Manchester Community Schools

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1 Manchester Community Schools Frequently Asked Questions

2 Question: Why are there maximum financial parameters included in the Financial Presentation power point from Umbaugh and the Notice of Preliminary Determination? Answer: Indiana law requires that any project to be done by MCS that is anticipated to cost more the $5,000,000 and paid with bonds issued by MCS or one of its nonprofit building corporations include certain financial parameters that the project financing cannot exceed. Those financial parameters include the maximum annual debt service payment/lease payment, the maximum aggregate lease payments over the term of the bonds, the total interest cost to be paid during the term of the bonds and the maximum term of the bonds. While the project financing can always be lower than these numbers, and in fact, most all of the time they are less than these numbers, the project financing may not exceed any of these numbers without repeating all of the preliminary determination steps already done by MCS in May and June. Because the proposed project financing is not anticipated to occur until January or February of 2019 at the earliest, we need to make sure that there is enough flexibility in these financial parameters to allow for a possible increase in interest rates between now and then. Therefore, Umbaugh has assumed in its power point presentation that the interest rates for the proposed project financing are about 1% higher than current market rates. The Notice of Preliminary Determination mirrors these same numbers and assumptions to ensure MCS will not have either repeat the preliminary determination process done in May and June or reduce the scope of the project should interest rates increase over current market rates. 2

3 Question: Why does the Financial Presentation power point from Umbaugh say the tax impact is estimated to be $ per $100 of net assessed value on page 3 of its power point but then say the maximum annual tax rate is estimated to be $ per $100 of net assessed value on page 4 of its power point? Answer: Indiana law requires MCS to provide the incremental increase in the debt service fund tax rate compared to the current debt service fund tax rate. The proposed project financing is estimated to result in the current debt service fund tax rate to increase by $ per $100 of net assessed value above the current 2018 debt service fund tax rate. This increase is anticipated to occur in 2020 and remain at that rate until However, based on the interpretation of the Indiana Department of Local Government Finance, the public question which would be on the ballot if a referendum is requested by a sufficient number in the community must include the estimated maximum annual debt service fund tax rate for this project financing assuming no other bonds of MCS are outstanding. The estimated maximum annual debt service fund tax rate needed to pay the annual debt service on only the bonds for the proposed project financing beginning in 2027 through 2038, assuming no increase in MCS net assessed valuation, would be $ per $100 of net assessed, and is the rate that will be in the public question if a referendum is requested by a sufficient number in the community. The correct number to use in determining how much of an increase each property owner may see in his/her annual property tax bill compared to what he/she is paying this year is the $ per $100 of net assessed value. 3

4 Estimated Annual Debt Service Tax Rate Manchester Community Schools Chart of Existing and Illustrative Annual Debt Service Tax Rates $ $ $ $ $ $ $ Calculation of Tax Rate Impact: $ $ = $ in Tax Rate Question: How is the increase in tax rate impact being calculated? $ Estimated Existing and Illustrative Debt Service Tax Rate: $ Estimated Illustrative Debt Service Tax Rate: $ $ $ Budget Year Estimated Existing Debt Service Tax Rate Illustrative 2019 Bonds Debt Service Tax Rate 4

5 Question: How do changes in the School s Net Assessed Value affect the tax rate? Change in AV from 2018 School s Net Assessed Valuation Estimated Tax Rate 3% 2% 1% No Change 1% 2% 3% $390,883,030 $394,912,752 $398,942,474 $402,972,196 $407,001,918 $411,031,640 $415,061,362 $ $ $ $ $ $ $ Note: Based upon 2018 Certified Net Assessed Valuation of the School Corporation. Assumes increase in payments over 2018 levels of $912,864. Assumes that 5% of the annual payment will be funded from miscellaneous revenue the School Corporation receives in conjunction with property tax distributions. The estimated interest rates used to calculate the tax impact are approximately 1% higher than current interest rate levels. * From 2014 to 2018, the School Corporation s Net Assessed Value grew annually by approximately 2.4%. 5

6 Question: How do changes in Net Assessed Value affect taxpayers? Market Value $100,000 Home $150,000 Home 1 Acre Ag Land 100 Acres Ag Land $100,000 Business/ Rental Net Assessed Value 3% 2% 1% No Change 1% 2% 3% $32,750 $72.67 $71.92 $71.20 $70.48 $69.79 $69.10 $68.41 $65,250 $ $ $ $ $ $ $ $1,610 $3.57 $3.54 $3.50 $3.46 $3.43 $3.40 $3.36 $161,000 $ $ $ $ $ $ $ $100,000 $ $ $ $ $ $ $ Note: Homes are eligible for the following deductions to the assessed value of their property: Standard Deduction, Supplemental Homestead Deduction and Mortgage Deduction. 6

7 Question: How does the School s total tax rate compare to other schools? Comparison of Selected 2018 Certified Total Tax Rates (By Geography) Wabash City S.C. Mississinewa C.S.C. Peru C.S.C. Oak Hill United S.C. Whitko C.S.C. Whitley Co. C.S.C. Tippecanoe Valley S.C. Proposed Manchester C.S.C. (Including Proposed Bonds) Current Manchester C.S.C. Total Tax Rate $ $ $ $ $ $ $ $ $ Note: Certified tax rates provided by the Department Local Government Finance 2018 Budget Orders for the School Corporations. 7

8 Question: How does the School s total tax rate compare to other schools? Comparison of Selected 2018 Certified Total Tax Rates (By Enrollment) River Forest C.S.C. Wabash City S.C. Elwood C.S.C. Crawford Co. C.S.C. Oak Hill United S.C. Mitchell C.S.C. Southwest Dubois C.S.C. Southwest S.C. Blackford Co. S.C. Randolph Central S.C. South Montgomery C.S.C. Proposed Manchester C.S.C. (Including Proposed Bonds) Current Manchester C.S.C. Total Tax Rate $ $ $ $ $ $ $ $ $ $ $ $ $ Note: Enrollment information per the Department of Education. Certified tax rates provided by the Department Local Government Finance 2018 Budget Orders for the School Corporations. 8

9 Question: How does the School s total tax rate compare to other schools? Comparison of 2018 Certified Total Tax Rates (All Schools) Percentile School Corporation Rates 10% $ % $ % $ % $ % $ Note: Information on this slide is credited to The Indiana Economic Outlook, School Funding Matters and Referendum Issues on June 13, 2018 by Larry DeBoer, Department of Agricultural Economics, Purdue University. 9

10 Question: How can I calculate my tax impact? Answer: Tax Calculator on the School s website. Input your Gross Assessed Value here Results will display here 10