DPS could ask voters to OK additional tax of $24 million

Nancy Mitchell, Rocky Mountain News

Friday, June 29, 2007

Denver Public Schools leaders discovered this week they have another option to bring in more operating dollars - a tax increase.

In addition to closing schools and trying to resolve their ballooning pension debt, the district can ask voters for another $24 million a year before they hit their tax limit.

That's more than triple the $7 million that DPS officials had mistakenly calculated as their ceiling under state law.

Rudy Andras, appointed to scour the district's budget for extra dollars as part of the A+ Denver citizens' group, found the error.

"We found a different way of looking at this," Andras said of the citizens' budget work group. "Whether or not they (DPS officials) want to do it, it doesn't matter. But it's an option."

DPS Superintendent Michael Bennet said it's too early to tell if DPS will pursue a tax hike.

"The first I'd heard about this was this week," he said Thursday. "I think it's a demonstration that asking a bunch of outside people to shake up and down the district's finances and give us their best thinking on it has yielded one more potential option for helping to restore the district to financial health."

Last year, DPS explored the idea of going to voters for more money to build and repair schools. They opted not to put a tax question on the ballot last November but left open the possibility of a future campaign.

A tax proposal in fall 2008 - a presidential election year - is more likely. Voter turnout is heavier and voters tend to be more liberal on school financing issues, according to research by the Colorado Association of School Executives.

Also, DPS may have more success in passing a tax increase for operating dollars if it is linked to a tax hike for building funds. CASE research shows combined requests typically are more successful than asking solely for operating money.

Andras, an economist for RBC Capital Markets, an investment banking and financial advisory firm, said the DPS error is rooted in the state's complex School Finance Act, passed in 1994.

It sets out funding for Colorado school districts, allotting a base amount per pupil that is then multiplied by various factors to ensure equity. For example, the act calls for a cost-of-living study every other year for all districts.

That cost-of-living factor for each school district is then to be plugged into the school funding formula. The idea is to ensure that expensive communities, such as Vail and Aspen, can keep up with rising costs.

But while the state apparently conducted the annual studies, the new numbers were never plugged into the formula. In 2000, the resort communities complained to the state.

State lawmakers ultimately decided not to fund the change in the cost-of-living factor between 1994 and 2000 - but they did say districts could add that amount to their tax limits.

DPS officials, for reasons that Bennet said are unclear, never did so. Andras, who advises school districts such as Douglas County, pointed out the change. And Denver's capacity to collect taxes suddenly grew to $24 million.

A+ Denver, the citizens' group assisting DPS on issues such as school closures, is expected to list a tax increase as one of the district's financial options in its final report due out soon.