KANSAS CITY LAWYER WEIGHS-IN ON PROPOSITION 1 (School Boundary Change)

​Mickes O’Toole, the Shelby County R-lV School Attorney in a memorandum highlights the apportionment of debt and assets from one district to another if voters approve of school redistricting on August 7th ;among other things. Mickes states in-part, “In the present case, if a portion of Shelby County R-lV School District is transferred to Macon County R-1 School District, the two districts will be required to apportion district assets and indebtedness. Shelby would be losing both real property as well as a portion of the increased revenue stream generated by the recent tax levy. Missouri courts have not examined the transfer of a tax levy obligation from a portion of one district to another. However, in the present case, the tax levy approved by voters on April 3rd was passed in order to repay the construction debt associated with the construction of the new elementary school building in Shelby School District. Shelby anticipates collecting $450,000 to $550,000 annually from the tax levy issued against property located in within the current boundaries of the District to be utilized to repay the construction debt over a twenty-year period. Shelby School District will construct a new elementary school building to be completed in 2020. The voters within the existing boundaries of the district approved the tax levy to repay the cost of the elementary building, ultimately approving indebtedness in excess of $7.5 million over a twenty-year period. As such, if a portion of Shelby School District is transferred to Macon School District, the districts must take into consideration the indebtedness that the voters approved in order to build the new elementary school building and the revenue stream to repay such debt. If Macon School District receives Shelby’s school buildings and other assets, Macon is also obligated by statute to be apportioned the indebtedness of Shelby. Based on prior court holdings and the language of the state statute, it would be reasonable that the court would recognize the tax levy utilized to repay the cost of school infrastructure as indebtedness. AS such, the tax levy approved by voters prior to any annexation or change to boundaries of Shelby School District may be included in the appropriation and payment by Macon to Shelby. The question that which was raised in State ex re. Hermitage R-lV Sch. Dist. V. Hickory City R-1 Sc. Dist., does the Macon County R-1 School District have the available funds to compensate Shelby? It may be possible that Macon would be required to issue its own tax levy to pay any apportionment or award issued by the state board of arbitration. As such, both districts need to take into consideration the obligations they have with regard to the transfer of a portion of the Shelby County R-lV School District to Macon and what additional obligations that may impose on Macon.”

​Superintendent Tim Maddex and School Board requested a third opinion. Ryan T. Fry of Guin Mundorf LLC. out of Kansas City was contacted and sent a letter to Superintendent Maddex after looking over the documentation. The letter is as follows: “As requested I have taken an opportunity to review the relevant documentation associated with the potential annexation of a portion of the Shelby County R-lV School District by the Macon County R-1 School District. Specifically, I have reviewed the Missouri state statutes regarding this process, as well as the memorandum provided by the law firm of Mickes O’Toole, and various Attorney General opinions. In general, I found the opinions expressed by Mickes memorandum to be an accurate interpretation of the law and case law as related to the possible annexation or boundary change. In the event that a majority of the voters in the Shelby County R-lV School District do not approve the boundary change, the vote can be appealed to a board of arbitration, consulting of three members of the Missouri State Board of Education. The Mickes memorandum discussed that arbitration process accurately and in depth, so I will not repeat that information. Unless the boundary change occurs, no issue regarding apportionment will arise at this time. In the event that a boundary change does occur, the process of apportioning the debt and/or payment from Macon County R-1 School District to Shelby County R-lV School District then becomes the primary concern. Once again, Mickes memorandum details the applicable statutory and case law basis regarding the apportionment issue. Unfortunately, neither the statutes nor prior cases have dealt with the exact circumstances which the two districts may potentially face. The approval of the levy increase by the Shelby County R-lV voters on April 3rd, 2018 could complicated this analysis considerably as the amount of debt apportioned to the parties will be up for debate. The one certainty that does exist if the boundary change occurs and the parties cannot agree on apportionment amounts, is costly litigation. In that event both districts will be required to expend valuable resources to decide the relative levels of debt apportionment. The process of litigating such a case could easily cost each district several thousand dollars and a great deal of administrative and board time and effort.”

In the case mentioned in the Mickes memorandum: Hermitage R-lV School District vs. Hickory County R-1 School District, the state found that in the case of one district not having enough available funds to accommodate a payment they will owe to another district, the state can come in and reasonably and constitutionally, instruct the paying school district to impose a tax levy (temporarily) on district patrons to acquire funds – not requiring a vote by taxpayers. In this case, debt such as the recently approved tax levy in Shelby County R-lV, the Clarence Elementary, the new Agriculture Building at South Shelby, and any other debt that the district may have, could be apportioned to the Macon R-1 School District in the event of voters approving Proposition 1 on August 7th.

​Through email, I asked Macon Superintendent Scott Jarvis, “Can you guarantee to the Macon R-1 patrons, that there will be NO tax increase, in the wake of apportioning debt, assets, etc. between both school districts if school redistricting passes?” To which he responded with: “I do not see a scenario in which I believe there would be a need to increase taxes on the patrons of the Macon R-1 patrons. The District currently has over 4 million in reserves and we would see an increased revenue stream of approximately 1.8 million a year. However, I cannot guarantee the sun will come up tomorrow. The state statue says debt at the time of the election not future debt. From what I can tell, the only debt Shelby County R-IV currently has is a 1-million-dollar loan. Macon County R-I may be responsible for approximately 30% of that debt. The proposed building project Shelby County R-IV is planning for has not been financed, and it should not be considered debt at the time of the election. If this issue were to pass Macon County R-I could receive up to 30 % of Shelby County R-IV’s fund balance or approximately 1 million dollars. The revenue we would receive from their fund balances would be used to pay for any debt we may have. I know there has been statements the Clarence building is worth six million dollars. I find this number hard to believe when their new building they propose to build is much larger and is being built to hold the students from both of their elementary schools. The cost of this new building is approximately $7,750,000.00. A portion of the Clarence Elementary building is almost 90 years old and the other addition is approximately 37 year old. I have also shared the old MO DOT building as a comparable in which I believe its value is much greater than the Clarence Elementary building is. In the end it will only be stated Mr. Jarvis cannot guarantee a tax increase; however, I do not believe there are any guarantees in anything we do in life.”

As far as taxes go, there is a big question surround the idea of whether or not the Clarence Area Residents if redistricted, will have to pay the recently approved school tax of .73 cents. The State Auditor and Attorney General’s opinion state that if Shelby County R-lV sets their tax rate before the boundary change occurs, that patrons in the area could pay the .73 cents up to one year. Mickes O’Toole disagrees with the opinion of the State Auditor/Attorney General stating that this issue is far from clear – citing that Missouri Courts have never examined a tax obligation transferring from one portion of one district, to another. Jill Wilson (State Auditor’s Office) also states that Macon R-1 Tax Payers will only pay Macon R-1 Taxes. If both districts involved cannot agree on apportionment of assets, debt, etc. if voters approve of redistricting on August 7th, the matter will go to the state to make the apportionment. Most of the specifics on debt, if taxes will be raised, who pays what, how much someone pays, etc. will be determined after voters head to the polls on August 7th. Money that will cost both districts to litigate the specifics of apportionment of debt, assets, etc. if voters approve of Prop 1., quoted in the Shelbina Weekly, Shelby County R-lV Superintendent, Tim Maddex stated, “That is money that we could be putting toward our students.”

UPDATE: Cardinal Kids United reached out to the State Auditor’s asking for clarification about their .73 cents opinion. It is clear and agreeable that patrons pay taxes in the district they reside in, however, the State Auditor’s Office doesn’t address indebtedness. On April 3, voters in Shelby County R-lV approved of a new elementary project of 7.5 million dollars and indebtedness for 20 years. If voters in Shelby County R-lV and Macon R-1 School Districts, approve of school redistricting on August 7th, with the transfer of both debt and assets to the Macon R-1 School District, it is still unclear if taxpayers will be on the hook for the cost of the newly approved elementary building, other debts that Shelby County R-lV has, and who will pay what. In the FAQ sheet that Macon Superintendent Jarvis released, it was stated that the amount of debt Macon R-1 would receive from Shelby County R-lV as a result of the boundary change is “unknown.” Decisions surrounding the transfer of debt, assets, etc. between the two districts will happen after the election if voters approve of Proposition 1 (School Boundary Change) on August 7th.