Forest Lake Area Schools Public Hearing for Taxes Payable in 2019 - - PowerPoint PPT Presentation

Forest Lake Area Schools

Public Hearing for Taxes Payable in 2019

DECEMBER 6, 2018 PRESENTED BY: LARRY MARTINI, DIRECTOR OF BUSINESS SERVICES

Tax Hearing Presentation

State Law Requires Public Meeting:

• Between November 25th and

December 28th

• After 6:00 PM
• May be part of regularly scheduled

meeting

• May adopt final levy at same meeting

State Law Requires Presentation of:

• Current year budget
• Prior year actual revenue &

expenditures

• Proposed property tax levy including %

increase

• Specific purposes & reasons taxes are

being increased *State Law also requires the district allow for public comments

Agenda for Hearing

____________

1. Background on School Funding 2. District’s Budget 3. District’s Proposed Tax Levy for Taxes Payable in 2019 4. Public Comments

Constitution Assigns Legislature Responsibility to Set Funding for Minnesota Public Schools

Minnesota Constitution ARTICLE XIII MISCELLANEOUS SUBJECTS Section 1 “UNIFORM SYSTEM OF PUBLIC SCHOOLS. The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty

• f the legislature to establish a general and uniform system of public schools. The

legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state.”

As a Result…

School funding is highly regulated by the state

State Sets:

• Formulas which determine revenue; most revenue based on specified

amounts per pupil

• Tax policy for local schools
• Maximum authorized property tax levy (districts can levy less but not more

than amount authorized by state, unless approved by voters) State also authorizes school board to submit referendums for operating and capital needs to voters for approval

Challenge: State Set Basic General Education Formula Lags Inflation

• Since 1991-92, state General Education Revenue formula has not kept pace

with inflation

• For Fiscal Year 2018-19, Legislature approved an increase of 2% or $124 per

year

• Per-pupil allowance for Fiscal Year 2018-19 would need to increase by another

$2,749 (9.8%) to have kept pace with inflation since 1991-92

• Our Referenda total of $1,287 ($825 + $462) is not even half of that gap.

Underfunding

• f Special

Education

MDE reports the FY 2016 cost of providing special education programs was underfunded by $697 million, or an average of 40% underfunded MDE reports the FY 2016 cost of providing special education programs was underfunded by $697 million, or an average of 40% underfunded Translating into a statewide average funding shortfall of $5,783 per special education student Translating into a statewide average funding shortfall of $5,783 per special education student Underfunding of special education costs requires a transfer from regular program resources to support an underfunded program mandated by state and federal law Underfunding of special education costs requires a transfer from regular program resources to support an underfunded program mandated by state and federal law Primary options to bridge special education funding gap are to cut regular program budgets or increase referendum revenue, most districts have done both Primary options to bridge special education funding gap are to cut regular program budgets or increase referendum revenue, most districts have done both

Result: Growing Dependence on Referendum Revenue

• In 1992-93, 65% of districts had operating referendum revenue averaging

$332 per pupil

• For 2018-19, all Minnesota districts have referendum revenue and/or local
• ptional revenue levy authority averaging $1,371 per pupil
• Referendum revenue provides 13% of General Fund operating revenue
• Of this amount, $951 is a board approved or voter approved operating

referendum, and $420 is Local Optional Revenue

Change in Tax Levy Does not Determine Change in Budget

Tax levy is based on many state- determined formulas plus voter approved referendums

1

Some increases in tax levies are revenue neutral, offset by reductions in state aid

2

Expenditure budget is limited by state-set revenue formulas, voter-approved levies, and fund balance

3

An increase in school taxes does not always correlate to an equal increase in budget

4

School District Levy Cycle Differs from City/County Levy Cycle

City/County:

• Budget Year same as calendar year
• 2019 taxes provide revenue for

2019 calendar year budget

Schools:

• Budget year begins July 1st and

coincides with school year

• 2019 taxes provide revenue for

2019-20 school fiscal year

• Budget will be adopted in June 2019

Budget Information

____________

All school district budgets are divided into separate funds, based on purposes of revenue, as required by law

Our District’s Funds:

• General
• Food Service
• Community Service
• Building Construction
• Debt Service
• OPEB Debt Service

Because approval of school district budget lags certification of tax levy by six months, state requires only current year budget information and prior year actual financial results be presented at this hearing. The Fiscal 19-20 budget will be set in June 2019.

FISCAL 2018 2017-18 ACTUAL 2017-18 ACTUAL JUNE 30, 2018 2018-19 BUDGET 2018-19 BUDGET JUNE 30, 2019

FUND

BEGINNING REVENUES AND EXPENDITURES & ACTUAL FUND REVENUES AND EXPENDITURES & PROJECTED FUND BALANCES TRANSFERS IN TRANSFERS OUT BALANCE TRANSFERS IN TRANSFERS OUT FUND BALANCE

General $1,275,101 $74,924,190 $74,198,112 $2,001,179 $72,500,000 $72,500,000 $2,001,179 Food Service (98,212) 3,898,810 3,715,575 85,023 3,735,120 3,689,936 130,207 Community Service 338,010 4,783,844 4,434,961 686,893 4,689,458 4,628,389 747,962 Building Construction 87,138,556 302,871 50,966,925 36,474,502 350,000 34,000,000 2,824,502 Debt Service 1,275,865 8,663,478 9,054,200 885,143 9,022,000 9,015,000 892,143 OPEB* Debt Service 230,508 532,359 522,837 240,030 318,000 420,000 138,030 Total All Funds $90,159,828 $93,105,552 $142,892,610 $40,372,770 $90,614,578 $124,253,325 $6,734,023

*Other Post Employment Benefits

Forest Lake Area Schools District Revenues and Expenditures Actual for FY 2018, Budget for FY 2019

Actual Results for 2017-2018

General Fund Food Service Community Ed Construction Debt Service OPEB Debt

Revenue

$ 75,166,080 $3,893,810 $4,794,219 $714,844 $8,690,970 $533,000

Expenditures

$74,612,924 $3,715,575 $4,529,304 $52,238,515 $9,054,200 $522,837

Ending fund balance

$ 2,137,470 $ 292,943 $ 821,795 $ 37,362,764 $ 921,913 $ 252,693

Proposed Districtwide Budgets for 2018-2019

General Fund Food Service Community Ed Construction Debt Service OPEB Debt

Beginning fund balance

$ 2,137,470 $ 292,943 $ 821,795 $ 37,362,764 $ 921,913 $ 252,693

Revenue

$72,500,000 $3,735,120 $4,689,458 $350,000 $9,022,000 $318,000

Expenditures

$72,500,000 $3,689,936 $4,628,389 $34,000,000 $9,015,000 $420,000

Ending fund balance

$ 2,137,470 $ 338,127 $ 882,864 $ 3,712,764 $ 928,913 $ 150,693

Payable 2019 Property Tax Levy

____________

• Determination of levy
• Comparison of 2018 to 2019 levies
• Specific reasons for changes in tax levy
• Impact on taxpayers

Property Tax Background

• Every owner of taxable property pays property taxes to various “taxing

jurisdictions” (county, city/township, school district, special districts) in which property is located

• Each taxing jurisdiction sets own tax levy, often based on limits in state law
• County sends bills, collects taxes from property owners, and distributes funds

back to other taxing jurisdictions

Parcel Specific Notice: This is a sample of the notice mailed to every property

• wner between November

11-24 with information on the impact of the Proposed 2019 levy on their property. Contents:

• Proposed property tax

compared to last year

• By voter approved and
• ther
• By taxing jurisdiction
• Contains time and place of

public meeting

School District Property Taxes

• Each school district may levy taxes in over 40 different categories
• “Levy limits” (maximum levy amounts) for each category are set by
• State law
• Voter approval
• Minnesota Department of Education (MDE) calculates detailed levy limits for

each district

Property Tax Background

School District Property Taxes

• Key steps in process are summarized on next slide
• Any of these steps may affect the taxes on a parcel of property, but district has

control over only 1 of the 7 steps

Schedule of Events in Approval of District’s 2018 (Payable 2019) Tax Levy

September 7: MDE prepared and distributed first draft of levy limit report setting maximum authorized levy September 20: School Board approved proposed levy amounts Mid- November: County mailed “Proposed Property Tax Statements” to all property

• wners

December 6: Public hearing

• n proposed

levy at regular meeting Following hearing, School Board will certify final levy amounts

Overview of Proposed Levy Payable in 2019

Total 2019 proposed property tax levy is an increase from 2018 of $5,406,380 Includes increase of $5,215,269 from the proposed levy approved by the School Board in September, because District voters approved an increase

• f $825 per pupil in operating referendum authority

State law requires that we explain reasons for major increases in levy Some decreases in specific levies will also be explained

Forest lake Public School District #831

Comparison of Actual Tax Levy Payable in 2018 to Proposed Levy Payable in 2019

Actual Levy Proposed Levy Fund Levy Category Payable in 2018 Payable in 2019 $ Change % Change General Fund Voter Approved Referendum $2,475,517 $8,059,925 $5,584,409 Local Optional Revenue 2,898,888 2,837,832 (61,056) Equity 1,070,674 747,022 (323,652) Alternate Teacher Compensation 586,896 597,201 10,305 Operating Capital 524,106 593,864 69,757 Long Term Facilities Maintenance 2,525,121 3,422,745 897,625 Instructional Lease 574,464 532,017 (42,447) Safe Schools 348,687 341,343 (7,344) Career Technical 347,302 475,125 127,823 Other 414,276 394,816 (19,459) Adjustments (433,888) (1,006,372) (572,484) Total, General Fund $11,332,043 $16,995,520 $5,663,476 50.0% Community Service Fund Basic Community Education $348,699 $348,699 $0 Early Childhood Family Education 175,531 177,433 1,902 School-Age Child Care 400,000 300,000 (100,000) Other 12,721 13,283 561 Adjustments 205,378 374,018 168,640 Total, Community Service Fund $1,142,330 $1,213,433 $71,103 6.2% Debt Service Funds Voter Approved $9,165,870 $8,233,732 ($932,138) Other 247,615 247,615 Long Term Facilities Maintenance 754,087 754,087 Other Post Employment Benefits 348,343 560,501 212,158 Reduction for Debt Excess (197,219) (805,892) (608,673) Adjustments 23,881 22,633 (1,248) Total, Debt Service Fund $9,340,876 $9,012,677 ($328,199)

• 3.5%

Total Levy, All Funds $21,815,249 $27,221,629 $5,406,380 24.8% Subtotal by Truth in Taxation Categories: Voter Approved 11,504,791 15,640,601 4,135,810 Other 10,310,458 11,581,029 1,270,570 Total $21,815,249 $27,221,629 $5,406,380 24.8%

Explanation of Levy Changes

Category: General Fund – Voter Approved Operating Referendum Change: +$5,584,409 Use of Funds: General Operating Expenses Reason for Change:

• Voters approved an increase of $825 per pupil of operating referendum authority
• Funding for the operating referendum is provided through a combination of local tax

levy and state aid

• Because District’s total property value increased, share of funding provided through tax

levy increased

Explanation of Levy Changes

Category: General Fund – Equity Change: -$323,652 Use of Funds: General Operating Expenses Reason for Change:

• State –determined formula
• Increase in operating referendum authority results in a reduction of a portion of the

District’s equity revenue

Explanation of Levy Changes

Category: General Fund – Long Term Facilities Maintenance (LTFM) Change: +$897,625 Use of Funds: Deferred facility maintenance and Health & Safety program costs Reason for Change:

• District is eligible for LTFM revenue based on state-approved project costs; estimated

project costs for Fiscal Year 2019-20 are higher than Fiscal Year 2018-19

• Revenue provided through a combination of property tax levy and state aid
• Because District’s total property value increased, share of funding provided through tax

levy increased

Explanation of Levy Changes

Category: General Fund – Adjustments Change: -$572,484 Use of Funds: Various Reason for Change:

• Each year, initial levies are based on estimates of enrollment, values, and expenditures

for future years

• In later years, estimates are updated and levies are retroactively adjusted
• 2019 levy includes negative adjustments in several categories

Explanation of Levy Changes

Category: Debt Service – Voter Approved Change: -$932,138 Use of Funds: Annual required payments of principal & interest on voter approved bonds Reason for Change:

• Scheduled decrease in principal and interest payments

Explanation of Levy Changes

Categories: Debt Service - Facilities Maintenance Changes: +$754,087 Use of Funds: Annual required payment of principal & interest on Facilities Maintenance bonds Reason for Changes:

• Facilities Maintenance Bonds were issued in August of 2018 to finance heating,

ventilation, and air conditioning replacement projects at three existing school facilities as included in the District’s Ten-Year Facility Plan approved by the Commissioner of Education

Explanation of Levy Changes

Category: Debt Service - Reduction for Debt Excess Change: -$608,673 Use of Funds: Payments on bonds Reason for Change:

• Districts are required to levy at 105% of debt service payment amounts to cover

delinquencies in tax collections

• Since delinquencies are generally less than 5%, most districts gradually build up fund

balances in debt service funds

• Formulas in state law determine adjustments to tax levy for debt excess balances
• State-required levy reduction for 2019 is higher than 2018

Factors Impacting Individual Taxpayers’ School Taxes

• Changes in value of individual property
• Changes in total value of all property in

District

• Increases or decreases in levy amounts

caused by changes in state funding formulas, local needs and costs, voter-approved referendums, and other factors

• Changes in value of individual property
• Changes in total value of all property in

District

• Increases or decreases in levy amounts

caused by changes in state funding formulas, local needs and costs, voter-approved referendums, and other factors

Many factors can cause tax bill for an individual property to increase or decrease from year to year

Four Year School Levy Comparison

Following are a table and graphs showing examples of changes in school district portion of property taxes from 2016 to 2019 Examples include school district taxes only All examples are based on a 11.4% increase in property value over this period

• Actual changes in value may be more or less than this for any parcel of

property

• Intended to provide a fair representation of what has happened to

school district property taxes over this period for typical properties

Impact on Taxpayers

• Amounts for 2019 are preliminary estimates, based on best data available now

– final amounts could change slightly

• Estimates prepared by Ehlers, District’s municipal financial advisors
• For commercial-industrial property, examples are for property in City of Forest

Lake; school taxes in other parts of the District may be slightly higher or lower due to variations in impact of Fiscal Disparities Program

Forest Lake Area Schools

Estimated Changes in School Property Taxes, 2016 to 2019 Based on 11.4% Cumulative Changes in Property Value from 2016 to 2019 Taxes Estimated Actual Estimated Actual Estimated Actual Estimated Change Change Market Taxes Market Taxes Market Taxes Market in Taxes in Taxes Value for Payable Value for Payable Value for Payable Value for 2016 to 2018 to 2016 Taxes in 2016 2017 Taxes in 2017 2018 Taxes in 2018 2019 Taxes Total 2019 2019 $89,805 $277 $90,703 $309 $95,238 $283 $100,000 $283 $96 $379 $102 $96 224,512 831 226,757 947 238,095 854 250,000 847 241 1,088 257 234 314,317 1,200 317,460 1,372 333,333 1,235 350,000 1,222 337 1,559 359 324 404,122 1,569 408,163 1,798 428,571 1,613 450,000 1,590 433 2,023 454 410 449,024 1,746 453,515 1,999 476,190 1,792 500,000 1,766 481 2,247 501 455 538,829 2,119 544,218 2,433 571,429 2,197 600,000 2,182 578 2,760 641 563 628,634 2,524 634,921 2,904 666,667 2,618 700,000 2,597 674 3,271 747 653 718,439 2,929 725,624 3,374 761,905 3,038 800,000 3,012 770 3,782 853 744 808,244 3,334 816,327 3,845 857,143 3,459 900,000 3,427 866 4,293 959 834 898,049 3,740 907,029 4,316 952,381 3,880 1,000,000 3,843 963 4,806 1,066 926 $449,024 $1,884 $453,515 $2,189 $476,190 $2,015 $500,000 $1,999 $481 $2,480 $596 $465 2,694,147 11,877 2,721,088 13,858 2,857,143 12,720 3,000,000 12,591 2,888 15,479 3,602 2,759 4,490,245 19,872 4,535,147 23,193 4,761,905 21,285 5,000,000 21,064 4,813 25,877 6,005 4,592 6,735,367 29,865 6,802,721 34,861 7,142,857 31,990 7,500,000 31,656 7,220 38,876 9,011 6,886 8,980,490 39,858 9,070,295 46,530 9,523,810 42,695 10,000,000 42,248 9,626 51,874 12,016 9,179

* "Proposed referendum" includes estimates of additional taxes for the operating referendum increase approved by voters on November 6, 2018. # General Notes

• 1. The amounts in the table are based on school district taxes only, and do not include taxes for the city or township, county, state, or other taxing jurisdictions.
• 2. Estimates of taxes payable in 2019 are preliminary, based on the best data available as of the date above.
• 3. For all examples of properties, taxes are based on changes in taxable market value of 1.0% from 2016 to 2017 taxes, 5.0% from 2017 to 2018, and 5.0% from 2018 to 2019.

For commercial-industrial property, figures above are for property in the City of Forest Lake. Taxes for commercial-industrial property in other municipalities may be slightly different, due to the impact of the Fiscal Disparities Program.

Without Referendum Proposed Referendum* Estimated Taxes Payable in 2019 Type of Property Residential Homestead Commercial/ Industrial #

Forest Lake Area Schools

Estimated Changes in School Property Taxes, 2016 to 2018 Based on 11.4% Cumulative Changes in Property Value from 2016 to 2019 Taxes

* For all examples of properties, the value shown in the title of the chart is the estimated market value for taxes payable in 2018. Taxes are calculated based on changes in market value of 1.0% from 2015 to 2016 taxes, 5.0% from 2016 to 2017, and 5.0% from 2017 to 2018. ** The darker portion of the 2018 bar represents the estimated taxes associated with the operating referendum increase approved by voters on November 6, 2018. Example 1: $250,000* Residential Homestead Property Example 2: $500,000* Residential Homestead Property $831 $947 $854 $847 $241 $1,088

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2016 2017 2018 2019 est. School Property Taxes

Year Taxes are Payable

$1,746 $1,999 $1,792 $1,766 $481 $2,247

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2016 2017 2018 2019 est. School Property Taxes

Year Taxes are Payable

Forest Lake Area Schools

Estimated Changes in School Property Taxes, 2016 to 2018 Based on 11.4% Cumulative Changes in Property Value from 2016 to 2019 Taxes

* For all examples of properties, the value shown in the title of the chart is the estimated market value for taxes payable in 2018. Taxes are calculated based on changes in market value of 1.0% from 2015 to 2016 taxes, 5.0% from 2016 to 2017, and 5.0% from 2017 to 2018. ** The darker portion of the 2018 bar represents the estimated taxes associated with the operating referendum increase approved by voters on November 6, 2018.

Minnesota Homestead Credit Refund “Circuit Breaker”

• Has existed since 1970s
• Available each year to owners of homestead property

(applies to taxes paid on house, garage and one acre for ag homestead property)

• Annual income must be approximately $110,650 or less

(income limit is higher if you have dependents)

• Sliding scale - refund based on income and total property taxes
• Maximum refund for homeowners is $2,710
• Also available to renters
• Complete state tax form M1-PR (www.revenue.state.mn.us)

Minnesota Special Property Tax Refund

Available each year to

• wners of homestead

properties with a gross tax increase of at least 12% and $100 over prior year

Helpful in first year after referendum

Refund is 60% of amount by which tax increase exceeds greater of 12% or $100, up to a maximum of $1,000 No income limits

Complete state tax form M1-PR (www.revenue.state.mn.us)

Senior Citizen Property Tax Deferral

• Allows people age 65 and older with household income of $60,000 or less to

defer a portion of property taxes on their home

• Limits maximum amount of property tax paid to 3% of household income
• Additional taxes are deferred, not forgiven
• Provides predictability; amount of tax you pay will not change for as long as

you participate in the program

• Deferred property taxes plus accrued interest must be paid when home is sold
• r homeowner(s) dies

Next Steps

Board will accept public comments on proposed levy

1

Board will certify 2019 property tax levy

2