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

1. Seminar on School Finance - Property Taxes and the Tax Levy(and other Local Revenues) IASBO Conference – May 19, 2011 Dave Lawson, Business Manager Johnsburg CUSD 12 (815) 385-6916 dlawson@johnsburg12.org

2. Session Objectives • Understand the Local Sources of Revenues • Understand the Property Tax Cycle

3. 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.

4. Revenue by SourceState-wide

5. Local Revenues • Investment Earnings • Student Fees • Impact/Transition Fees • Corporate Personal Property Replacement Taxes (CPPRT) • Local Property Taxes • Other Local Revenues

6. 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

7. Student Fees • Textbooks • Classroom Supplies • Drivers Education • Technology • Athletic Participation • Student Activities • Parking Permits • Any other ideas?

8. 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

9. 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

10. 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

11. Property Assessment Cycles / Property Tax Cycles / Budget Cycle

12. 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

13. 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

14. 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

15. 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!)

17. 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.

18. 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.

19. Tax Capped Counties http://www.isbe.net/sfms/FAAS01/taxcaps.htm

20. CPI History

21. 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 2010 tax year, 2009 total tax levy extended less tax extended for debt service) • CPI - All Urban Consumer Price Index for December 31st. CPI for December 2010 – 1.5% • 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.

22. 2009 Levy & Tax Rate / 2010 Proposed Levy

23. Assumptions and Givens

24. Limiting Tax Rate Calculations

25. 2010 Tax Levy and Estimated 2010 Tax Rate

26. 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

27. 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

28. Assessment Appeals

29. Time Frames for Filing Appeals • Township Assessor – after receipt of proposed assessment. • Board of Review – by township closing date. • PTAB – within 30 days of date of final decision from Board of Review. (Mostly commercial and industrial assessment appeals go beyond the Board of Review) • Circuit Court – within 120 days of second property tax installment due date

30. Typical Issues for Commercial/Industrial Appeals • Fair cash value – this is determined by a proper appraisal • Uniformity • Vacancy/Occupancy • Recent sales • Legal arguments (open space, conservation easement, historic property, etc.) • Exempt status

31. 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.

32. 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; 2007 – 13,515 • 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

33. Your Rights at the Circuit Court • You are not notifiedof cases presented to the court • Some legal firms have begun monitoring the filings and can notify you if a relevant case is filed. • In 2008, attorney’s have been allowed to give input into a few cases, hopefully that will grow (foot in the door) • 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

34. Other Local Revenues • Foundations • Local Grants • Corporate Sponsorships

35. Finally, The End Any Questions? Thank You!