Could the city and the county's tax increases impact Rochester Public Schools' referendum?

ROCHESTER — How much of a tax hike is a city able to absorb at once?

That's a question property owners in Rochester will be dealing with over the next few months as the city, the school district, and Olmsted County eye significant increases to the amount they collect from residents in property taxes. Between the three governing bodies, there could be more than $30 million worth of additional taxes collected from the community in one year alone.

But whereas the city and the county are simply implementing their sides of the increase, the school district will be at the mercy of voters. And that begs the question: Could the recent increase from the city, and to a lesser extent the county, compromise voters' willingness to approve the school district's request?

City and school district leaders are trying to make the argument that both are necessary. Brooke Carlson, president of the Rochester City Council, said she sees the work of the city and the school district as complementary rather than fundamentally working in isolation.

"Even though we operate as separate government entities and decision-making bodies, (I'm) thinking about them collectively as a way that we draw additional investment in our community," Carlson said. "That is the most important argument from my perspective."

Last week, the Rochester City Council approved a preliminary 10% increase in its local tax levy. That will add as much as another $10 million to the total the city will collect from local taxpayers, amounting to $111.6 million, although the amount could be lowered between now and the time the council approves a final budget in December.

The school district's proposed levy would be twice as large as the increase from the city. If approved by voters, the school district's levy would generate $19.4 million a year in additional revenue, based on the current student enrollment. (If voters do not approve the special levy, the district's regular property tax levy still will rise by about $2.8 million, or 3.6% .)

Olmsted County is also looking at an increase , too. On Sept. 17, the county commissioners set a preliminary levy increase of 5.57%, equating to an additional $7 million.

That means that between the three taxing entities, there would be an additional $37 million collected from the community.

To be fair, not everyone living in one ring of the Venn diagram will be impacted by the others since all three taxing entities have different borders. There are people who live in Olmsted County but not in the Rochester School District. On the other hand, since the school district includes parts of Wabasha County, there are some who live in the district but not in Olmsted County.

Nonetheless, more than 120,000 people live within the intersection of all three rings: the city of Rochester.

So could the increase from the city and the county impact the success of the district's referendum? It's possible.

"The 10% increase from the city and the proposed 5% from the county will be too much for most of the people to deal with," said resident John McGuine. "The school district needs to learn how to manage their money more effectively."

Carlson's argument that the increases are investments in the future will have to appeal to a wide swath of the community, since many residents don't have a direct connection to the schools. According to data from RPS, 80% of residents do not have a child enrolled in the school system.

Nonetheless, it's an argument that's coming from more than just the government officials themselves. On Sept. 9, The Rochester Area Chamber of Commerce endorsed the school district's proposed levy, which it's marketing as the Ignite Student Learning referendum. Chamber President Ryan Parsons described it as "an investment in the future of our workforce and the future development of Rochester."

Another major player to support the district's referendum is Mayo Clinic. After Rochester Public Schools announced the need to close schools after the previous referendum failed in 2023, the Mayo Clinic donated $10 million to the school district. At the time, Mayo's Chief Communications Officer Halena Gazelka referred to the donation as a "bridge" for the district to "achieve greater financial sustainability."

That support from the clinic seems to still be intact a year later. When asked by the Post Bulletin, Mayo Clinic Senior Director of Community Relations Erin Sexton released a statement, speaking to the school district's importance to the clinic's own growth.

"Strong performing schools set our kids up for long-term success and are critical to the health and vibrancy of our community," Sexton said. "Mayo and other employers rely on our public schools to recruit and retain staff in Rochester and serve as a building block for our future workforce."

As much as it may be wrapped up with good intentions about investing in the future, there still may be an element of sticker shock to the overall increase.

Before it decided to move forward with a second referendum, Rochester Public Schools contracted with an external firm, The Morris Leatherman Company, to conduct a survey of local households this spring, gauging their tax tolerance. The survey was conducted prior to the city or the county announcing their own tax increases, but it nonetheless offers a glimpse into the community's receptiveness to the increase from the district.

Of those surveyed, 41% defined themselves as financially stressed, whereas 58% defined themselves as financially comfortable.

In regard to all taxes, 52% of respondents said property taxes were "very high" or "somewhat high." When asked specifically about the property taxes for the schools, 47% described them as either "very high" or "somewhat high."

"The threshold we use on this is 50% to be considered a hostile tax climate," said Peter Leatherman of Morris Leatherman. "Do they blame the school district? No, they don't blame the school district because we can see the 52% high goes down to 47%. That's the good news. The bad news is you're really the only show in town that has to go to the public for a funding request."

In other words, if there's one scapegoat the voting public could sacrifice on the altar of property tax discontent, it's Rochester Public Schools.

The fact that the school district is the only tax increase this cycle that the public has any control over is not lost on voters. Leatherman noted that. So did the local organization called "Say No To the Taxman."

"The School Referendum is the only potential tax increase that the voter has a voice in stopping. If we could affect change with the City we would," the organization said in a statement. "Say No to the Taxman does not 'buy' the argument that simply throwing money at the schools improves the schools."

But what about the school district itself? Is the RPS leadership concerned about how the city and the county's increases might impact voters' receptiveness to the school district's referendum?

For School Board Chairwoman Cathy Nathan, it's important to just keep the focus on things they can control.

"We have to think about filling the minds of our voters with the information they need to make an informed vote," Nathan said. "To try to factor in how they may be thinking about another government agency's taxes is just beyond the capacity of what we need to focus on."