received as long as five years ago from tax-incentive development projects.
The multimillion-dollar surprise comes while district leaders are struggling with a looming $9 million deficit next fiscal year and even more financial stress if its 7.9-mill levy fails to attract enough votes in November. School leaders have estimated the deficit could grow to more than $22 million if the levy fails.
School board President Jason Haas said Tuesday that the district learned of the latest financial crisis and its $3 million price tag just days ago.
“It’s another significant obstacle dropped on you out of the blue,” Haas said.
Essentially, the $3 million stems from a handful of construction projects in the city of Akron that involved tax increment financing, or TIF incentives.
A TIF freezes land values before infrastructure upgrades are made to a property. Taxes are still paid, but at a lower sum over time and with portions of the property tax money going back to a municipality to help defray its costs for things such as sewer, water and road projects related to the development.
In this case, businesses that made development deals with Akron paid their property tax bills to the county and, in turn, the money was distributed to the school district. However, because the properties were tied to TIF incentives, portions of the tax bill were to be paid to the city of Akron to cover its development costs.
However, those dollars owed the city were only recently approved by the state, and school officials just received word that tax revenue paid to the schools on about 10 TIF-funded projects between 2007 and 2010 must now be repaid to the city.
District Treasurer Jack Pierson said Tuesday that he did not anticipate the TIF-related losses and he believed the money owed to the city was being sent to them.
“There was a breakdown somewhere,” he said.
Pierson said the blame probably lies somewhere with him, the county and the state. The district, he said, should not have received the $3 million over those years. Instead, the money should probably have been placed on hold and then paid out once the state approved the TIF projects.
Haas said there are no available avenues to contest the TIF payments or spread out their cost.
“We’ve got to figure a way to correct this and anticipate the budget,” Haas said.
School officials will now add the $3 million to their budget cutting discussions, he said. Although many cuts have already fallen, Haas said, more can be anticipated, if the levy fails in November.
Those cuts, he said, need to be “sustainable solutions” and may have to come from inside the classroom in the form of teachers and aides and programs. Wages paid to district employees have already fallen since 2007 from $165 million to $159 million.
Budget talks won’t fully take place until after November.
“It’s unfair to ask the community to make up the entire deficit,” he said.
Phil Trexler can be reached at 330-996-3717 or firstname.lastname@example.org.