Mattoon Community Unit School District #2

MCUSD#2

2007 Tax LevyPresentation

Presented:

Tuesday, October 9, 2007

Board Action:

Tuesday, November 13, 2007

Budgeting and Operating Funds

What is a school district budget? Illinois Law requires the BOE to budget its income and

expenses each year and to make the budget available for public inspection.

The budget serves two purposes: To demonstrate a plan for receiving and spending in

each of the district’s operating funds. To demonstrate the amount of taxes levied on real

property within the district.

Budgeting and Operating Funds

Operating Funds: Education Fund Operation & Maintenance (Building) Fund Transportation Fund Working Cash IMRF Social Security Fund Life Safety Fund Tort Fund Special Education Fund Leasing/Rent Fund Bond & Interest Fund

Aggregate Funds Subject to Levy

Generating Revenue

Where does the money come from? Federal dollars = 10% State dollars = 31% Local dollars = 59%

Federal, 10%

State, 31%

Local, 59%

Generating Revenue

What is a tax levy? A levy is the amount of dollars in each operating fund a

school district asks for to pay the bills for the next school year.

When must the levy be adopted? The board has to adopt a levy no later than the last

Tuesday in December and certify it with the County Clerk.

Generating Revenue

What is a tax extension? A levy is the amount of money a district asks for; however,

the extension is the amount of money a district actually receives.

How is the extension processed? The BOE certifies a tax levy to the County Clerk. The clerk assigns appropriate tax rates to the various

operation funds. The County Clerk processes tax bills that generate tax

dollars extended to the school district.

Generating Revenue

What is Equalized Assessed Valuation (EAV)? EAV is the property valuation (for individual and total property of

a school district) after the county and state equalization calculations are performed.

How much will the EAV grow from last year? EAV declined by 0.18% in 2006 after a 3.75% growth in 2005.

The 5-year average EAV growth is 1.1%.

Why is EAV important? Any growth EAV must be captured to ensure the financial health

of the district. The total district EAV is multiplied by the approved tax rate (per $100 EAV) to arrive at the extension.

Generating Revenue

Example of Tax Extension Calculations:

Variables:

Sample Education Fund Tax Rate = 3.1771

Sample District EAV = $264,303,919

Extension Formula: EAV x Tax Rate/100

$264,303,919 x 3.1771/100 = $8,397,199

(EAV) (Ed.Rate/100) (Extension in Ed. Fund)

Generating RevenueBudget & Levy Calendar

Jan.-Feb.2007

Building Admin. Identify costs Dec. 2006 tax levy figured into 2007-08 Budget

March 2007

Build Admin. submit building budget to business manager.Business manager discusses program issues related to costs with central office staff.

July 2007

Central office formulate tentative budget based on costs and revenues.Tentative Budget is presented to the BOE.Budget Hearing Notice in newspaper.Final budget numbers are entered.

August 2007

Special Board Meeting to abate for 2006 tax levy.Final budget approved by Board. Budget hearing is conducted & BOE gives formal approval of the budget by Sept. 30th.

September 2007Central office start to gather information re-garding 2007 tax levy.

October 2007Tentative property tax levy is presented to the BOE.

November 2007Property tax levy hearing conducted & BOE gives final approval of tax levy

December 2007Levy submitted with County Clerk prior to the last Tues. of the month.

Generating Revenue

What does the November 2007 Levy pay for? The November 2007 tax levy will pay for programs,

services, operating costs, salaries, and all other expenses for the 2008-2009 school year.

Property Taxes:How are local property taxes controlled?

What are direct property tax controls?Direct property tax controls used to reduce or freeze EAV of property.

Examples of controls to assist individuals and seniors: Homeowners: $5,000 exemption in EAV; Homestead Improvement: Exemption limited to fair cash value that was

added to the homestead property by any new improvement, up to an annual max of $75,0000. The exemption continues for 4 years from the date the improvement is completed and occupied.

Senior Citizen: Reduction of an additional $3,500 in EAV if 65 years of age or older;

Disabled Veteran: Exempts up to $70,000 in EAV; and Senior Citizen Freeze: Allows seniors, with less than $50,000 annual

income, to maintain EAV of homes at base year values & prevents increases due to inflation.

Property Taxes:How are local property taxes controlled? Controls to Assist Businesses:

Tax Increment Financing (TIF): economic development incentive for specific area of city, town, or county is created. Mattoon has four TIF districts.

Enterprise Zones: school boards abate property tax for business improvements on property.

General Authority Abatements: abatements exist for commercial and industrial firms, leasehold abatements for restaurant and lodging facilities, and blighted and decaying areas.

Property Taxes:How are local property taxes controlled?

What are indirect property tax controls? Include tax limitations such as Property Tax Extension

Limitation Law (PTELL), commonly known as “tax caps”. PTELL limits the growth of the aggregate extension to an

annual rate of 5% or the Consumer Price Index (CPI), whichever is less.

PTELL was originally enacted for the five collar counties surrounding Cook County in the early 1990s.

The purpose of PTELL is to control the growth of the aggregate extension.

Consumer Price Index History

*CPI rates over the last six years: CPI Year Levy Year School Year2006 = 2.5% Nov. 2007 2008-092005 = 3.4% Dec. 2006 2007-082004 = 3.3% Dec. 2005 2006-072003 = 1.9% Dec. 2004 2005-062002 = 2.4% Dec. 2003 2004-052001 = 2.3% Dec. 2002 2003-04

*CPI in November of the CPI Year is used for the calculation.

Administrative Levy RecommendationProjects 1% EAV Growth and the actual 2.5% CPI Growth

Funds 2006 Actual Rate

2006 Actual Extension

Projected Rate

Levy Projected Extension

Education 3.1771 $8,397,147 3.2347 $8,635,000 $8,635,000

Building 0.5201 $1,374,645 0.5282 $1,410,000 $1,410,000

Transportation 0.2073 $ 547,876 0.1873 $ 500,000 $ 500,000

Working Cash 0.0377 $ 99,616 0.0281 $ 75,000 $ 75,000

IMRF 0.1131 $ 298,848 0.1135 $ 303,000 $ 303,000

Social Security 0.1131 $ 298,848 0.1135 $ 303,000 $ 303,000

Life Safety 0.0000 $ 0 0.0000 $ 0 $ 0

Tort 0.0000 $ 0 0.0000 $ 0 $ 0

Spec. Ed. 0.0000 $ 0 0.0243 $ 65,000 $ 65,000

Leasing 0.0000 $ 0 0.0000 $ 0 $ 0

Sub-total 4.1682 $11,016,980 4.2297 $11,291,000 $11,291,000

Bonds 0.3225 $ 852,433 0.3609 $ 963,499 $ 963,499

Total 4.4908 $11,869,416 4.5906 $12,254,499 $12,254,499

Abatement $ 554,000 $ 475,000

Why Abate?

Abating the bond and interest payment keeps the overall tax rate at a more manageable level for taxpayers.

By abating from the bond and interest fund, we are able to keep the aggregate tax rate (all funds except Bonds) financially healthy. This allows us to expand our borrowing capacity if, sometime in the future, the District should ever need to borrow money.

As a result of Public Act 94-976, our tax rate ceiling for individual funds within the aggregate has increased to limits defined in the School Code. Aggregate fund rates can now grow to those limits defined in the School Code without referendum, as long as the aggregate levy growth does not exceed CPI.

By abating, we can still “control” the overall tax rate. Taxpayers are concerned about the “bottom line”, namely the total tax rate ---- not the individual fund amounts that make up the total rate.

Results of the Recommendation: Aligns to the PTELL guidelines; Generates $385,086 additional revenue to the District while

costing $14.97 more per year ($1.25 per month) for a taxpayer owning $60,000 home;

Minimizes the increase to the property taxpayer at 2.22%, below the 2.5% increase in CPI; and

Maintains MCUSD#2 tax rate as the lowest in Coles County;

The administration’s recommendation continues to align with the district goal “for fiscal responsibility to the students, staff, and residents of the community”; again demonstrating balance among those you serve.