6/1/2020 North Olmsted City Schools 5 Year Financial Forecast Presentation May 26, 2020 Contrary to what you have hear, the “Sky is Not Falling”. In fact, the District is in a better financial position to weather the storm now than it was during the Great Recession of 2008 . 1
6/1/2020 Historic Prospective In 2008 ‐ 09, like most school districts in Ohio, North Olmsted was facing a serious decline tax collections and cut backs in state funding due to the nationwide recession and housing foreclosure crisis. The Ohio General Assembly eliminated Tangible Personal Property Taxes assessed on businesses and replaced it with the Commercial Active Tax (CAT). This resulted in the loss of $3.9 million in tax revenue annually. In 2009 and 2010 the State of Ohio made a 10% cut in funding to school districts. In 2020 the State reduced funding 10.2%. The Great Recession of 2008 was driven by an overvalued housing market and the meltdown of the banking system. Property Values declined 12.0% and the District permanently lost over $1.0 million of real estate tax revenue. Today, the housing market should remain stable in this environment of historic low interest rates. The financial crisis today is driven by a medical crisis. The District has Lost $23.3 million in Operating Revenue From the Phase ‐ out Personal Property Tax (PPT) Collections $12.0 $11.0 $10.0 $9.0 Millions $8.0 $7.0 $6.0 $5.0 State Funding PPT Collections State Reimbursement Casino Revenue 2
6/1/2020 Unlike neighboring school districts, the cuts in state funding will have minimal impact on North Olmsted Will the District received additional cuts in state funding? Today, Ohio has a $2.9 billion rainy Day Fund to off ‐ set temporary shortfalls in sales and income taxes. In 2008, the rainy day fund has been exhausted. Ohio has received a Federal $104 million Federal Care Act Grant which must be used to provide emergency support for maintaining K12 and higher education services. These funds have not been allocated. There is serious discussions in Washington DC for Congress to provide and additional $60 Billion in relief fund to state and local governments. The current forecast has factor a $1.0 million reduction in state funding during the 2020 ‐ 21 school year. 3
6/1/2020 Percentage Change in Property Values 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% ‐ 2.0% ‐ 4.0% ‐ 6.0% ‐ 8.0% Shortfall in Real Estate Tax Collections $800,000 $600,000 $400,000 $200,000 $0 ‐ $200,000 ‐ $400,000 ‐ $600,000 ‐ $800,000 ‐ $1,000,000 ‐ $1,200,000 ‐ $1,400,000 4
6/1/2020 MORTGAGE AND CONSUMER DEBT AT KEY TIMES Consumer Debt as a % of Disposable Personal Income, Current and Prior to Last 3 Recessions 160% The big difference 140% between 2008 and 2020 120% is mortgage debt as a % of disposable income. 100% 80% Consumers are better 60% positioned today than in 2008. 40% 20% 0% 2019:Q4 2007:Q4 2000:Q3 1990:Q1 Source: Federal Reserve Bank Mortgage Debt as a % of DPI Consumer Credit Debt as a % of DPI Other Household Liabilities as a % of DPI 9 What will be the impact on Real Estate Tax collections? There should be no impact on housing values. There may be a decline in commercial property values because of store closures and vacancies. However, the effects of any decline will not impact the district for 2 or 3 years. The Forecast was prepared assuming a tax delinquency rate of $1.1 million during the 2020 ‐ 21 school year and $800,000 during the 2021 ‐ 22 school year. The rate of delinquencies may be softened because bank now require tax payment to be escrowed and part of the monthly mortgage payment. 5
6/1/2020 Change in Operating Deficit due to One ‐ time Savings in Operating Expenditures $1,000,000.0 $448,000 $0.0 ‐ $1,000,000.0 ‐ $2,000,000.0 ($2,962,000) ‐ $3,000,000.0 Oct 2019 May 2020 Oct 2019 May 2020 What is the Future? 6
6/1/2020 North Olmsted City Schools Little Change in Forecasted General Fund Cash Balance 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 ‐ 5,000,000 ‐ 10,000,000 ‐ 15,000,000 May 2019 Oct 2020 May 2020 The District has a Number of Issues it must Address in the Near Future to Maintain Financial Stablity Deficit spending – 5 out of the last 7 years Reducing the number of student in the classroom. Redistricting and better utilization of school facilities. Meeting the demand for technology. Seeking new operating revenues. 7
6/1/2020 North Olmsted City Schools 25 Year History of Passing Tax Levies Date Approved Type Millage ATTEMPTS Nov 2014 Bond 5.45 1 Nov 2010 Operating 7.90 3 Feb 2007 Operating 6.50 5 May 2002 Operating 7.90 4 Aug 1995 Operating 5.90 3 Nov 1994 PI 1.95 1 June 1992 Operating 6.50 3 The End 8
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