Seminar on School Finance - Property Taxes and the Tax Levy (and other Local Revenues)

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 [email protected]

Session Objectives

• Understand the Local Sources of Revenues

• Understand the Property Tax Cycle

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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

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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; andthe sum of dollars to be levied as a special tax for operations and maintenance purposes; andthe sum of dollars to be levied as a special tax for transportation purposes; andthe sum of dollars to be levied as a special tax for a working cash fund; andthe sum of dollars to be levied as a special tax for municipal retirement purposes; andthe sum of dollars to be levied as a special tax for social security purposes; andthe sum of dollars to be levied as a special tax for fire prevention, safety, energy conservation,

disabled accessibility, school security and specified repair purposes; andthe sum of dollars to be levied as a special tax for tort immunity purposes; andthe sum of dollars to be levied as a special tax for special education purposes; andthe 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; andthe 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 copyof 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 andinterest 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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Tax Capped Counties

http://www.isbe.net/sfms/FAAS01/taxcaps.htm18

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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Other Local Revenues

• Foundations• Local Grants• Corporate Sponsorships

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Finally, The End

Any Questions?

Thank You!

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