Sinking Fund Position Paper

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					                             “Sinking Fund” Expansion

          Approved by the Government Affairs Committee on June 12, 2009
            Approved by the Board of Directors on September 22, 2009

RECOMMENDATION: The Muskegon Area Chamber of Commerce opposes the
expansion of public school “Sinking Fund” for uses other than capital projects, due to the
adverse impacts it will have on the business community and the state of Michigan.

RECOMMENDED BY: Government Affairs Committee

BACKGROUND: Under the Revised School Code, school district voters can authorize
up to five mills to establish a “sinking fund”. Currently, sinking funds can be used only
for capital projects, such as the purchase of real estate that will serve as school sites, and
for the construction or repair of school buildings. Currently, legislation has been
introduced to amend the Revised School Code allowing a school district to use a sinking
fund for “any purpose for which a school district can borrow money and issue bonds
under Section 1351a” of the code. The bill also amends the code to allow a levy of up to
five mills on the “taxable value of the real and personal property” of the school district
rather than five mills on “the state equalized valuation of the school district.” This would
result in more money being levied for an expanded list of allowable uses.

POSITION: The Muskegon Area Chamber of Commerce opposes any legislation to
increase the use of sinking fund monies beyond the intent of capital projects. The
Chamber’s opposition is based on the following principles, as the legislation would:
    • Hurt job providers by substantially raising property taxes.
    • Circumvent the tax limits imposed by Proposal A. The primary goal being to
       reduce reliance on property tax to fund schools, and to close the spending gap
       between high and low value school districts. Higher the property values yield
       more revenue a district can raise at low millage rates without inflicting hardship
       on taxpayers. The current legislation gives wealthier districts an advantage over
       districts with fewer resources.
    • Encourage and allow long-term funding (10-20 year bonds) to be used to fund
       short-term purchases (technology, buses).

OPPONENTS RATIONALE: Many school administrators argue that legal restrictions
governing the use of sinking fund revenues are far too limiting and have proposed a
change in the law to give them more flexibility. If school electors decide to authorize
sinking funds for these new uses, they argue there would be a reduction in a district’s
need to bond or borrow overall, reducing interest costs and legal fees associated with
bonded or borrowed debt.
SUPPORTING RATIONALE: Reducing taxes on job providers is a top priority for the
business community. While the Chamber supports the intent of school districts to create
sustainable academic programs, increasing the financial burden on already struggling job
providers is neither a prudent nor a viable way of supporting schools. Additionally,
allowing legislation to be used as a vehicle for circumventing Proposal A, versus
holistically addressing our state school’s funding mechanisms are contrary to the intent as
approved by voters in 1994.

ADVOCACY: The Muskegon Area Chamber of Commerce will communicate our
opposition to members and legislators. We will work through our Government Affairs
Committee to identify a sustainable and adequate funding resource for our public school
systems.