Friday, December 14, 2012
Next Minooka 201 School Board Meeting
The next meeting of the Minooka CCSD 201 school board is
Wednesday, December 19, 2012. The Committee of the Whole Meeting starts
at 6:00 p.m. in the board room (the old library) at the Minooka Primary
Center located at 305 Church Street in Minooka. The Committee of the
Whole Meeting will be followed by a Truth in Taxation (tax levy) hearing at 6:45 in the gymnasium. The Truth in Taxation hearing will then be followed by the regular Board Meeting at 7 p.m. All of the meetings are open to the public, and everyone is encouraged to
attend. You can find the agenda for each of the meetings here. In addition, for those who are interested, click here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting, and click here for the information that will be discussed at the Truth in Taxation (tax levy) hearing.
Tuesday, December 11, 2012
Tax Rates Set to Rise With or Without Referendum
Sometime in the next few years, the taxpayers of Minooka CCSD 201 will be asked to raise their own property tax rates. Yes, it's coming. If you attend the Finance Committee meetings, you can already here talk of it. Oh sure, there will be talk of deficit reduction, but the real plan in the end will be to ask the taxpayers for more money (it seems like this is always the plan whether the government body be federal, state, or, in this case, local).
Well, regardless of the outcome of a possible future referendum, Minooka CCSD 201 tax rates are already set to rise. Why? Because of the current bonded indebtedness of the school district and the slow growth (and, in some recent years, decreases) in equalized assessed valuation (EAV). You see, when the school district issued the bonds to build the two new schools (Jones and Minooka Intermediate School), add on to Minooka Elementary School and renovate what is now the Minooka Primary Center, the district and its financial advisors projected that the EAV of property within the school district would increase at a rate of 8% per year for the next twenty years. As it turns out, this was a "pie in the sky" projection. Perhaps this was another instance of "normalcy bias" since the EAV had been growing at such a rate during the housing bubble. Perhaps this was done because it made the resulting bond and interest tax rate appear to remain stable throughout the payback period of the bonds. In either case, projecting such a growth rate to continue for that time period was, at best, wishful thinking.
Unfortunately, reality intervened, the housing bubble burst and the EAV did not continue to grow at the projected rates. In fact, in each of the last few years, the EAV has dropped. As a result, the bond and interest tax rate (only one component of the total tax rate of the school district) must increase in order to compensate. The school district's financial advisors recently issued a new chart of the Minooka CCSD 201 current bond and interest payments based on a revised projection of a 2% EAV growth rate. Even this may be optimistic, since the EAV is projected to drop again next year and may remain flat for a few years after that.
What this means is that, even assuming that the tax rates for the other funds remain the same, the district's total tax rate will increase each and every year for the foreseeable future. This increase will occur automatically since by law the district must levy sufficient funds in the bond and interest fund to pay the then current principal and interest payments on the bonds each year. Based on the projected bond and interest tax rates, the projected implied total tax rates (assuming tax rates for the other funds remain the same) are as follows:
Well, regardless of the outcome of a possible future referendum, Minooka CCSD 201 tax rates are already set to rise. Why? Because of the current bonded indebtedness of the school district and the slow growth (and, in some recent years, decreases) in equalized assessed valuation (EAV). You see, when the school district issued the bonds to build the two new schools (Jones and Minooka Intermediate School), add on to Minooka Elementary School and renovate what is now the Minooka Primary Center, the district and its financial advisors projected that the EAV of property within the school district would increase at a rate of 8% per year for the next twenty years. As it turns out, this was a "pie in the sky" projection. Perhaps this was another instance of "normalcy bias" since the EAV had been growing at such a rate during the housing bubble. Perhaps this was done because it made the resulting bond and interest tax rate appear to remain stable throughout the payback period of the bonds. In either case, projecting such a growth rate to continue for that time period was, at best, wishful thinking.
Unfortunately, reality intervened, the housing bubble burst and the EAV did not continue to grow at the projected rates. In fact, in each of the last few years, the EAV has dropped. As a result, the bond and interest tax rate (only one component of the total tax rate of the school district) must increase in order to compensate. The school district's financial advisors recently issued a new chart of the Minooka CCSD 201 current bond and interest payments based on a revised projection of a 2% EAV growth rate. Even this may be optimistic, since the EAV is projected to drop again next year and may remain flat for a few years after that.
What this means is that, even assuming that the tax rates for the other funds remain the same, the district's total tax rate will increase each and every year for the foreseeable future. This increase will occur automatically since by law the district must levy sufficient funds in the bond and interest fund to pay the then current principal and interest payments on the bonds each year. Based on the projected bond and interest tax rates, the projected implied total tax rates (assuming tax rates for the other funds remain the same) are as follows:
| Fiscal Year | B&I Tax Rate | Implied Total Tax Rate |
| 2013 | 0.5306% | 2.9630% |
| 2014 | 0.5686% | 3.0010% |
| 2015 | 0.5993% | 3.0317% |
| 2016 | 0.6366% | 3.0690% |
| 2017 | 0.6741% | 3.1065% |
| 2018 | 0.7152% | 3.1476% |
| 2019 | 0.7653% | 3.1977% |
| 2020 | 0.8094% | 3.2418% |
| 2021 | 0.8568% | 3.2892% |
| 2022 | 0.9074% | 3.3398% |
| 2023 | 0.9539% | 3.3863% |
| 2024 | 1.0061% | 3.4385% |
| 2025 | 1.0739% | 3.5063% |
| 2026 | 1.1340% | 3.5664% |
| 2027 | 1.2108% | 3.6432% |
| 2028 | 1.2927% | 3.7251% |
| 2029 | 1.0661% | 3.4985% |
Wednesday, December 5, 2012
Ouch! . . . Illinois Makes Forbes' List of "Death Spiral" States
Click here for a recent article which lists Illinois among eleven "death spiral" states. I must warn you, however, that the article is pretty harsh.
Monday, December 3, 2012
Next Minooka 201 Finance Committee Meeting
The next meeting of the Minooka CCSD 201 Finance Committee will be Wednesday, December 5, 2012. The Finance Committee meeting starts at
6:00 p.m. in
the board room (the old library) at the Minooka Primary Center located
at 305 Church Street in Minooka. Finance Committee meetings are open to
the public, so everyone is welcome to attend. The Finance Committee will
be discussing a
new deficit reduction plan to further address our operating deficit.
So, if you want your voice heard during the process, you may want to
attend the Finance Committee meeting. The agenda for the meeting is available here.
As an informational reminder, here is a link to the Minooka CCSD 201 budget for fiscal year 2012-2013, as well as a link to a previous post regarding the financial projections which were presented to the Finance Committee this past January. We now know that the EAV (the property value upon which property taxes are based) in the district fell by roughly 8% in 2011, whereas the projections had assumed that the EAV would be stable. Therefore, updated projections would reflect a bleaker local revenue picture than previously projected.
There are really only two courses of action open to the school district. The first course of action is to make the needed cuts in order to bring our spending into line with our realistic revenues under the current property tax rates. The sooner these cuts are made, the smaller the cuts will need to be since their effects would be compounded over time. If the district were going to opt for this course of action, what would be needed would be a complete top to bottom review of the district budget. Every dollar that is being spent would be questioned. Every opportunity to save money would be explored. The current deficit is approximately 5% of the total budget. Which means that for every dollar that the school district spends, it would have to find a way to save 5 cents. The second course of action is to refuse to make the needed cuts (or make largely symbolic cuts) and hope that the voters in the district will vote in favor of a referendum to raise their tax rates. Of course, if the voters vote down the referendum, then the school board and the school district will be faced with making drastic cuts quickly. If this is the situation that we find ourselves in a few years from now, it will not be the fault of the voters but rather the fault of the school board.
As an informational reminder, here is a link to the Minooka CCSD 201 budget for fiscal year 2012-2013, as well as a link to a previous post regarding the financial projections which were presented to the Finance Committee this past January. We now know that the EAV (the property value upon which property taxes are based) in the district fell by roughly 8% in 2011, whereas the projections had assumed that the EAV would be stable. Therefore, updated projections would reflect a bleaker local revenue picture than previously projected.
There are really only two courses of action open to the school district. The first course of action is to make the needed cuts in order to bring our spending into line with our realistic revenues under the current property tax rates. The sooner these cuts are made, the smaller the cuts will need to be since their effects would be compounded over time. If the district were going to opt for this course of action, what would be needed would be a complete top to bottom review of the district budget. Every dollar that is being spent would be questioned. Every opportunity to save money would be explored. The current deficit is approximately 5% of the total budget. Which means that for every dollar that the school district spends, it would have to find a way to save 5 cents. The second course of action is to refuse to make the needed cuts (or make largely symbolic cuts) and hope that the voters in the district will vote in favor of a referendum to raise their tax rates. Of course, if the voters vote down the referendum, then the school board and the school district will be faced with making drastic cuts quickly. If this is the situation that we find ourselves in a few years from now, it will not be the fault of the voters but rather the fault of the school board.
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