Township and Road District Finance 101

1. Township and Road District Finance 101 Satellite Community Issues Workshop Illinois Department of Commerce & Economic Opportunity

2. What is a Budget? • Financial plan • Identifies revenues • Identifies spending • Legal tool to control spending • Prevents financial problems by forcing comparison of spending to revenue

3. Why Is a Budget So Important? • All operations revolve around money • Budget determines “Who gets what?” • More help for the Assessor? • Computer for general operations? • Spending cannot exceed budget amount

4. Perpetual Budget Struggle • Conflict is inevitable • Officials want best operation possible • More employees & higher wages • Newer equipment • Government mentality of “Spend it or lose it” • Taxpayer pressure to hold down costs

5. Budget / Appropriation Requirements • 50 ILCS 330/3 • 60 ILCS 1/80-60 • 605 ILCS 5/6-501 • Adopt before or during 1st quarter of fiscal year

6. What Should Be in Budget? • 2 years of financial history • Actual revenues • Actual spending • Upcoming budget year

7. Simplified Budget Format

8. Format Important • Prevents overstatement of revenues • Prevents understatement of expenditures • Compares revenues to expenditure • Compares "Beginning Cash" to "Ending Cash"

9. Budget Terms • "Operating Deficit" • Revenues less than Expenditures • Results in "Ending Balance" to be less than "Beginning Balance" • Serious financial warning signal if occurs 2 years

10. Developing Expenditure Figures for the Budget • Start with amount actually spent • Adjust for program changes • Adjust for payroll changes • Adjust for changes in economy

11. Best Tools to Compile Budget • Personal computer • Spreadsheet software • Enables instant revisions • Enables easy printing • DCEO has budget formaton disk

12. Six Steps to Adopt Budget

13. Step 1 - Tentative Budget • Board of Trustees prepare a proposed budget • Starting point for discussion • Can be changed

14. Step 2 - Inspection • Clerk makes tentative budget available for inspection • At least 30 days before adoption • Convenient time & location to public

15. Step 3 - Notice in Newspaper • Announce inspection of tentative budget and hearing 30 days before hearing • Dates & time • Location • Published in Township • If none, then post in 5 of most public places

16. Step 4 - Hearing • Hearing conducted by board of trustees • Answer questions from public

17. Step 5 - Adopt • Board of trustees adopts budget • May adjust items in budget

18. Step 6 - File • Clerk files adopted budget with county clerk • Within 30 days of adoption

19. Sound Budget is Important - But ... It is not enough • Must watch over budget • Are revenues coming in as expected? • Are expenditures in accordance with budget?

20. Important Financial Reports • Monthly Budget Report • Financial Speedometer • How fast revenue is coming in • How fast is spending going out • Keeps you out of trouble

21. Monthly Budget Report(Financial Speedometer)

22. Necessary Financial Reports • Monthly Investment Report • Financial Fuel Gauge • How much money is left • Is it necessary to adjust rate of spending?

23. Monthly Investment Report(Financial Fuel Gauge)

24. What If Budgeted Amount Is Not Enough? • Board may transfer spending authority from one item to another item of same fund • Total adjustments limited to 10% of that fund • Transfers do not increase total spending

25. What If Budgeted Amount Is Not Enough? (Cont) • Have “Contingency” of 5% for each fund for emergencies • Transfer to needed line-item • Also limited by 10% transfer rule

26. What If Transfers Are Still Not Enough? • May amend the budget to appropriate more money • Requires same procedures to adopt budget • 30 day inspection • Newspaper notice • Hearing

27. Property Tax Levy

28. What Is the Purpose of the Tax Levy Ordinance? • Formal request for property tax money • For the Road District - determined by the highway commissioner • Passed by the board of trustees

29. What is the Purpose of the Tax Levy Ordinance? • Provides property taxes in the following fiscal year • 2002 tax levy produced taxes in 2003 • 2003 tax levy will produce taxes in 2004

30. Property Tax Levy Deadline • Last Tuesday in December • But don’t wait until the last day

31. Common Terms Used With Property Taxes • Levy - Amount of property taxes requested • Extension - Total amount of property taxes billed for the township • Tax Rate - Amount of taxes due stated as a percentage of tax base

32. How Much Tax Money Can Be Received? • Multiply equalized assessed valuation by tax rate Assumptions: Equalized Assessed Valuation = 25,000,000 Road & Bridge tax rate = .165%

33. How Much Tax Money Can Be Received? 25,000,000 x .165% = $41,250

34. If Using a Calculator: Enter 25,000,000 Press the multiplication key Enter .165 Press the percent key The most that can be received is $41,250

35. Truth in Taxation • Is estimate of proposed total levy more than 5% greater than previous extension? • If yes, then: • Publish notice in newspaper • Conduct hearing

36. Truth in Taxation • Estimate (determine) total levy 20 days before adoption • Don’t include • Permanent Road Tax • Bonds

37. Hearing Notice Requirements • Not more than 14 days or less than 7 days before hearing • 1/8 page in size • 1/4 inch black border • Type size - 12 point • Not in classified or legal section • No additional information allowed

38. Property Tax Extension Limitation Law (PTELL) • Does not really “Cap” taxes • Allows for inflationary increase • Allows for new construction

39. What is the Limitation? • Lesser of 5% - or the increase in Consumer Price Index (CPI) • For the 2002 levy • it is 1.6%

40. How To Estimate Maximum Tax Estimated Tax = Prior year total extension x (1 + %CPI Limit) x (1 + %New Property) Assumptions: Prior Year Extension = $100,000 CPI = 1.6% New Property = 4%

41. How To Estimate Maximum Tax $100,000 x (1 + .016) x (1 + .04) = Tax $100,000 x 1.016 x 1.04 = $105,664 Note: Subject to Truth in Taxation hearing