April 17, 2013

ESPLOST revenue lagging

First two months of sales tax below projections

By Christopher Smith

— Revenue from education Special Purpose Local Option Sales Tax (ESPLOST) is off to a slow start, leaving officials with Dalton Public Schools and Whitfield County Schools wondering if they will have to scale back projects.

ESPLOST was projected to raise $105 million over five years, with county schools taking $68.65 million and city schools getting $36.35 million.

The sales tax collected for county schools in January was $745,000, but county school officials expected at least $940,000 a month. February brought in $974,242 — more than the $940,000 expected — but the surplus was not enough to make up for the January deficit. County school officials expected to have $1.88 million by now, but have $1.71 million.

Sales tax revenue for each month is released on a two-month delay. Information on revenue from March will not be made available by the state Department of Education until May.

“January is typically the lowest revenue of the year because people have exhausted their wallets from big spending in December during Christmas shopping,” said Ron Hale, chief financial officer for county schools. “January is normally the lowest month, but this is still abnormally low for January ... this is well below expected, but hopefully things improve. If they don’t we will have to cut back on some projects.”

Whitfield school board members have said they want to use ESPLOST to pay off $36 million of debt from building the new Eastbrook Middle School and Coahulla Creek High School, put $8 million towards technology upgrades such as computers and put $12.5 million toward smaller facility upgrades including new air conditioning or new roofs.

The sales tax split between the two systems is based on student population; county schools teach 13,176 and city schools teach 7,225 students, according to the last official count by state officials.

City schools also lower than expected

Officials with Dalton Public Schools also reported lower than expected ESPLOST revenue. January revenue was expected to be close to $500,000, but was $353,000. February was expected to bring in another $500,000, but brought in $489,700. Instead of $1 million in revenue, city schools have $842,700.

“This is only the second month of collections,” said Theresa Perry, city schools chief financial officer. “We can always adjust our projections and fine tune for expenditures in our capital projects. We will make another projection if we find several months into this that we are three or more percent below expectations.

“Overall, February revenue is significantly better than January. That’s 38 percent improvement, but it’s a little bit below projections. Finance staff will continue to monitor this.”

City school board members are planning to use ESPLOST funding to expand Dalton Middle School and Morris Innovative High School.

Differences from July ballot

Hale says the $105 million — the number voters were given when they approved the tax — could be a “rosy scenario.” ESPLOST collections continue until revenues hit the ballot number or five years is up, whichever comes first.

A budget forecast provided by the county school system anticipates $56.5 million over five years, a $12 million difference than what was on the ballot in July. A city school budget forecast expects $30 million, not the $36.5 million voters approved.

To generate $105 million in five years the ESPLOST would have to bring in $1.1 million a month for county schools and a $605,833 a month for city schools. Both marks aren’t likely to be hit even in the best months, Perry said.

“The resolution the voters approved is not a projection of what we think we’re going to collect,” she said. “We actually — on purpose — pick a very high number, but from a budget standpoint we’re using $30 million as opposed to $36.5 million.

“We do not believe we will collect $36.5 million. But if the economy were to improve beyond anyone’s expectations, we don’t want to lose out. Really, right now we’re budgeting for $30 million but it looks like we won’t even hit $30 million.”

Hale said the number on the ballot was intended to tell voters “what the school systems expected to receive.”

“The actual resolution the board took for the tax had to state how much we thought we were going to get,” he said. “That’s required by law. But the $68.65 million figure assumes a 5 percent increase in sales tax revenue each year for the five years. The $56.5 million is more conservative.”

Asked where the projection for a 5 percent increase in sales tax revenue comes from, Hale said it has “no basis.”

Perry said the city schools did not assume a 5 percent revenue and projected an initial overestimation instead.

“The 5 percent increase is a rosy expectation that things will be great and booming,” Hale said. “We didn’t want the ESPLOST to cap off before the five years was up so we added the increase. This is reasonable, not completely out of hand. ... If we hit the $68.65 million or if we hit five years of collections the tax will stop, whichever comes first.”