Property Taxes: Revenue Impact and Taxable Value Updates MSBO Annual Conference April 19, 2018 1
State Aid Formula State Revenue = Foundation Allowance X Pupil Membership Local Revenue 2
State Aid Formula Local Revenue = (Taxable Value minus Captured Assessed Value of Property) multiplied by School Operating Millage Note: At least 2 categories of property at different millage rates 3
Terminology: Non-Principal Residence (Nonhomestead) Property Non-principal residence property is considered to be second homes, business property, and rental housing. Non-principal residence property is subject to the local school operating millage, except for industrial personal property that is exempt and except for commercial personal property that is exempt from the first 12 mills. 4
State Aid Formula Non-PRE Taxable values: Tax years 1994-2007 Non-PRE values only 18 operating mills Tax years 2008-present All Other (Non-PRE) 18 operating mills Commercial Personal Property 6 operating mills
State Aid Formula School Operating Millage (non-pre) = the lesser of 18 Mills or what the district levied in 1993 (FY 1994) Note: State Aid calculation assumes maximum allowable millage is levied. Per Section 20(4), no allowance is made for Millage Reduction Fractions. 6
State Aid Formula State Aid Per Pupil (StatePP) = Per Pupil Foundation Grant minus (Local Revenue divided by General Ed. Membership) General Ed. State Revenue under Section 20 = State Aid Per Pupil x General Pupil Count + Section 20(5) adjustment for nonresident pupils 7
State Aid Formula As taxable values increase, state aid payments decrease As taxable values decrease, state aid payments increase This SHOULD be automatic, but it requires active participation of your county treasurer s office Pay special attention to Capture row 8
Taxable Valuation Collection Process Taxable Value collection is web-based Input no longer limited by old schedule Old schedule now a minimum guideline Initial values September 1 Revisions as of settlement May 1 Revisions after settlement October 20 Greater availability for school districts Improved oversight from State agencies 9
Taxable Valuation Collection Process Tax Years 1994-2007 4 values PRE Includes Capture and RZ Non-PRE Includes Capture and RZ PRE Capture Only Non-PRE Capture Only All 4 values are totaled above Data can be downloaded as Excel file 10
Taxable Valuation Collection Process Tax years 2008 present 4 columns for classes of property Row for taxable value of unit, less RZ Row for value of unit captured by local authority Row for Renaissance Zone property value of unit All 12 values totaled at top of page Data can be downloaded as Excel file
14
15
Reconciliation tools 16
Current Year Calculation 17
How To document 18
Prior Year Adjustment Report 19
Prior Year Adjustment Report 20
Prior Year Adjustment Report 21
Prior Year Adjustment Report 22
Prior Year Adjustment Report 23
Prior Year Adjustment Report 24
Taxable Valuation Management Tips Try to stay current Gather baseline information annually (mid-august) Becomes comparison tool for October 20 th prior year changes and May 1 st current year changes Check for specifics before contacting county Tax year Unit Which column Which row Specific questions lead to specific answers 25
Section 31A At-Risk Eligibility in the Hold-Harmless district Proposal A held harmless districts with foundations above $6500 in 1994-95 May levy mills against PRE properties to achieve full foundation. Levying Hold Harmless mills does not always maximize per-pupil revenue. Most do not qualify for 100% At-Risk funding through section 31A 26
Maintaining 100% 31A Eligibility Hold Harmless Eligibiliy 03080 Saugatuck Membership 844.96 Basic Foundation $ 8,099.00 District Foundation $ 8,130.00 Local Revenue per GE $ 6,254.94 Sect. 20 State Per Pupil $ 1,544.01 PRE Property Value: $ 241,123,596.00 HH Mills: 1.22 HH revenue max: $ 294,170.79 HH revenue max per pupil: $ 348.15 "Total per pupil": $ 8,147.10 Actual per pupil: $ 8,130.00 Is Eligible? NO At-risk count 223 27
Maintaining 100% 31A Eligibility Hold Harmless Eligibility 82120 River Rouge Membership 1,495.61 Basic Foundation $ 8,099.00 District Foundation $ 8,435.00 Local Revenue per GE $ 2,092.78 Sect. 20 State Per Pupil $ 5,727.05 PRE Property Value: $ 35,059,469.00 HH Mills: 2.5 HH revenue max: $ 87,648.67 HH revenue max per pupil: $ 58.60 "Total per pupil": $ 7,878.43 Actual per pupil: $ 7,878.43 Is Eligible? YES At-risk count 1,272.00 31A funding $ 1,184,721.72 31A per pupil $ 931.39 28
Maintaining 100% 31A Eligibility 31A At-Risk funding can exceed revenue from Hold Harmless Levy Beginning in FY 2018 30% eligibility for districts with combined state and local section 20/20m revenue above basic foundation. FY 18 31A allocation = $499,000,000.00 FY 19 Executive Budget 31A = $499,000,000.00 29
Taxable Value / State Aid Shortcuts Taxable Value Management System: https://mdoe.state.mi.us/tvs/menu State Aid Home Page:http://www/mi.gov/sasf State Aid Calculation Page: http://www.michigan.gov/mde/0,4615,7-140- 6530_6605-166291--,00.html State School Aid Act: http://www.legislature.mi.gov/documents/mcl/pdf/ mcl-act-94-of-1979.pdf 30
Ad Valorem Property Tax Millage Levies, K-12 Millage Supplemental Hold Harmless Taxable Value Base PRE and Qual. Ag./Forest in the local school district Lesser of Annual School Code Limit Millage and the 1994 Certified Millage, as permanently reduced, times the current year millage reduction fraction for all property. (Letter 3-29-99) 31
Exemption & Specific Taxation Programs Hold Harmless School Districts Because industrial and commercial personal property are treated like PRE and Ag property, hold harmless millage rates are levied on industrial and commercial personal property. Commercial personal property is only exempt from 12 school operating mills. It is only subjected to the first 12 hold harmless mills. 32
Hold-Harmless Mills When foundation allowance increases by more than inflation, hold-harmless districts must reduce their millage rate to limit state/local increase to inflation. To allow hold-harmless districts to receive full dollar increase in foundation allowance, their foundation increases were limited to inflation. Sec.20j payments were ended after FY 2011 and replaced by sec. 20m payments beginning for FY 2017. 33
Limits on Ad Valorem Property Tax Millage Levies, ISD 1. Allocated Operating Levy--150% of what was authorized in 1993. 2. Special Education--175% of what was authorized in 1993. 3. Vocational Education greater of 150% of what was authorized in 1993 or 1 mill. 4. Enhancement 3 mills 34
Distribution of Specific Taxes For industrial facilities tax, commercial facilities tax, technology park tax, commercial forest tax, MSHDA payments, neighborhood enterprise zone tax, obsolete properties tax, commercial rehabilitation act and ETRPST: the local school operating share is paid to the school aid fund. 35
Distribution of Specific Taxes (Continued) local school districts keep the share attributable to debt and sinking fund mills. for the MSHDA PILOT, technology park tax, commercial forest tax, and NEZ tax, the local school operating share of the specific taxes is calculated using the district s 1993 operating millage rate less 6 mills. for IFT, commercial facilities tax, OPRA, commercial rehabilitation tax and the ETRPST, the local school operating share of the specific taxes is calculated using the district s current operating millage rate. 36
Specific Taxes Distribution of ISD Special Ed. And Voc. Ed. mills For IFT, NEZ, OPRA, Commercial Facilities Tax, Commercial Forest Tax, and Commercial Rehabilitation Tax and ETRPST only: the share of the tax attributable to ISD special ed. mills is paid to the school aid fund if the ISD receives special ed. millage equalization funding under section 56 (ICD 450). the share of the tax attributable to ISD voc. ed. mills is paid to the school aid fund if the ISD receives voc. ed. millage equalization funding under section 62 (ICD 510). Otherwise, the ISD share of specific taxes is paid to the ISD. 37
MICHIGAN RENAISSANCE ZONE ACT A tax liability exemption enacted under PA 376 of 1996 Properties located in the zone are still listed on the local unit assessment roll An assessment and taxable value are established for the levy of non-operating millage rates Exempts property taxes except for debt, sinking fund, and ISD enhancement mills Schools districts and ISDs reimbursed through Sec 26a of the School Aid Act. Payment based on RZ TVs reported to Treasury by local assessors, not RZ TVs reported to MDE. 38
Tax Increment Financing Downtown Development Authorities (DDA) PA 197 of 1975 Tax Increment Financing Authorities (TIFA) PA 450 of 1980 Local Development Finance Authorities (LDFA) PA 281 of 1986 Brownfield Redevelopment Finance Authorities PA 381 of 1996 39
Tax Increment Financing Allows authority to capture property taxes from incremental increase in value and spend money to develop area or finance specific project. Used for local economic development. Method to finance different types of projects ranging from commercial development to neighborhood revitalization. Appeals to communities by providing funds for economic development without levying more taxes and has the potential to increase the tax base. Redirecting of other property tax revenues to TIF plan may adversely affect other governmental units. 40
Tax Increment Financing Property Value in Current Year $15,000,000 Property Value in Initial Year $10,000,000 Captured Value $5,000,000 Tax Rate - 50 Mills 0.050 Tax Increment $250,000 School Operating Impact: 5,000,000 x 18 mills = School Operating Portion - $90,000 41
Tax Increment Financing DDA and TIFA Acts: May capture debt taxes or may exclude them. LDFA and BRF Acts: May not capture debt mills. 42
Tax Increment Financing DDA, TIFA, and LDF plans may only capture school taxes for obligations issued or incurred before 1995, except for: LDF smart zones that can capture 1/2 of school taxes for up to 15 years Other minor exceptions BRF may capture school taxes to pay for: certain site investigations, baseline environmental assessment reports, and due care plans. - Other clean-up costs, with DEQ approval Infrastructure costs, with MSF approval 43
New Tax Increment Financing Laws No School Tax Capture, except as noted Historical Neighborhood TIF Authority Act 2004 PA 530 Corridor Improvement Authority Act *** 2005 PA 280 Neighborhood Improvement Authority Act 2007 PA 61 Water Resource Improvement TIF Authority Act 2008 PA 94 Nonprofit Street Railway Act 1867 PA 35 Am. By 2008 PA 486, added Transit Operations Finance Zone *** (May Capture School Taxes with approval of Michigan Strategic Fund) 44
Calculate Your Foundation Foundation per pupil $7,693 x Number of students 3,550.05 = Foundation Total _27,310,534.65 45
State Source Expected Gross Foundation_ 27,310,534.65 Less Local Property Tax Revenue 4,332,490.00 Total Expected State Aid _22,978,044.65_ 46
Remember. There is no such thing as extra revenue with this formula or reconciliation. If you have collected more than your foundation calculation, it is not your money, so do not book it as revenue you owe somebody and eventually they will figure out you owe it and come take it back! 47
UNDERSTANDING THE BASICS OF ASSESSING FOR LOCAL UNIT OFFICIALS A free one day course 12 sessions scheduled throughout Michigan, April August 2018 http://www.michigan.gov/treasury/0,4679,7-121- 1751_2228-457200--,00.html 48
Contact Info Howard Heideman Michigan Department of Treasury HeidemanH@michigan.gov 517-373-9002 Phil Boone Michigan Department of Education boonep2@michigan.gov (517) 335-4059 www.mi.gov/sasf 49