December 15, 2023, the Board of Education hired me to replace retired Superintendent Joel Quinn. I retired from Superintendent of Tonkawa Schools in 2013 after serving in that role 13 years. Previously I had taught Math, coached basketball and track and served as Principal and athletic director at various times over 38 years in the communities of Braman, Deer Creek-Lamont, Garber, Blackwell and Tonkawa. Most recently I came out of retirement in 2019 to serve as interim Superintendent at Blackwell. My observation of Pond Creek-Hunter Schools after a very short presence is that the Board of Education under the leadership of Mr. Quinn and with the support of the community has provided first class facilities for the children in this district. My purpose here will be to assess the financial condition of the district, advise the Board of Education in their search for and employment of a new Superintendent and come along side and support the teachers and support personnel to best serve the children of the district.
School finance has become very volatile over the past several years in school districts with large amounts of property value in the petroleum and wind industries. The instability is caused by tax assessment protests by the largest property owners in these districts. Presently over one million dollars of our ad valorem is under protest. About half of that money goes to our general fund for operations. Another 20 mils or roughly $250,000 goes into our sinking fund to pay bond issue and lease purchase payments for the capital improvements made in our district. Tax monies under protest are paid to the county and held in an escrow account until a settlement is reached. In the Kingfisher case millions of dollars were held in escrow for nearly 5 years and then settled in the Supreme Court of Oklahoma in the favor of the wind industry. Of the $416 million protested only $175 million was released to the school district. The ruling stated that the federal production tax credits used to construct the wind farms are intangible property and therefore not subject to taxation. Adding that “the State Legislature has not chosen to define PTCs so as to allow them to be taxable as part of a real property tax assessment. Until it does so, they are not subject to taxation.”
When wind energy came into Oklahoma, they were given a 5-year exemption whereby the state reimbursed the school districts for the loss of revenue due to the tax credits. There were no protests to the assessed value of the property for the first five years when the property taxes were paid by the State. When the 5-year exempt manufacturing expired the wind companies were responsible for paying the tax on their property then the property suddenly lost a proportionate amount of their value.
Since the Oklahoma Supreme Court has ruled PTCs as intangible and not taxable the assessors have lowered their assessments on wind property to exclude intangible property. Yet the protests continue. The reason wind and petroleum are here in Oklahoma is because we have wind and petroleum. They do not need incentives to invest here. They need to pay their taxes just like you and me. Until the courts and legislature force their hand, schools will continue to have an unstable stream of revenue on which to budget for the education of our children. This issue doesn’t just affect districts where wind and petroleum are invested, it affects all public schools because when ad valorem is reduced, per pupil expenditures are reduced statewide.
When PCH was unable to fulfill their financial obligations, the local bank stepped forward to pay for the obligations of the district. Consequently, a judgement had to be filed to raise the sinking fund levy from 16 to 20 mils to repay the bank. This was not the first kindness shown the school district as they also purchased the bonds sold to build the new high school and gymnasium.
At the end of the 2019-2020 school year the general fund balance fell to $24,160.49. The following year the balance was $214,682.28 in the red. Hence the judgement and the bank loan. At the end of the 2021-2022 school year the general fund balance was back up to $764,767.20.
State Aid is determined by the funding equalization formula based on a district’s Adjusted Valuation. Because of 2020 protests our Adjusted Valuation went down from $54,533,883.56 to $27,705,950.32 raising our State Aid to $905,000. Then in January the mid-term adjustment reduced our State Aid to $407,000 based on an increased Adjusted Valuation to $54,604,787.92 because of money released from three protests from 2019 and 2020. Next year the tax dollars protested this year will again reduce our Adjusted Valuation and if no money is released our midterm adjustment will go back up. This is the roller coaster of school finance that we ride. We receive our State Aid monthly, but we receive our local money when the taxes are paid from January to May. It is difficult to determine how we will end the year when it depends on taxes paid or not paid at the end of the school year. That is presently the state of things. It is too early to tell if we will grow or reduce our general fund balance this school year. If you have any questions about this or anything else about Pond Creek-Hunter Schools, I would love to visit and seek answers to your questions.
Rod Reese, The Interim