Levies School Board Work Session May 3, 2018
Work Session Purpose Gain an understanding of how taxpayers support our schools Review levy process Consider ways school board might increase revenue to support learning Previous Discussions: Finance 101 Presentation: 11/28/18 Finance 102 Presentation: 12/01/18 Finance Work Session: 03/28/18 Budget History and Timeline Discussion: 04/18/18
Revenue Collection Methods State and Federal Aid Miscellaneous Local Levy (property taxes) Voter Approved Referendum Operating referendum (operating costs) Capital projects (technology) Non-Voter Approved Levies Other Post-Employment Benefits (OPEB) obligations Q Comp Long Term Facility Maintenance
1. Changes in market values 2. Changes in class rates/history 3. Market value credit 4. State adjustments
Revenue through property tax collections A School District Tax Levy May Be Either: Set by State Formula Required by Statute or District Option or Voter Approved
Change in Market Values (school property taxes per home to collect $1,000 levy) $200,000 $200,000 $200 $200 $400,000 $200,000 $400 $150 $200,000 $200,000 $200,000 $200 $150 $200,000 $200,000 $200 $200 $200,000 $200,000 $150 $150
Impact of Tax Base Changes (school property taxes per home to collect $1,000 levy) $125 $200 $125 $125 $200 $125 $125 $200 $200 $200 $125 $125 $125
District 2018-2019 Comparison of Metro Schools *Above state operating levy cap Operating Levy per pupil Capital Projects Levy Annual amount *St. Louis Park $2,049.40 Voters approved $2,071.16 $2,363,469 *Hopkins $2,044.34 Voters approved $2,075.00 $9,963,839 Bloomington $1,967.32 Voters approved $1,995.00 $7,859,745 Orono $1,967.32 Voters approved $2,014.90 $978,983 Wayzata $1,967.32 Voters approved $2,000.00 $6,885,342 Edina $1,857.46 $5,537,666 South Wash County $1,836.60 $2,000,000 Eden Prairie $1,824.73 $6,592,059 Burnsville $1,763.75 $2,665,552 Osseo $1,697.43 $6,202,224 Minnetonka $1,653.13 $5,878,035 Minneapolis $1,636.72 $0 Hastings $1,576.95 $0 White Bear Lake $ 1,538.38 $1,704,570 STILLWATER $1,514.53 $0 Roseville (23) $1,180.97 $0 NSP-MO (25) $1,149.56 $0 Mahtomedi (28) $1,043.74 $634,628 Chisago Lakes $525.00 $0 Forest Lake (41) $461.67 $0
Budget Timelines January March June Staffing Preliminary Budget Jan-Feb: Licensed staff decisions Board action on Preliminary budget March: Non-licensed staff decisions Decisions on OPEB, Q-COMP and Long-Term Facilities Maintenance levies August September October November Proposed Property Tax Levies Annual Audit Budget Assumptions Development of proposed property tax levies Board action on audited financial statements Creation of budget assumptions by Budget Committee Call for election Board to certify proposed property tax levies December Revised Budget Board action on revised budget Final proposed tax levies certification 3-year budget projections
The Levy Cycle Districts start the levy process six months before the calendar year the taxes are collected in, and one year before the fiscal year the taxes are reconciled. Certified in 2017 School Board adopts final levy in December 2017. PAY 2018 Property owners pay taxes in May 2018 and October 2018 based on the levy certified in December 2017. for FY 2019 Taxes are collected in two different fiscal years (FY18-19) but must be reconciled in FY19.
Opportunities for Additional Revenue Non-voter approved: Other Post-Employment Benefits (OPEB) Levy = $1 million per year Q Comp Levy $91 per student = $745,000 per year Voter approved: Increased Operating Levy Estimated $465 per student below the cap = $3.9 million per year* Technology/Capital Projects Levy* * 10 year max
Property Tax Comparison - Payable 2018
OPEB $1,000,000 ($24.73) Q Comp $750,000 ($18.56) Levy Tax Impact: $43.29 on $250,000 home
OPEB Levy Tax Impact
Revenue Consideration Timeline June 21, 2018 Preliminary decision on OPEB and Q Comp levies Dec. 13, 2018 Final decision on OPEB and Q Comp levies
Board Considerations How do we fund the WBWF and Board priorities and sustain them into the future? Short-term considerations: Do nothing - use fund balance reserve and drop below fund balance limit set in policy Approve state-authorized OPEB/Q Comp levies Reduce expenses / control costs: Class sizes, programs, and services, employment contracts Long-term considerations: Request operating levy increase from voters Request capital projects levy from voters
Levy Limitation and Certification Process
How Residents Are Taxed 1. Property Classification Examples: Residential Homestead and Non-Homestead Apartments Commercial-Industrial-Public Utility Agricultural Homestead Season Recreational Commercial and Non-Commercial Miscellaneous 2. Class Rates 3. Market Values Categories used to determine school district taxes: Net Tax Capacity (NTC) Includes ALL parcels of property in the school district Referendum Market Value (RMV) Excludes certain parcels of property in the school district such as: Agricultural Land Seasonal Residential Recreational Non-Commercial Rural Vacant Land Managed Forest Land
Net Tax Capacity (NTC) NTC includes all parcels of property in the school district. Formulas take into consideration the classification of the property (class rate), along with Taxable Market Value to come up with a NTC value. NTC HOMESTEAD properties may qualify for the Homestead Market Value Exclusion. This calculation artificially lowers the value of the property only in terms of determining what amount taxes should be spread on.
Referendum Market Value (RMV) Referendum Market Value is based on each parcel s Taxable Market Value (TMV) Can vary from the Assessed Value (Estimated Market Value or EMV) of the property if certain limitations apply. The remainder of Agricultural Property after the House, Garage, & 1 Acre (2a) Non-homestead Agricultural Land (2b) Managed Forest Land (2c) Noncommercial Seasonal Residential Recreational (4c(1)) 55% of the Taxable Market Value of a Blind/Disabled Homestead up to $50,000 (1b) 50% of the first $600,000 of a Comm. Seasonal Residential Rec. used less than 250 days per year and includes Homestead. (1c) 25% of Qualifying Low Income Rental Housing (4d)
Tax Rate Example A School District needs to collect $1,000,000 in taxes from all eligible properties in NTC. The NTC total for the school district is $5,300,000. The Tax Rate is: $1,000,000/$5,300,000=.1887 A Residential Homestead valued at $245,000 has a NTC of: $245,000 x.01= $2,450 The Initial Taxes for the school district before credits would be: $2,450 x.1887 = $462.31
Tax Rate Example A school district is collecting $780,000 a year on an Operating Referendum. The RMV for the entire district is 600,000,000. The Tax Rate is: $780,000/600,000,000=.0013 A Commercial Industrial property has a TMV of $350,000 The Initial Taxes for the school district before any adjustments would be: $350,000 x.0013 = $455.00
How Property Taxes are Determined There are two general categories that determine how the county auditor calculates the school district taxes owed by each parcel of property: Net Tax Capacity (NTC) Referendum Market Value (RMV)
Options for General Fund Non-Voter Approved Revenue Q Comp = $745,000 annually Other Post Employment Benefits (OPEB) = $1,000,000 annually
Options for General Fund Voter Approved Revenue $4 million = Operating levy is not at the cap $750,000 to $1 million = Currently no tech levy
Levy Trends in Minnesota Total Certified Levy Before Credits Fiscal Year Ended June 30 Total School Taxes Statewide 2007 $1,675,412,400 2008 $1,836,768,800 2009 $1,977,862,300 2010 $2,126,937,400 2011 $2,196,356,600 2012 $2,240,361,600 2013 $2,279,658,400 2014 $2,316,384,400 2015 $2,356,123,300 2016 $2,469,286,500 2017 $2,641,453,600 2018 $2,703,156,800 2019* $2,873,418,000 *Estimate from Minnesota Department of Education