Nickel Tax Explainer
Public school facilities in Kentucky are funded largely by local property taxes and specifically through "nickel taxes" which make up the first 5 cents of the property tax rate per $100 of assessed value.
The nickel comes out first and can only legally be used for facility spending. It does not go into the general fund, which funds operations such as teacher and staff salaries. If a Board of Education sets a tax rate of 50 cents per $100 of assessed value, that means the first 5 cents goes into the Building Fund, and 45 cents goes to operations. If the Board sets a rate at 40 cents, then 5 cents still goes to the building fund, and operations only gets 35 cents.
Nelson County has three nickel taxes, which were passed by boards of education in the late 20th and early 21st centuries.
- In 1994, the Kentucky Education Reform Act (KERA) required every county to adopt an initial nickel tax
- In September 2001, the Nelson County Board of Education levied a "Growth" nickel
- In November 2005 the Nelson County Board of Education levied a second growth nickel
Over the next two decades, Nelson County's "Nickel Tax" will generate between $150 and $250 million. Those funds are reserved exclusively for facility funding.
Economic Growth, Rising Property Values
The local building fund's growth is due to the increase in existing property values and the economic growth of Nelson County over the past several years.
For example, in 2010 each of Nelson County's three nickels generated a little over $1 million each. For the 2022-23 Fiscal Year, those same nickels will generate almost $6.7 million.
Forecasting future growth
The table below shows four projections for the facility funding for Nelson County Schools, ranging from, at far left, a conservative 1.5% in property values, to the far right, a 6.1% increase, which is the rate of property value growth for the last five years, as of 2023.
Annual facility revenue comparison to other districts
In the 2022-23 Fiscal Year, Nelson County Schools' nickel taxes will generate about $6.7 million. The table below shows how that compares to other districts.
How our facility liability compares to the region
When compared to other districts in the region, Nelson County Schools has one of the lowest debt-to-revenue ratios. In addition, ranks among the lowest in per-pupil funding for facilities.
The table below compares NCS debt-to-revenue- ratios as well as per-pupil spending on facilities. Nelson County is in bold at the top, and all data is based on Fiscal Year 2022-23.