About 30 schools were built in Indiana in 2003 and 2004, costing more than $670 million. But in 2009, school projects of any scope practically came to a standstill, halted not just by recession-battered budgets but by state regulations steadily eroding the authority of school board members to build, improve or even maintain their schools.

East Allen County Schools and Fort Wayne Community Schools both are up against the new regulations as they prepare to improve schools. The different approaches each is taking reflect their unique tax environments. But they also highlight regulations that almost certainly are confusing to the public and might well push tax bills higher.

For years, Indiana had a unique petition and remonstrance process governing any projects that required a school board (or library board, city council, etc.) to issue more than $2 million in property tax bonds.

Property owners opposed to a project could collect signatures of 100 registered voters or property owners to trigger petition drives pitting supporters and opponents in a 30-day contest to gather signatures of property owners. If remonstrators prevailed, the project was delayed at least a year; if supporters prevailed, it could proceed.

That’s the process followed in 2007, when the FWCS board approved a $500 million long-range building plan. A successful remonstrance campaign killed the project.

The win-loss record for petition and remonstrance projects statewide was almost perfectly even, according to figures from Larry DeBoer, professor of agricultural economics at Purdue University-West Lafayette. Between 1995 and 2007, 52 percent of the 94 projects challenged were approved. That was just a small fraction of the projects completed, however. Only those that faced opposition were subject to the dueling petition drives.

New rules

A property tax uproar in Marion County changed all that. Lawmakers, unnerved by taxpayer protests there and stung by complaints of “Taj Mahal schools” built in some suburban districts, approved property tax caps.

They also established a referendum process, wherein voters could approve property tax hikes beyond the tax-cap limits to raise additional money for capital projects or general fund expenses.

For construction, any elementary or middle school project totaling less than $10 million or high school project less than $20 million would fall under the dueling petition and remonstrance process; anything more is subject to referendum.

While a petition and remonstrance drive can be held at any time, legislators have amended the original law to prevent school districts from scheduling referendums in a special election, when turnout is presumably low. Southwest Allen County Schools held a special election in April 2009, picking up the $19,000 election bill, on its way to approving a $3.5 million tax increase to support its general fund. Now, a special election can be held only if no regularly scheduled election is held and only on the first Tuesday after the first Monday in May or November.

Since the referendum process was set in place, 64.7 percent of construction projects have been rejected, compared to 54.5 percent of general fund referendums, which allow school districts to collect more tax revenue for teacher salaries and other classroom costs.

In a study of Indiana’s new school referendum process, Indiana University’s Center for Evaluation & Education Policy noted the difference between the approval rates for capital projects and general fund tax hikes, attributing it to voters making a distinction between wants and needs.

“(G)eneral fund referenda might have been approved at a greater rate because voters viewed those tax increases as a ‘need’ to prevent schools from cutting teachers and increasing class sizes,” according to the study.

But John Ellis, executive director of the Indiana Association of Public School Superintendents, notes that building expenses in Indiana fall increasingly into the “need” category.

“It’s in the area of trying to keep things up to date where we’re seeing the most construction activity,” he said. “We’re paying now for the end of the baby boom construction. When my peers and the group just after them started school, Indiana built a lot of its schools. We’ve now got a lot of schools that are getting to be 50, 60 years old and they were built cheaply and in a hurry.”

Two districts, two routes

Both the Fort Wayne and East Allen districts require improvements for schools constructed during those baby boom years. The average age of the 51 FWCS school buildings is 54 years. East Allen’s New Haven High School was built in 1975, but building codes and accessibility requirements have changed dramatically in the past 35 years.

To pay for projects currently proposed, the districts will follow different paths:

•At East Allen, a tight timeline dictated a quick start on improvements. The school board a year ago approved a districtwide redesign, establishing kindergarten through grade 12 campuses at Heritage and Woodlan high schools and new early-childhood through high school configuration models in the New Haven and Paul Harding attendance areas. With some money available in its capital projects fund and capacity to increase its levy without hitting the tax-cap limit, the district was able to proceed with renovations at Woodlan and Heritage under the petition-and-remonstrance rules.

The EACS board approved a $10.8 million bond issue for the Woodlan project, which includes a new elementary school classroom wing added to the existing high school. The project will cost taxpayers about $530,500 a year through 2021, increasing to $1.3 million a year in 2022, when other debt obligations are paid off. Overall, the effect on the tax rate would remain fairly stable. But the project hasn’t escaped opposition – signatures have been submitted to the Allen County Office of Voter Registration to trigger the dueling petition drive after a 30-day cooling-off period.

The district has much work ahead, including renovation needs at the New Haven-area schools and Harding High School, set to open as a magnet school for ninth-graders next fall. Down the road, a construction referendum seems inevitable.

•At FWCS, options are dictated by tax caps from the outset. The district will lose $5.9 million to property tax credits this year alone. Increasing the tax rate would only result in greater loss because the circuit-breaker tax cap simply leaves tax revenues uncollected. In addition, the district’s needs – worsened by a four-year delay from the failed 2007 project – far exceed the limits triggering the referendum process.

District officials are in the midst of a public education campaign to explain the current $242 million proposal, with three community meetings set for this week. It’s possible a proposal approved by the school board could escape opposition, but unlikely. The school board hopes to approve a project in time to place the referendum question before voters in the May primary.

Fort Wayne’s current proposal is modest. The work will scarcely be noticeable because it mostly addresses outdated heating systems, damaged masonry, window replacement and roofs. No new classroom space is proposed.

State oversight

Gov. Mitch Daniels, an outspoken critic of Indiana’s school construction environment since he took office in 2005, said in 2008 that Hoosiers should be allowed a “straightforward referendum … to weigh the pros and cons of big investments for which they will pay the costs.”

But his call to “end the era of micromanagement from Indianapolis” hasn’t quite panned out. Legislation approved this year gives the Indiana Department of Local Government Finance the authority to reject referendum ballot questions. Perry Township Schools in Marion County submitted a referendum question earlier this year seeking approval of $50 million in construction bonds.

DLGF nixed the wording, objecting to a phrase that noted the debt service rate would otherwise be zero. The state also objected to the project description because it referred to safety and security improvements, while “only 6.8 percent of the project cost is allocated for safety and security.” The question was rejected as “inaccurate and biased” and had to be rewritten to DLGF’s specifications.

“The ballot language is almost written as a double-negative,” said the superintendent association’s Ellis. “We hear from people all the time – that they read the question and it’s very confusing to them if they support the referendum.”

Other changes in the last session clarify rules placed on school officials to talk about a proposed project. Previously, school employees were effectively barred from even answering questions about a proposed referendum.

Costly delays

The new state controls on school construction might well be holding down property tax bills, but that’s not to say there isn’t a cost to taxpayers and, more important, to Indiana’s 1.1 million students. They need buildings that are not only safe and efficient, but also offer the learning environment today’s economy demands.

A handful of electrical outlets won’t work when every student is equipped with a laptop or tablet computer. Small classrooms don’t lend themselves to the project-based learning demanded, with instruction that fosters critical thinking instead of rote memorization.

Ironically, now is the ideal time to leverage tax-dollar investments in schools. Decreased demand has pushed construction costs lower, and interest rates are low.

But Karyle Green, superintendent of East Allen County Schools, said the remonstrance delay on the Woodlan project will push back a targeted construction start this spring.

“I think that the legislators intended to make things tougher, but in this economic environment it’s getting even tougher to do projects.” she said. “If you look at neighboring states, their facilities are just awful. When the rules changed (in Indiana), people knew we were going the way of the other states. We’ve had really good facilities, but that is coming to an end.”

Ohio’s experience is instructive. The state’s highest court in 1997 declared Ohio’s school funding system unconstitutional, directing the legislature to enact a complete overhaul. The Ohio General Assembly approved several measures, including one to create a school-facilities commission to oversee more than $2.3 billion in spending for school infrastructure rated as the worst in the nation by a federal study.

For Indiana school districts, increasingly hamstrung by property tax caps limiting how much is available in their capital projects funds for maintenance and repair, Ohio’s example is looking more like a preview of what’s to come.