School Funding in New Buffalo, Modular Homes and More

We’ve lost count with the number of times we hear concern about school funding, short-term rentals, affordable housing, 250-unit modular homes, fear of scholarship money loss and money.

Hence, we decided to write as much detail as we can about the way in which New Buffalo Area Schools receives its funding. Join us, will you?

First, yes. There is a casino in town. In lieu of paying taxes, the casino, distributes various percentages of slot machine revenue to local areas  including New Buffalo Area Schools ($1.6MM). Some of the funds from the casino go right into the Bison Educational Trust. This is for New Buffalo High School graduates who live in the school district. Each graduate is eligible for $5,000 per year for five years, upon completion of high school, maintaining a specific GPA, etc. The funds can be used for anything from college, trade schools, etc.

Of the approximate $1,600,000 NBAS receives from the Local Revenue Sharing Board (they distribute the funds from the casino to the area), $1,100,000 is put into the Bison Educational Trust. As of June 2018, ~$776,000 was distributed to recipients. Which means there is a surplus of scholarship funds that are invested every year, collecting interest, etc. In theory, the interest collected from this investment could fulfill the amount being distributed to recipients in a financial self-fulfilling model. The other $500,000 is put towards capital improvements. 

Next, you may ask about operating budget.

This is where the second home owners come in. Second home owners in the school district (including areas of Union Pier and Three Oaks that are in the district) pay more taxes as full-time residents. A good portion of these taxes go towards funding the schools’ operating expenses. Thus, full-time residents’ tax revenues go towards other things like running the city, parks, etc, but their tax bill does not go towards funding the schools - this comes from second home owners.

In addition to second home owner taxes, businesses in the area contribute to the school operating budget. 

With me so far? Great.

All of this means that New Buffalo Area Schools is out of formula. The school district gets $0 from the State of Michigan. Because the revenues are high from second homeowner taxes and businesses, New Buffalo doesn’t rely on money from the state to educate kids.  According to last year’s audit (October 2018), the district received approximately $1,000,000 more in revenue from second home owners. The bucket of funds from the second homeowners and businesses is what is used for operating expenses. 

Like a pendulum, if something goes up or down, you need to adjust things accordingly to provide services to the kids.   

Now, if you are to increase the population of the area, the budget needs to be considered. Here are some key questions that should be reviewed, but also analyzed with various if/then scenarios. It would behoove the entire community and its stakeholders to have this exercise completed before the school year. So much misinformation seems to be passed from neighbor to neighbor, when clear black and white facts could put everyone on the same page. 

Key questions that should be elevated:

-If a specific pool of cash is used for expenses and you increase the number of kiddos, what happens to the pot and its distribution? 

-If an increase in population means that New Buffalo is back in Michigan’s formula, could the per pupil amount from the state cover the operating expenses?

-As the area is in need of more affordable housing for residents, how do you raise your hand for more homes and families while balancing the operating budget of the school?

-As the revenue from second home owners kept New Buffalo out of Michigan’s formula since 1994, what’s next? What is the back-up plan? 

In addition to all of the above, there are many short-term rentals in the area. Those short-term rentals are in homes that are considered second homes. If the city adheres to Michigan state law and disallows short-term rentals in R-1 districts, the city would, in essence continue to get the revenue from the second home owners and, in turn, operating funds for the schools. An analysis should also be done regarding this part of the equation as the short-term rental debate has taken on quite the activity in New Buffalo. 

New Buffalo Area Schools continue to get accolades and awards for its fantastic program and instruction. Out of state residents pay a yearly fee to get their children in. Nearby communities are on wait lists for Michigan School of Choice options. 

The City of New Buffalo, New Buffalo Township and New Buffalo Area Schools should have an open, transparent discussion around community development and how the role of schools, casino funding, real estate and other areas play key roles in the future of the area. 

Local leaders who are also heavily involved in the real estate world should be transparent about their affiliations, participation and goals as it relates to all transactions.

These are complicated issues that should not be something residents are shouldering and debating in small get togethers. We hope local leaders come together, put siloed goals aside and work towards better communication, transparency and planning for area residents and children.