School District Looks at 4 Options for 2011 Tax Levy; Tax Increase Is Coming in Every Scenario

• Editor's note: The following are highlights from the Geneva Board of Education meeting held Monday, Nov. 14, as presented in School District 304's "For the Record." Minutes from this meeting will be available at http://www.geneva304.org under the Board of Education link after being approved by the Board of Education at a future meeting.

Per Illinois statute, the district is required to file a tax levy by the last Tuesday in December. The levy sets forth the maximum receipts that can be received from property taxation in a given year. The actual levy rate is determined in the spring in the assessment process.

While the levy is filed by fund, it is limited in aggregate by the Property Tax Extension Limitation Act (PTELL). New property (construction) must be levied higher than anticipated in order to capture all new growth as it comes on the tax books because, once lost, it can never be recaptured.

The district’s levy request for the 2011 tax year will be adopted at the December 12, Board of Education meeting. The total levy request for 2011 is $77,844,981, representing a 4.17 percent increase over the 2010 actual levy extension.

Actual levy dollar amounts won’t be known until March or April 2012. Since the tax cap formula limits the actual amount extended, the district will not receive the full levied amount requested for operating funds.

Illinois statute does not require a Truth in Taxation Hearing to be held if the levy increase is less than 5 percent.

Donna Oberg, assistant superintendent for business services, reviewed preliminary tax levy information, including components of the tax levy, a 10-year EAV history, new property growth and the Property Tax Extension Limitation Law, PTELL, which is commonly referred to as the tax cap.

PTELL, or tax cap, was enacted in 1991 and was designed to limit the increases in property tax extensions for taxing districts. PTELL does not cap an individual’s property tax bill or property assessment. PTELL allows taxing districts to receive a limited, inflationary increase in tax extensions onproperty—at the level of the Consumer Price Index (CPI) or 5 percent, whichever is less.

The limitation does not apply to new property (new construction), which allows taxing bodies to recoup their fair share of tax revenue for new property. There has not been a CPI of 5 percent since PTELL was enacted.

Originally, PTELL applied to only collar counties but currently 37, or about one-third, of Illinois school districts are impacted by PTELL. Current CPI is 3.9 percent and will probably taper off at about 2 percent. Debt service is levied by the county and not the school district.

The Limiting Rate Calculation, which is PTELL, is based on the PTELL formula: prior year extension x (1 + Lessor of 5% or CPI-U. When the EAV goes down, the tax rate goes up. When the EAV goes up, the tax rate goes down. All limiting rates decreased from 2002 through 2009, and increased in 2010 and 2011.

"Data, Assumptions, and Calculations for Levy" were also reviewed. The CPI-U equaled 1.5 percent in December 2010. The estimated EAV percentage change from 2010 EAV equals a negative 3 percent. New property is estimated at $12,597,282 but (the district) will levy at $15 million in order to capture all new growth (construction). The needs of each fund are estimated and the district will “balloon levy” in order to protect the district from estimated differences.

Oberg presented four options for the board’s consideration relative to the levy.

Option 1: Levy with no refunding or abatements and full CPI-U. Increase over prior year (5.31) — .42 per $100 EAV. Average increase per home with a market value of $288,000 = $403.

Option 2: Levy with 2011 refunding, 2012 refunding and abatement, Education Fund Levy abatement, and full CPI-U. Increase over prior year (5.31) = .23 per $100 EAV. Average increase per home with a market value of $288,000 = $307.

 November 2011 refunding completed at a savings of $742,000. January 2011 refunding will complete the 2004A refunding at a projected combined total savings of $1.033 million. November 2012 refunding and abatement moves debt out one additional year at a cost of approximately $7 million dollars additional but gives a decrease in rate for the immediate levy years. A resolution by board of Education is required each year to abate the Education Levy increase.

This option moves debt out one year at a cost of $7 million dollars and gives some relief to taxpayers, but adds cost.

Option 3: Levy with 2011 refunding, 2012 refunding and abatement, and no CPI-U. Increase over prior year (5.31) = .35 per $100 EAV. Average increase per home with a market value of $288,000 =  $336.

November 2011 refunding completed at a savings of $742,000. January 2011 refunding will complete the 2004A refunding at a projected combined total savings of $1.033 million. November 2012 refunding and abatement moves debt out one additional year at a cost of approximately $7 million additional but gives a decrease in rate for the immediate levy years. No CPI-U levied means a permanent loss of levy extension.

This option, with no CPI-U, impacts all future levies.

Option 4: Levy with 2011 refunding, 2012 refunding and abatement, Education Levy Increase Abatement, $10 million fund balance abatement, and full CPI-U. Increase over prior year (5.31) = .32 per $100 EAV. Average increase per home with a market value of $288,000 = $307.

Resolution by Board of Education each year to abate the Education Levy increase. Resolution to abate $10 million in fund balance reserve from the Education Fund. This would mean an approximate $20 million reduction in the Education Fund over the next six years. It would reduce the fund balance limit in policy below 30 percent (17 percent). The bond rating would be lowered.

Regardless of which option the board chooses, property taxes will go up because the district has a mortgage that must be paid. Oberg reported that for the 2011-12 school year, the district has received no funding from the state other than General State Aid.

Kelly Nowak and Bill Wilson, board member liaisons to the Superintendent’s Financial Task Force, recommended going for the full CPI-U in order to get all the funding the district is entitled to each year and then determine the best options as future economy is known. They noted that the board is aware of its debt and would welcome feedback and questions from community members.

The consensus of the board is that prudent planning would be to pay down debt but not add costs at the end.

Community members are encouraged to get their feedback and questions to the board over the next few weeks so the board can review it and run numbers if necessary. If the School District were to abate, it will need to tap reserves and determine how to keep a healthy balance.

The Financial Task Force will bring recommendations back to the board for consideration.

Levy, budget and other financial information can be found on the district’s website, www.geneva304.org, under the District 304 Finances link or the Board of Education link.

The next regular meeting of the Board of Education is 7 p.m. Monday, Nov. 28, at , 1113 Peyton St., Lincoln Avenue entrance.