Board members of Nogales Unified School District No. 1 voted unanimously to take a budget override to the voters in November. But they balked at a $15.46 million bond measure.

The board met July 27 to hear reports from two committees that met on short notice.

Additional money

What is an M & O (maintenance and operations) override?

“It’s a mechanism for public school districts to budget additional dollars above and beyond the state’s constitutional limit,” Finance Director Karla Soto told the board.

A district may ask for up to 10 percent of its revenue control limit.

NUSD already has an override because funding from the Arizona Department of Education (ADE) is not keeping pace with inflation, Soto said. About half the school districts in the state operate with an override.

Nogales voters approved the override in May 2000 for 4.15 percent of the limit. In May 2005, after NUSD held a bilingual forum on the issue, voters renewed the override and increased it to 6.39 percent, Soto said.

It raises the property tax rate by a few cents to pay for extracurricular activities and higher salaries for teachers and staff. At the meeting, the committee recommended a boost to 8.96 percent.

Currently, the override costs Nogales property owners $1.18 per $100 of assessed property value and raises approximately $1.8 million a year, Soto said. About 36 percent goes to recruit and retain staff.

This includes an annual incentive of $1,500 for 335 teachers and $500 for 240 classified employees.

About 38 percent of the current override pays for extracurricular activities: sports and music events, coaches, and student clubs. It also funds after-school tutoring, DARE drug education, the international baccalaureate program, senior projects and Young Audiences, Soto said.

In 2010, the override will enter its sixth year and the percentage of funds it can raise will drop, Soto said. The rate would drop to 4.26 percent and district would collect just $1.2 million.

“We’re at the stage where if we don’t renew the override, we have to begin cutting pay,” said Neal Krug, a science teacher at Nogales High School.

“Our salary schedule does not compare with communities close to Nogales,” said Irene Molera, a member of the override committee. “To me, the teachers are worth their weight in gold.”

Some board members doubted if voters would OK an increase in the override.

Unemployment has reached 11.8 percent in Santa Cruz County and residents are filing record numbers of bankruptcies and foreclosures, said board member Hector Arana.

“It’s more important to preserve what we have than to give raises,” Arana said. “We are in trouble if we don’t renew it (the override).”

Board member Charlotte Suarez asked why NUSD couldn’t keep the override at 6.39 percent.

“Classroom site monies are decreasing and will be felt this year,” Soto said. The funds were earmarked for schools since 2001-2002 after voters passed Proposition 301.

“We have to keep the programs going,” said board member Frank Morales. “I don’t care how many businesses are going out. It’s the only way we can keep our kids going to college.”

Businesses would pay a lion’s share of the increase, noted board chairman L. Hunter Nash, who owns a dental practice.

“I’m in full support of the override �“ the one we already have,” Nash said. “If you make those businesses pay 40 percent more, I doubt if they can handle this. I think we’re going out on a limb.”

The increase to 8.96 percent would cost $62 more per year for the owner of a $134,440 home, Soto said. A business valued at $534,286 would pay $547 more a year.

Arana moved to put a measure on the ballot to renew the override at 6.39 percent, instead of raising it. Board members voted 5-0 in favor of the motion.

Then Assistant Superintendent Steve Zimmerman made a case for a new school improvement bond measure.

Selling bonds allows a school district to generate money for construction and building renewal, Zimmerman said. The district raises the property tax rate to pay the debt service on the bonds.

Districts used to get funds from the state School Facilities Board to repair their older buildings, Zimmerman said. But that funding has virtually dried up, so districts must turn to their taxpayers.

Last week, members of the bond committee visited all 10 schools, he said. Here’s what they found: A termite infestation at A.J. Mitchell Elementary, 46 rotting posts at Coronado Elementary, science labs in poor condition at NHS, and an eroding bank by the district office parking lot.

Committee members wanted to resurface the track at NHS and add high jump pits so the school could host more track events. But they didn’t stop there. They built a wish list that included a $2.5 million swimming pool at NHS and a new science wing, paving several tracks and making repairs to the HVAC system at Desert Shadows.

The total bill came to $15.46 million, just shy of the district’s $15.8 million bonding capacity. For some board members, it was just too much.

“I can see replacing the poles at Coronado,” said board member Manuel Ruiz. “I have no problem with the override, but this thing (the bond measure) gives me heartburn.”

Suarez agreed. “Putting two measures before the public may be too much,” she said. “What is it we need right now?”

NUSD just paid off its last bond issue, the $13.8 million that voters approved in 1993 to build Bracker Elementary School and Desert Shadows Middle School, Zimmerman said.

This was costing property owners $1.47 on their secondary rate, said Michael LaVallee, managing director of public finance for Stone and Youngberg LLC.

The firm traced NUSD’s bonding history and prepared an analysis for the board.

This year, “it (the rate) will go to zero,” Lavellee said. “The $15 million (in bonds) will raise it to $1.”

But Ruiz noted the cost of interest. “Over a 15-year-period, we would end up paying $32 million,” he said.

In November 2008, in the midst of the national financial meltdown, voters passed every school bond measure in Arizona, LaVallee said. “Typically, the bond doesn’t hurt the M & O override.”

Arana and Suarez asked the committee to come back with a “short list” of essential projects. But it appeared there wasn’t enough time to meet before the ballot deadline.

The board voted 5-0 not to place the bond measure on the November ballot.