The Los Altos School District faces some financial headwinds in the next few years due to current economic trends, the expiration of its parcel tax in June and the looming construction of its 10th school campus, the combination of which could require passing a new bond to cover costs.
LASD’s Citizens’ Advisory Committee for Finance gave a mid-year update on its findings at the Jan. 23 board of trustees meeting, offering an overview of district finances and future projections.
As of this year, LASD finances are in a good position, but the “challenge is on the horizon,” according to advisory committee member Fred Gallagher. The district currently maintains reasonable reserves, which will help once high inflation and interest rates likely raise costs and lower revenue after this year.
To overcome the obstacles, committee members strongly recommended that the board consider renewing its expiring parcel tax. In 2016, voters renewed the 2011 parcel tax (the first time voters approved a second parcel tax on top of the one originally introduced in 1989) at $223 per parcel, which in total accounted for $2.8 million annually, or 5.4% of LASD revenue at the time.
The committee presented three options for renewal.
Option one is to renew the parcel tax at the current rate of $223 per parcel, which would now account for 3.4% of projected district revenue. Option two is to renew at $295 per parcel, which is the same as the 2016 tax adjusted for inflation and would total $3.7 million annually, or 4.4% of projected revenue. The final option is to adjust both the original parcel tax and the second one for inflation at $401 per parcel, accounting for 5.9% of projected district revenue.
Any renewal or increase in the tax would require two-thirds majority approval, which could prove difficult to achieve given economic pressures on voters as well as possible difficult timing with the needed approval of a new bond measure to support the completion of the 10th school site and upgrades to other district facilities.
The committee found that revenue growth is likely to suffer based on the local housing market, which has seen the volume of home sales drop to pre-pandemic levels in Los Altos. Housing prices are also down, and large-scale layoffs at major companies such as Google, Apple and Meta could worsen the situation.
Fewer home sales means lower tax revenue for schools and other local public institutions. Proposition 13 requires that properties be assessed at market value at the time of sale, and fewer homes being sold at 2023 market value means less new money flowing into
Another cause for concern is the high variability of the stock market, which affects employer contribution rates to state employee pensions CalSTRS and CalPERS. Where pension costs accounted for 1.09% of LASD payroll in the 2019-2020 school year, the number rose to 2.18% in the 2021-2022 school year and is expected to continue to climb as employers make up for stock market losses in the fund.
Finally, personnel costs are expected to continue to increase, especially if the district hopes to remain competitive with other employers in the area. In a previous presentation by auditor Paul Pham from Chavan & Associates, LASD falls behind districts like the Santa Clara Unified School District when it comes to starting salaries for new teachers – $63,000 versus $89,000 for SCUSD teachers. As both Pham and Gallagher pointed out, there is more to consider in an employment package than just base pay, but they both recommended that more LASD resources be put toward hiring quality teachers to remain a top school district.
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