The feasibility study for a city-run school system in Orange Beach is in, and civic leaders have already set a tentative date of September 23 for a referendum vote that would make the plan a reality.
Though the study performed by Decision Resources LLC suggested the creation was possible, it also suggested Orange Beach would need an extra 7.5 mils of additional revenue to reach its goal of being a top-tier school system.
“The study shows that it’s very feasible for Orange Beach to break away from the (Baldwin County School System),” Mayor Tony Kennon said. “The value of a mil here is the greatest in the state of Alabama. We won’t have to raise taxes very much.”
While a mil in Orange Beach is valued at more than $700,000, the plan the city unveiled May 20 outlined three varied tax increases that together could generate about $6.5 million in local funding for the school system annually.
The plan includes a 5-mill property tax increase, a 1 percent lodging tax increase and a ½ cent sales tax increase.
A mill amounts to about $1 in property tax for every $1,000 of assessed value, so a 5-mil increase on a $100,000 home would only raise the owner’s property taxes by $50 annually.
Orange Beach has the lowest municipal millage rate in Baldwin County, around 4 mills, and even with the additional 5 mils, Orange Beach will still have a lower rate than Daphne, Fairhope, Bay Minette, Spanish Fort and Silverhill.
The one percent lodging tax increase would only affect those temporarily staying in Orange Beach, and would raise costs of $100-a-night rooms by $1, $200-a-night rooms by $2 and so on.
The 1/2-cent increase will bring sales taxes in Orange Beach up to 10.5 percent and is expected to generate around $1.15 million in additional funding based on numbers from 2013.
“I’m as anti-tax as any person on this earth, but the track record of other cities show that, when it’s done correctly, there’s tremendous economic value on top of the academic benefits,” Kennon said. “There will be a great return on any tax investment.”
Kennon said the mixture of several taxes allows the city to be prepared for a number of possible economic situations in the future because some taxes would increase significantly with tourism and others would be more stable throughout the entire year.
“By doing a lodging tax, we would have immediate cash ready to pay for any debt, as opposed to property taxes, which wouldn’t be accessible for 12 to 15 months,” Kennon said. “That would prevent the city from tapping into its reserves to cover any start-up costs.”
During a town hall meeting, Kennon said the development of a school system would foster both business and residential growth to the north via the Wolf Bay Bridge.
It would also help foster a larger full-time population, which would give the city a stronger voice with State lawmakers and bring in more support for businesses when tourism slows down.
“This is part of our strategic plan for economic growth and development in the City of Orange Beach. We must find a way to diversify our economy and it’s proven a top-notch school system can do this,” Kennon said. “It creates all the reserves and buffers necessary to protect us in any type of economic downturn or hurricane.”
Councilman Al Bradley, chairman of the city’s finance committee, gave a brief update on the city’s current financial status at the meeting, and touted the city’s recent upgrade from an AA-minus to an AA-plus credit rating from Standard and Poor.
“That is unheard of to go up two notches,” he said. “It puts us in a very select group of cities across the country. The city is in great financial shape.”
Bradley also said Orange Beach has made significant increases to its reserves over the last five years, which currently hold around $25 million.
Kennon said he and the council are very excited about starting a system, but the ultimate choice would come from the citizens in the September referendum.
Alabama law allows any city with a population of 5,000 or more to establish a school system through a city council decision, such as Chickasaw City Schools in 2012, but Orange Beach officials want to make sure the school has the community’s support.
The city council can approve a one-mil increase in ad valorem taxes on its own, but any additional funding means would require a citywide vote.
Because the system couldn’t function without the increased taxes, Kennon said the ballot in September would comprise the tax increases and the creation of the school system in a single question.
“We’re hopeful, but it’s totally up to the citizens,” he said. “We’ll honor their decision either way and move forward from there.”