While the Dallas School Board couldn’t get a definitive endorsement from its Citizens Oversight Committee of a plan to implement a Construction Excise Tax, several community members made it abundantly clear it would be a bad idea.
The district’s finance committee first broached the idea to the school board at their April 24 meeting as a way to buffer their diminished coffers due to budgetary shortfalls at the state level. The board decided to forego a decision without hearing first from their CoC.
A CET could add a $1 per square foot tax to new home builders or 50 cents per square foot to non-residential structures. District director of financial services Tami Montague said her research estimated the district could take in about $312,000 a year over the next five years with a CET in place.
Ironically, it was one of the members of the CoC, Gary Suderman, who most vehemently opposed the CET.
“I think it is just an absolutely fatal, lame idea. Because it’s raising taxes. No. 1, I hate taxes. I don’t make any bones about it,” Suderman told the board members. “It is a typical go-to for governmental entities to think we when we don’t have enough money we’ve got to raise taxes. We all know we’ve got to pay taxes. But nobody says, ever, I hope next year they raise my taxes. Because wages don’t keep up with inflation, and wages don’t keep up with taxes. This excise tax on top of what it takes to build a house before you even turn a clod is absolutely ridiculous.
“As a tax payer and member of the bond committee (slams fist on table) no more taxes!” Suderman emphatically concluded.
Jerry Boudreaux, chairman for the district’s CoC, due to extraneous circumstances, couldn’t deliver an endorsement of the CET.
“At the meeting where this came up, we barely had a quorum,” Boudreaux told the board members, pointing to absences due to illness, a family tragedy and another moving away. “We had three members and myself, out of a committee of eight. The information I provide tonight is not a representation of the whole community.”
Boudreaux said Montague conducted a thorough survey of 65 surrounding school districts to look into how a CET impacted their communities. However, he added there just were not enough eyes on the results of her report to make a fair assessment.
“The CoC barely had a quorum and public input is vital on this matter. Our recommendation was leaning in favor of the CET. I’m reluctant as the chairperson to put that recommendation forward to you because of the barely minimum quorum on the committee,” Boudeaux said.
“It would be safer to say a recommendation could not be made at this time. Further discussions need to be held on the CoC as a full committee. I realize that’s punting, you guys are going to be faced with making a decision and I’m glad I’m not sitting in your chair,” he concluded.
In the meantime, several other members from the builder’s community gave their thoughts on a proposed CET for the board to consider.
Real estate broker Timm Cable asked the board to consider the new tax cautiously.
“At this time of rising inflation and the affordability of housing in our area is not necessarily in line with what a lot of folks hope to get into home ownership would like to do,” Cable said. “When all the costs go up, it just knocks out another section of people hoping to have that American dream of home ownership.”
Mike Herdman of the Homebuilder’s Association of Marion and Polk Counties said he represents about 650 contract businesses in the region. While he wasn’t against the school district raising needed funds through increased taxes, a CET was going down the wrong path to do so.
“I certainly recognize your ability to implement it if you choose. Let me argue this is a really bad time to look at it. The housing market is a pretty precarious state right now with affordability and the impact with a tax like this would be especially problematic for builders to deal with,” Herdman said.
Rather, he said his organization sees bonding as a much more appropriate way to handle the valid school construction needs. Voters did just do that – they approved a $28 million bond last year.
“The challenge that we’ve got is that an excise tax would be a very flawed method of raising money. Most of the folks who buy new homes don’t have kids in schools. And frankly, the folks that are moving to town, the vast majority of those with kids are buying existing,” Herdman said.
He explained that somebody who is buying a new home is paying 60-70% more on that same mortgage than they would have 18 months ago. That causes fewer folks able to buy, pushing them out of the new home market.
“Builders are doing all they can to bring those costs down, including smaller homes, but this kind of tax would really make that affordability that much worse,” Herdman said. “If you do choose to go down this path, I suggest to hold off doing it now. And if you do choose to do it, to phase it in over a few years to give the industry a better opportunity to phase that in and soften the blow.”
Longtime builder Steve Bennet explained next that a lot of the new homes his company builds around Dallas are catered to mostly newcomers. He said while the $2,500 a CET would add to the home’s final cost to buyers doesn’t sound like much, it can actually put them out of the ballpark of buying here.
“Compared to 3 to 4 years ago we could make adjustments. Now there’s nowhere to adjust. All the new energy codes cost us another $2,500. We can only go so far. We have to make a profit as well. We’re hoping in a couple years things will even out. But we buy a piece of property and develop it, it’s 2 ½ to 3 years before we see a return on capital. So that’s quite a risk we put out there,” Bennet explained. “I don’t think it’s time to implement another tax, personally.”
Board member Lu Ann Meyer asked Bennet if he had problems selling homes with the excise tax. Bennet replied he had built homes in Independence 10 years ago (where the Central School District has a CET) and that was not a challenge, then.
Just, being on the front line and having the kind of folks come in to buy our houses, and get them financed, you just have to trust me, $2,000 one way or the other makes a big difference in today’s economic climate, anyway,’ Bennet said.
Board Chair Matt Posey said it would be prudent to wait until a full decision from the CoC out of its next meeting June 6.
“I don’t think we’re in such a hurry that we have to move forward or not move forward, to wait it out and get the information so we’ve got something to make educated choices on,” Posey said.
Summer roofing projects
In other action, the school board approved spending $1.4 million on roofing projects to begin this summer. Director of facilities Bob Archer said the lowest bids came from Weatherproofing Technologies, Inc., to do the gym roof at Lyle Elementary for $195,833 and six areas of Dallas High School’s roof for $855,974.
The district also accepted a $388,185 bid from Anderson Roofing, Co., for a project at LaCreole Middle School.
Archer said all three projects will be initiated this summer.
“It was between this summer or next and things aren’t getting any cheaper,” he told the board.
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