Policy analyst Jane Herman: Senate Bill One will shrink Borden-Henryville School tax base, forcing trade-offs

Jane Herman of Policy Analytics presented parcel-level projections to the Borden-Henryville School Corporation board showing that Senate Bill One will reduce the district's net assessed value (NAV) and create funding pressures through 2031.

Herman, who said the firm analyzes every parcel in a school corporation, told trustees that Senate Bill One "will increase deductions on homesteads" over a multi-year phase-in and introduces a $300 (or 10%) homestead credit and new deductions for certain rentals and small business personal property. "The effect is going to be the shrinking of net assessed value," she said.

Why it matters: The district funds operations and debt largely with property tax revenue. Herman said the homestead credit and other deductions reduce the tax base, which can push tax rates higher even when boards ask for the same or lower levy amounts because the taxable "pie" is smaller.

Numbers and examples: Herman quantified several near-term impacts. She said the $300/10% homestead credit will cost the district about $544,000 in property-tax revenue in 2027 that trustees had previously included in their budget. She also said the county's current local income-tax cash distribution to the district (about $196,000 a year) and the county's property-tax replacement credits (roughly $19 million countywide) are scheduled to phase out in 2028'29, which will raise homeowner liability when that support ends.

Three scenarios presented: Herman offered trustees three debt/levy options and explained trade-offs for operations funding and future borrowing: - Minimum-debt levy: collect only what is needed to pay currently issued debt; operations growth will track state-allowed levy growth but may still be squeezed by rising fixed costs. - Fixed debt levy: seek the same dollar amount for the debt fund each year (many districts are moving to this to reduce tax-rate volatility); this may preserve some capacity for new capital but can leave operations constrained. - Keep total tax rate below 87 cents: limit the total tax rate, which would require reducing levies and could produce a significant reduction in operations funding.

Herman warned that, under several modeled paths, the district could face declining NAVs through 2031 and that maintaining prior promised rates will be "very painful" for operations budgets. She also noted legacy debt allocations between neighboring units (which she estimated could cost the district an additional roughly $30,000'$40,000 beginning in 2027) will sunset in coming years.

Board questions and clarifications: Trustees pressed on whether transfers from the education fund were included (Herman said the scenario that showed operations pressure did not include those transfers). Board members also asked whether household savings from credits would be offset by increases caused by the end of county income-tax support; Herman said many taxpayers will pay less than they otherwise would have, but some will see higher bills once replacement credits end.

Legal and technical limits: On refinancing and extending debt, Herman said state law restricts lengthening new debt and that restructuring options are limited to cases with substantial circuit-breaker loss or within established refunding call windows; she recommended trustees consult bond counsel for specific issues.

Next steps: Herman offered to run additional scenarios if the board provided growth assumptions or neighborhood-level housing projections and recommended involving the district's underwriter when considering levy changes. The board thanked her; presenters left and the board reconvened for its public meeting at 6:30.

All attributions in this report are to Jane Herman of Policy Analytics or to unidentified board members as indicated in the meeting transcript. No formal motion or vote on levy strategy was recorded during the presentation.