HANCOCK COUNTY — The $55 million question on May’s primary election ballot, asking voters whether they support a property tax increase to build a new jail, addresses only construction of the new facility — not the operational and staffing costs that come along with it.
Running the new jail would cost about $9.3 million annually -– about $2.8 million more a year than what it costs to run the current facility, according to estimates from RQAW, the consulting firm working on the jail project.
That $9.3 million estimate is a worst-case scenario, records show: it factors in additional staffing (16 jailers), plus supply and utilities costs to run the proposed new jail at its maximum capacity of 438 inmates — which the county isn’t projected to hit until, at the earliest, 2035.
How to cover those additional annual operating costs remains unanswered as voters head to the polls, though county leaders say that’s purposeful.
How residents vote on the referendum will play a major role in how county leaders finance the remaining costs for a project they say will move forward, regardless. If residents agree to the property tax increase, it’ll give county officials a green light to split construction costs between property taxes and income tax, making way for them continue their discussion on how to cover operational costs, they say.
In today’s story, the Daily Reporter breaks down some the financial questions voters might have.
What costs does the referendum address?
The question on the ballot addresses the “construction, renovation and expansion of county Criminal Justice Center Complex facilities.”
This includes: building a new 430-bed jail; renovating the current jail, 123 E. Main St., Greenfield, to make it the county’s community corrections facility; renovating the current community corrections building, 233 E. Main St., Greenfield; move the probation department; and repairing the courthouse roof.
These construction and renovation costs should total about $35 million, officials said. Another $20 million will be set aside for soft costs associated with a project of this size, including financing, design and engineering costs.
The county commissioners say $55 million is the most the project will cost, and they hope the work is less expensive.
Who pays if the referendum passes?
If the referendum passes, the cost is shared among all property owners. The question on the ballot asks for residents’ permission to increase property taxes above the state’s caps –- something that can’t be done without voters’ approval –- to fund the construction.
County leaders would get, essentially, a loan to fund the construction and renovations they’ve outlined, and then they’d used the revenue from that property tax increase to pay back the loan over 20 years –- meaning taxpayers will cover about $30 million in interest on top of the $55 million loan, based on the current interest rate of plus 1 percent, according to documents provided to county officials by their financial advisers.
In the referendum passes, property taxes would increase by about 14 cents on every $100 of assessed value, though the actual impact will be less because of property tax deductions, such as the homestead deduction, county leaders say.
For a $100,000 home, the increase would end up being about $45 a year; a $150,000 home would see an increase of about $89 a year; on a $200,000 home, the increase would be about $133 a year, county leaders said.
One acre of farmland that’s assessed at $1,850 an acre would see an increase of about $2.50 a year before deductions are applied, Commissioner Marc Huber told the local farm bureau recently.
Those estimates represent the impact on taxpayers if all construction costs were covered with only revenues from increased property taxes. But county leaders have said they’d consider dividing construction costs between property taxes and income taxes, which would reduce the property tax impact, they say.
For the purposes of this story, however, we’ve based all calculations assuming the property tax increase alone covers all construction, as is stated in the referendum question.
Construction is a capital — fixed, one-time — cost. How will annual operational costs change?
RQAW has outlined some estimates of the additional costs to run and staff the new jail.
The current jail has an operating budget of $6.5 million. The biggest chunk of that covers salaries for the 29 officers who staff the facility, about $4.6 million annually.
The sheriff’s department says — and RQAW’s studies agree — the jail is under-staffed at its current population.
To safely house the current inmate population, the jail now operating with 29 staff actually needs 38 officers, RQAW’s study found. And those manpower needs won’t change when they’ve moved into new facility: a staff 38 people strong will be sufficient to oversee the proposed new Hancock County Jail on its first day of operation.
Hiring nine new officers will add $900,000 annually to the current jail budget.
Do we know yet where that money is coming from?
No, not exactly.
Greg Guerrettaz, the county’s financial adviser, who has worked closely with county officials as they prepare for the referendum, told the Daily Reporter it’s still too early to know exactly what the operational expenses will total.
The amounts put forward by RQAW are estimates — about $2.8 million more a year than what it costs to run the current jail — and without the final building designs in hand, county leaders can’t know the total impact and therefore can’t tell voters what that impact will be, Guarrettaz said.
“It really depends on the schematics,” he said.
But the only way to really cover these continually, no matter what they might amount to, is through an increase in the local income tax, Commissioner John Jessup said.
In November, he and fellow Commissioner Brad Armstrong presented the Hancock County Council with a series of written reports outlining different financing options for both the operational and construction costs of the project.
A disclaimer: None of these suggestions has been approved or even publicly discussed by the county council – the board that would have to approve any income tax increase – since that November meeting.
One of the financing options suggests raising the local income tax — taken out of Hancock County workers’ wages — by 0.15 percent to cover the new jail’s operating expenses at its maximum capacity.
This scenario assumes the referendum is successful and that all additional revenues from the property tax increase are used to cover jail construction costs.
The increase would raise the current income tax rate to 1.85 percent — up from its current 1.7 percent – and would collect a total of $3.1 million.
Some 40 percent of that revenue — about $1.4 million a year — would go into county coffers to cover public safety initiatives, including the additional jail officers’ salaries, the document show.
The remainder — about $1.6 million — would be divvied among local municipalities to also be used for public safety as they see fit (fire and ambulance service, police officers’ salaries, etc.).
The 0.15 percent increase would mean someone making $50,000 would pay $925 a year in local income taxes (about $35.50 per biweekly paycheck), before any deductions are applied, document show.
Doesn’t the county have savings? Can’t we pay jail officers with that money?
We could — but not forever.
Where the county’s general fund is sustained with continuous revenues from both property and income tax, its savings account — nicknamed the rainy day fund — doesn’t have that revenue stream, said Robin Lowder, the county’s auditor.
Records show the county’s rainy day fund contains about $5 million. Those dollars are leftover funds, transferred into rainy day at various times when they’ve gone unused, Lowder said.
Local officials could vote to cover a few years’ worth of the new jail’s operating expenses; but eventually, the fund would dry up, she said.