HAMMOND | The Indiana Department of Local Government Finance said the School City of Hammond has some options if it doesn't agree with a decision turning down the district's request to build a new school.

Commissioner Tim Rushenberg denied the project Tuesday, saying he was concerned about the impact it would have on taxpayers in the district.

Hammond resident and community activist George Janiec, who opposed the project, applauded the commissioner's ruling.

"They made a good decision, a sound decision," he said. "They took to heart the interests of the taxpayers, just as Governor Daniels intended for them to do in the provisions of (tax reform) House Bill 1001."

Janiec said millions of dollars spent on a new high school would have created an "onerous obligation and burden" for taxpayers. Instead, he suggested school officials look at the entire high school issue and provide taxpayers with "measurable and significant" indications they are able to produce a quality product and boost the graduation rate.

DLGF spokeswoman Mary Jane Michalak said the Hammond school district has the option of appealing the decision to the tax court, holding another preliminary hearing of determination, and if the voters object, they can initiate a referendum that would go on the ballot for the public in the school district to decide.

Hammond Superintendent Walter Watkins said all of the parties -- School Board, financial consultant and legal consultant -- have not had a chance to review the decision. No course of action will be decided until that takes place.

Watkins emphasized the district needs a new high school. The plan called for closing Hammond High School and Gavit Middle/High school and building a new high school. Gavit would be converted to a middle school for sixth-, seventh- and eighth-graders.

Watkins said the principal cost of a new school project is $106 million. Of that amount, $75.5 million would pay for the cost of the high school. The remainder of that cost would be used to convert Gavit to a middle school. Adding the interest over a 20-year period, the cost balloons to a pay back of about $165 million.

Previous reports indicated the payments are backloaded. The proposed financing schedule calls for the district to pay nothing this year and next. Annual payments would jump to $5.3 million in 2010 and to $13.9 million in 2020.

Watkins said they had been in conversation with the DLGF during the long process while the commissioner reviewed the Indiana State Property Tax Control Board's rejection of the proposal in July.

Watkins said Hammond school officials had proposed modifying the project, and reducing the principal amount for the project from $106 million to $102 million.

However, Michalak said "that's a small decrease" on a project of this magnitude. She said it still left a significant tax rate impact and circuit breaker impact on the school district and the overlapping taxing units."