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:

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%

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