July 15, 2004

Yellow Springs schools eye ‘windfall’ as mixed blessing

The Yellow Springs school district is expected to receive a one-time payment of $1.275 million later this month as a result of The Antioch Company restructuring its organization and tax status.

Though the extra funds are welcomed — Joy Kitzmiller, the district treasurer, called it a “windfall” — the news is tempered by the fact that the company’s move also means that the school district will lose income tax revenue each year.

Rich Bullock, the school board president, said that the additional payment would create “the illusion the school district has a huge bank account.”

Kitzmiller said that the district expects its revenue to decrease by $190,000 a year. When she initially reported this news to the school board in May, Kitzmiller estimated the loss at $325,000 annually.

The decrease in funding equals 3 percent of the district’s expenses, $6.3 million, for the 2004–05 school year, according to Kitzmiller. If the district makes no changes in its revenue or expenses, it will spend the $1.275 million in a little less than seven years.

Superintendent Tony Armocida and Bullock said that next school year’s programs would not be affected by the future loss of revenue. Bullock said that the district would maintain its budget “as we’ve planned it for this coming year rather than making rash cuts.”

However, he also said that he assumes the district would “have to make some cuts over the next few years to make sure we are in the black.”

Armocida said that he would “like to maintain” staffing levels and programs “as long as we can.”

Last December, The Antioch Company reorganized from a sub-S corporation to 100 percent employee owned. An S corporation is a business that passes its income to its shareholders, who report the company’s profit or loss on their individual tax returns.

Lee Morgan, the CEO and chairman of The Antioch Company, said that when the company reorganized, or “recapitalized,” he sold his stock to The Antioch Company’s Employee Stock Ownership Plan (ESOP) and, therefore, had to pay a one-time tax, which “caused the windfall for the school district.”

Tony Arnett, the Village Council president, said that the company’s reorganization should not affect the Village. “From the best of our ability to tell, it does not have an impact,” he said.

School district officials said that they would likely spread the extra funding out over the next few years, giving them time to plan how to make up the loss in funding or reduce expenses.

For instance, Armocida said that the district could decrease expenses by cutting staffing or programs; it could gain more revenue, if the tax base grows; or it could increase taxes. Armocida said that he would not recommend the third option, and that his preference is to realize additional funding through commercial and residential growth.

Last November, Yellow Springs voters approved the renewal of a three-year emergency levy. The levy, which will go into effect in January 2005, will generate $1.06 million a year, or 17 percent of the district’s revenue, for operational costs, including salaries and benefits.

With that levy on the books for three years, Kitzmiller said, the district has “more than enough time to determine the net effect” of The Antioch Company’s restructuring plan and the status of state funding.

Bullock said receiving a one-time payment of more than a million dollars “gives us the ability to plan intelligently and work with all our constituencies and people in the village to come up with a good plan.”

He said that the district’s challenge is not limited to making up a shortfall in revenue, but to find ways to spread its revenue sources around.

—Robert Mihalek