Seminar on School Finance - Property Taxes and the Tax Levy (and other Local Revenues) IASBO Conference – May 15, 2013 Dave Lawson, Director of Finance.
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Seminar on School Finance - Property Taxes and the Tax Levy
(and other Local Revenues)
IASBO Conference – May 15, 2013Dave Lawson, Director of Finance
McHenry Community High School Dist. #156(815) 759-2264 lawsondave@dist156.org
Local Revenues - Objectives
• Recognize school funding as a political process• Recognize our “over” dependence on property
taxes. • Become familiar with the property tax levy and
extension cycles.• Be cognizant of the time frame for each process.• Start looking for alternate revenue sources.
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Local Revenues
• Investment Earnings• Student Fees• Impact/Transition Fees• Corporate Personal
Property Replacement Taxes (CPPRT)
• Local Property Taxes• Other Local Revenues
4
Investments
• If you have fund balances, do a multi-year cash flow analysis
• Maximize interest earnings by investing funds for the longest term based upon the cash flow analysis
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Student Fees
• Textbooks• Classroom Supplies• Drivers Education• Technology• Athletic Participation• Student Activities• Parking Permits
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Impact/Transition Fees
• From new housing developments
• Work with villages and/or county to establish consistent impact fees
• Make sure the villages/county distribute the funds timely
• To be used for construction needs
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Corporate Personal Property Replacement Taxes
• State tax on net income of corporations to replace local tax on the assessed value of corporate personal property (1979)
• Jan, Mar, Apr, May, Jul, Aug, Oct, Dec payments
• Will fluctuate (+/-) with the economy
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Local Property Taxes
• Assessment Process• Review Process• Equalization Process• Levy Process• Truth in Taxation• Property Tax Extension Limitation Act (PTELA)• Tax Extension• Collection and Distribution• Assessment Appeals & Other Issues
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Property Assessment Cycles / Property Tax Cycles / Budget Cycle
2011 2012 2013
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Assessment Cycle
Township Assesses Properties
County Assessor Review
Department of Revenue Equalizes
Tax Levy/Extension/Collection
Tax Levy
Extension
Collection and Distribution
Budget Cycle
Prepare Budget
Adopt Budget
Manage Budget
Audit
2005
2005
2005
2006
2006
2006
2007
2007
2005 2006 2007
2005 2006
2005-06
FY06
2005-06
FY06
2006-07
FY07
2006-07
FY07
2007-08
FY08
FY08
2004
2006
2011
2006
2007
2007
2007
2008
2008
2006 2007 2008
2006 2007
2006-07
FY07
2006-07
FY07
2007-08
FY08
2007-08
FY08
2008-09
FY09
FY09
2005
2005
2011
2011
2012
2012
2012
2013
2013
2011 2012 2013
2011 2012
2011-12
FY12
2011-12
FY12
2012-13 Budget
FY13
2012-13
FY13
2013-14
FY14
FY14
2010
2010
Assessment Process• At the Township level, assessors identify real
property, appraise and place value on it. You should double check that properties are on the books. Know your assessor(s).
• Business/Industrial properties are valued based upon market value as well as income generated.
• Illinois statute states assessed value should represent 33.3% of market value except for farm land. Farmland is assessed using a yield-based formula.
• A few counties have special classification systems.
• Manage your real properties – new growth, TIFs
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Review Process• Purpose - For system to correct
under, over, and non-uniform assessments by local assessor.
• Assessor sends changes to property owners. Publishes.
• Property owners can go to the assessor and then the Board of Review to challenge their assessment.
• Next level of challenge - Property Tax Appeals Board (PTAB) or Circuit Court
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Equalization Process
• Purpose - To bring all township assessments to the state mandate of 33.3%.
• Multiplier is applied to township and then county assessments (except Cook).
• Cook County multiplier is determined by the Illinois Department of Revenue.
• EAV = Multiplier x Assessed value
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Levy Process
• School district passes budget• Determine levy amount. How much do you
ask for? Are you under the Tax Cap?• If required:
– Publish in Newspaper– Hold public hearing
• Board adopts Levy• File Certificate of Tax Levy with County
Clerk prior to last Tuesday in December (watch Christmas date!). Also, double-check the bond amounts (County clerk offices can make mistakes!)
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ILLINOIS STATE BOARD OF EDUCATIONOriginal: X School Business and Support Services Division
Amended: 100 North First Street
Springfield, Illinois 62777-0001 217/785-8779
A copy of this Certificate of Tax Levy shall be filed with the County Clerk of each county in which the school district is located
on or before the last Tuesday of December.
District Name District Number County
Amount of Levy
Educational $ Fire Prevention & Safety * $
Operations & Maintenance $ Tort Immunity $
Transportation $ Special Education $
Working Cash $ Leasing $
Municipal Retirement $ Other $
Social Security $ Other $
Total Levy $
* Includes Fire Prevention, Safety, Energy Conservation, Disabled Accessibility, School Security,
See explanation on reverse side. and Specified Repair Purposes.Note: Any district proposing to adopt a levy must comply with
the provisions set forth in the Truth in Taxation Law.
We hereby certify that we require:the sum of dollars to be levied as a special tax for educational purposes; and
the sum of dollars to be levied as a special tax for operations and maintenance purposes; and
the sum of dollars to be levied as a special tax for transportation purposes; and
the sum of dollars to be levied as a special tax for a working cash fund; and
the sum of dollars to be levied as a special tax for municipal retirement purposes; and
the sum of dollars to be levied as a special tax for social security purposes; and
the sum of dollars to be levied as a special tax for fire prevention, safety, energy conservation,
disabled accessibility, school security and specified repair purposes; and
the sum of dollars to be levied as a special tax for tort immunity purposes; and
the sum of dollars to be levied as a special tax for special education purposes; and
the sum of dollars to be levied as a special tax for leasing of educational facilities
or computer technology or both, and temporary relocation expense purposes; and
the sum of dollars to be levied as a special tax for ; andthe sum of dollars to be levied as a special tax for
on the taxable property of our school district for the year 2009 .
Signed this 17th day ofDecember 20 11 .(President)
(Clerk or Secretary of the School Board of Said School District)
When any school is authorized to issue bonds, the school board shall file a certified copy of the resolution in the office of the county clerk of each county in which the district issituated to provide for the issuance of the bonds and to levy a tax to pay for them. The county clerk shall extend the tax for bonds and interest as set forth in the certified copy
of the resolution, each year during the life of the bond issue. Therefore to avoid a possible duplication of tax levies, the school board should not include a levy for bonds and
interest in the district's annual tax levy.
739,387739,387
21,157,8312,843,7941,365,021
568,759
568,759
00
739,387739,387
2,172,659227,504568,759
1,365,021568,759
CERTIFICATE OF TAX LEVY
568,7592,172,659
227,504568,759
Lake
30,951,860
21,157,831
School of Hard Knocks 411
2,843,794
Truth in Taxation• If current year’s levy request (excluding bond and
interest) is more than 5% greater than prior year’s extension:– A notice must be published in a newspaper
• Publication must be no more than 14 and no less than 7 days before the date of the public hearing
• Must be published in newspaper of general circulation
– A public hearing must be held• District explains the reason for the levy and any increases• District must permit anyone wishing to speak the opportunity• Usually done as part of a regular Board meeting
• Tentative levy must be approved no less than 20 days before the adoption of the levy ordinance.
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Property Tax Extension Limitation Act
• Enacted in Collar Counties in 1991, Cook County in 1995, and by referendum in some downstate counties.
• Limits the increases in property tax extension to 5% or the increase in the “Consumer Price Index-All Urban Consumers” (CPI-U), whichever is less.
• Allows for issuance of limited tax bonds where bond debt cannot exceed 1994 tax levy for bond debt. Enacted in 1995.
• 1996 Amendments. PTELA enacted for remaining Illinois counties if approved at county-wide referendum. If law is approved in referendum, then it becomes effective in the next levy year. Fight all PTELA referendums.
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CPI History
2.40%
1.90%
3.30% 3.40%
2.50%
4.10%
0.10%
2.70%
1.50%
3.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Ten Year CPI History
Property Tax Extension Limitation Calculations
• Limiting rate = (Aggregate Extension Base x (1+ CPI)) / (Equalized Assessed Valuation - New Property)
• Aggregate Extension Base - Prior year extension for all funds excluding the debt service fund. (i.e.: for 2012 tax year, 2011 total tax levy extended less tax extended for debt service)
• CPI - All Urban Consumer Price Index for December 31st. CPI for December 2011 – 3.0%
• New Property - New improvements or additions to existing improvements on any parcel of real property that increased the assessed value of that real property.
• Debt Service Extension Base: The tax levy for debt service levied in tax year when the Law is enacted.
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2011 Levy & Tax Rate / 2012 Proposed Levy
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2011 2011 2011 Maximum Proposed 2012
Fund Levy Extension Rates Rates Levy
Education 4,025,000 3,500,000 2.2581 3.5000 4,200,000
Tort Immunity 74,750 65,000 0.0419 78,000
Special Education 34,500 30,000 0.0194 0.4000 36,000
Operations & Maintenance 345,000 300,000 0.1935 0.5500 360,000
Transportation 172,500 150,000 0.0968 180,000
IMRF 52,900 46,000 0.0297 55,200
Social Security 52,900 46,000 0.0297 55,200
Working Cash 86,250 75,000 0.0484 90,000
Life Safety - - - 0.1000 -
Aggregate Extension 4,843,800 4,212,000 2.7175 5,054,400
Bond & Interest 650,000 650,000 0.4194 656,000
Total Extension 5,493,800 4,862,000 3.1369 5,710,400
Assumptions and Givens
Description Amount
2011 Equalized Assessed Valuation 159,696,970
Estimated Current Year EAV 2012 Assumption ( A 1.00% Decrease from 2011 ) 158,100,000
Estimated New Growth 2012 Assumption 250,000
December 2010 Actual CPI Given 1.50%
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Limiting Tax Rate Calculations
A. Prior Year Aggregate Extension 4,212,000 D. Est. Current Year EAV 158,100,000
B. Prior Year CPI 3.0% E. Est. New Grow th 250,000
C. Numerator Number (A * (1+B)) 4,338,360.00 F. Denominator Number (D - E) 157,850,000
G. Curr Year Est. Agg. Limiting Rate = (C / F) x 100 2.7484 H. Est. Max Agg. Ext. = (G/100)*2010 EAV 4,345,220
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2012 Tax Levy and Estimated 2012 Tax Rate
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PROPOSED 2007 TAX LEVY & ESTIMATED TAX RATE AFTER APPLYING LIMITING RATE
Proposed 2012 2012 Initial Rate Reduction Est. 2012 Limited Est. 2012
Fund Levy Rates % Extension Rate Tax Extension
Education 4,200,000 2.6565 2.2838 3,610,688
Tort Immunity 78,000 0.0493 0.0424 67,034
Special Education 36,000 0.0228 0.0196 30,988
Operations & Maintenance 360,000 0.2277 0.1958 309,560
Transportation 180,000 0.1139 0.0979 154,780
IMRF 55,200 0.0349 0.0300 47,430
Social Security 55,200 0.0349 0.0300 47,430
Working Cash 90,000 0.0569 0.0489 77,311
Life Safety 0 - - -
Aggregate Levy/Extension/Rate Total 5,054,400 3.1969 85.970% 2.7484 4,345,221
Aggregate % Increase 20.00% 3.16%
Bond & Interest 656,000 0.4149 0.4149 655,957
Tax Extension• Adds loss amount to District levy
(2% to 5%)• Calculate Property Tax Extension
Limitation• Calculate final tax rates for each
taxing district• Extend taxes on Equalized
Assessed Value and enters in county Collector’s books
• Deliver Collector’s books to county Treasurer for preparation of bills
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Collection & Distribution
• Two mailings of tax bills• Taxes due one month
after billing date• Distribution : Cook County
March & Fall; Collar Counties 1/2 in June and 1/2 in September; Downstate often July and September
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Assessment Appeals
Township Assessor
Board of Review
Circuit Court Property Tax Appeal Board (PTAB)
Circuit Court (Complaint for Administrative Review
Only)
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Your Rights at the Board of Review (BOR)
• Right to notice if over $100,000 EAV Change• Right to Intervene (submit letter within 14 days)• May submit evidence and defend current assessment • Attend the hearings to 1) make sure the appellant knows that
the taxing bodies have knowledge of what is going on and will be actively involved, 2) look at the evidence submitted by the appellant (if presented) and the township assessor, 3) to encourage the parties involved to come to a settlement.
• All settlements at the BOR are pre-tax extension.
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Your Rights at the Property Tax Appeal Board (PTAB)
• Right to notice - submit within 30 days • Only legal counsel can represent taxing bodies• The appeals process at PTAB may take up to two years to resolve. The
volume of PTAB Appeals State Wide: 1997 – 3,072; 1999 – 6,176; 2002 – 9,918; 2004 – 11,218; 2006 – 15,060; 2008 - 17,626; 2010 - 20,233
• Manage your legal counsel- legal counsel will hire an independent appraiser to review the appellant and the township’s appraisal. If appraiser believes the appellant’s assessment is closer to the fair market value, do nothing. If the appraiser believes the township assessor’s numbers are closer to the fair market value then submit that to PTAB. If the appraiser believes that both assessments are low, then get a full appraisal of the property and submit that to PTAB and request an assessment increase.
• Form consortiums with other taxing bodies to share the cost of challenging the assessment appeals.
• All settlements come out of current year’s tax collections
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Your Rights at the Circuit Court
• You are not notified of cases presented to the court
• The Illinois State’s attorney and the county assessor represent the taxing bodies.
• All settlements come out of current year’s tax collections
• Keep an eye on this as this is a growing issue, especially in Cook County
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