Forest Lake Area Schools Truth in Taxation Hearing for Taxes Payable in 2010

1. Forest Lake Area SchoolsTruth in Taxation Hearing forTaxes Payable in 2010 December 3, 2009 Presented by: Larry Martini Director of Business Services

2. Truth in Taxation Law • State law initially approved in 1988 and modified for 2009 • Two major requirements • Counties must send out “proposed property tax statements” in November, based on preliminary tax levies set by all taxing jurisdictions • Taxing jurisdictions must hold a hearing • You are here for the school district’s annual required hearing

3. Truth in Taxation Hearings • School district is required by law to present information on: • The budget for the current school year, including sources of revenue and expenditures by program area • The proposed property tax levy, including: • The percentage increase over the prior year • Specific purposes and reasons for which taxes are being increased • District must allow for public comments

4. Agenda for Hearing • A. Information on District Budget • B. General Background Information on School District Property Taxes • C. Information on the District’s Levy for 2010 Property Taxes • D. Public Comments

5. A. 2009-10 Budget • All school districts’ budgets are divided into separate funds, as required by law • For our district, 5 funds: • General Fund • Food Service Fund • Community Education Fund • Debt Service Fund • Trust Fund

6. A. Overview of Funds • General Fund • Accounts for most daily operating expenses of district - everything not included in other funds; 84% of revenues for 2009-10 • Salaries, benefits, supplies, other costs for instruction, administration, transportation, custodial services, etc. • Insurance, utilities, other purchased services • Also includes annual capital expenditures

7. A. Overview of Funds • Food Service Fund • Accounts for all expenses of the National School Lunch and Breakfast Programs • Community Education Fund • Accounts for expenses of educational and recreational programs that are not part of the “regular” K-12 and special education programs • Early childhood family education • Programs for adults • Classes & Recreational programs

8. A. Overview of Funds • Debt Service Fund • Accounts for principal and interest payments on the district’s voter-approved building bondsas well as the district’s OPEB bonds • Trust Fund • Accounts for revenues and expenses of our Employee Cafeteria Plan and vending machine program

9. A. 2009-10 Budget by Fund

10. A. 2009-10 Revenues by Fund

11. A. General Fund Budget Highlights

12. A. General Fund Budget Highlights 78 % of our funds are spend on direct services to students

13. A. General Fund Budget Highlights

14. B. Property Tax Background • Every owner of taxable property pays property taxes for the various “taxing jurisdictions” (county, city or township, school district, special districts) in which the property is located • Each taxing jurisdiction sets its own tax levy, often based on limits in state law • County sends out bills, collects taxes from property owners, and distributes funds back to other taxing jurisdictions

15. B. Property Tax Background • School District Property Taxes • Each school district may levy taxes in up to 30 different categories • “Levy limits” (maximum levy amounts) for all categories are set either by: • State law, or • Voter approval • Minnesota Department of Education (MDE) calculates detailed levy limits for each district

16. B. Property Tax Background • School District Property Taxes • Key steps in the process are summarized on the next slide • Any of these steps may affect the taxes on a parcel of property, but the district has control over only 1 of the 7 steps

18. QUOTE: Senator Randy Peterson • When Senator Peterson was chair of the Senate’s Education Committee he stated: • “as a practical matter, school districts really don’t have very much authority, any meaningful authority anyway, over their local taxing decisions. With the exception of decisions to build school buildings and the excess-levy referendums…school district taxing decisions are pretty much a matter of state law…”

19. QUOTE: Dr. Tom Melcher • Dr. Melcher is the leader of Program Finance for the Minnesota Department of Education: • “For most levy categories, if a school district reduces the amount of the levy, there is a proportionate, corresponding reduction in state aid…”

20. C. Proposed Levy Payable in 2010 • Schedule of events in approval of district’s 2009 (Payable 2010) tax levy • Early September – MDE prepared and distributed first draft of levy limit worksheets • September 10 – School Board approved proposed levy amounts • Mid-End of November – County sent out “Proposed Property Tax Statements” • December 3 – Public hearing on proposed levy • December 3 – School Board can certify final levy amounts (Alternate is December 10)

22. C. Proposed 2010 Levy - Overview • Total levy decreased by $697,771 or 4.4%, from 2009 to 2010 • The decrease is due to two major items: • Elimination of the Qcomp Program • Fewer Health & Safety Projects • Law requires that we explain the reasons for the major increases in the levy • We will also discuss major decreases in the levy

23. Explanation of Levy Changes (Items +or- $75,000) • Category: Voter Approved Referendum • Change: -86,138 • Use of funds: general operating expenses • Reason for Decrease: • Decrease in pupils

24. C. Explanation of Levy Changes • Category: Alternative Compensation • Change: -$644,442 • Use of funds: restricted to Qcomp plan approved by MDE • Reason for Decrease: • Teachers voted against Qcomp Program

25. C. Explanation of Levy Changes • Category: Health and Safety Levy • Change: -$273,733 • Use of funds: Capital projects related to health and safety • Reason for Decrease: • Decreased number of projects • Legislature continues to limit categories allowed for health & safety funding and fewer projects qualify for program

26. C. Explanation of Levy Changes • Category: Prior Year Adjustments • Change: -$391,914 • Use of funds: Operating Capital / Deferred Maintenance / Health & Safety • Reason for Decrease: • Declining pupils in formula for Operating Capital and Deferred Maintenance • Health and safety projects denied by MDE during prior year

27. C. Explanation of Levy Changes • Category: Voter Approved Debt Service • Change: +$109,724 • Use of funds: Retirement of Principal and Interest on Bonds • Reason for increase: • MDE determines this category by formula ( +2.6% change)

28. C. Explanation of Levy Changes • Category: OPEB Debt Service • Change: +$535,623 • Use of funds: Retirement of Principal and Interest on OPEB Bonds • Reason for increase: • New Legislation allowed OPEB bonds to be issued

29. C. Property Taxes - Going Down Again

30. C. State Property Tax Refunds • State of Minnesota has two tax refund programs available for owners of homestead property • Both programs may reduce the net tax burden for local taxpayers, but only if you take time to complete and send in the forms • For help with the forms and instructions: • Consult your tax professional, or • Visit the Department of Revenue web site at www.taxes.state.mn.us

31. C. State Property Tax Refunds • Minnesota Property Tax Refund (aka “Circuit Breaker” Refund) • Has existed since 1970s, but amounts increasing since 2001 property taxes • Available to all owners of homestead property • Annual income must be $96,940 or less • Refund is a sliding scale, based on total property taxes and income • Maximum refund is $2,310 • Especially helpful to those with lower incomes • Fill out state tax form M-1PR

32. C. State Property Tax Refunds • Targeted Homeowners Property Tax Refund • Available for all homestead properties with a gross tax increase of at least 12% and $100 over the prior year • Refund is 60% of the amount by which the tax increase exceeds 12%, up to a $1,000 maximum • No income limits • Fill out state tax form M-1PR

33. D. Public Comments