Friday, February 22, 2013
Next Minooka 201 School Board Meeting
The next meeting of the Minooka CCSD 201 school board is
Wednesday, February 27, 2013. 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 the regular Board Meeting at 7 p.m.
Both 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 and here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.
Friday, February 1, 2013
Is This The Future Of Illinois?
This blog is about Minooka CCSD 201, but sometimes I post about happenings in other places in order to illustrate a point. (Also, because the school district is affected by happenings on the state and federal level). This is one of those times. It seems that Harrisburg, Pennsylvania is sinking, not only financially but literally (see here). You see, they spent money unwisely and took on too much debt. As a result, the city is on the verge of bankruptcy and is having difficulty getting a loan. Over the years, they neglected the maintenance of basic infrastructure like sewer and water pipes. Now, sink holes are opening up all around the city due to the sandy soil and the leaking pipes. The city not only neglected this maintenance but now is having trouble even making its payroll. The State of Illinois, meanwhile, had its credit rating recently down graded (again) by one of the major rating agencies (see here), leaving Illinois with the worst credit rating of any state in the nation. As a result, Illinois recently shelved plans to issue $500 million in bonds for school and transportation projects (see here). Now, Illinois may eventually issue these bonds, but the state (and, therefore, ultimately the taxpayers) will end up paying more in interest on the bonds due to the state's poor credit rating. This is a classic debt-spiral, which I have written about previously (see here and here). Harrisburg is merely farther along down the spiral than Illinois.
So, what causes a debt-spiral and how does a state, city, school district (or nation, for that matter) avoid one (or, if it is already in one, how does it get out)? If you boil it down to its root cause, a debt-spiral is caused when an entity (state, city, school district, etc.) refuses to live within its means. Public sector entities are supported by taxes on the private sector (even money printing by a central bank like the Federal Reserve is ultimately a tax). However, there is only a certain level of taxation that the taxpayers (the private sector) are willing or able to support. It is sometimes difficult to determine what that level of taxation is for any given public sector entity since it depends on a multitude of factors. As is all too typical, once a public sector entity starts to bump up against that level of taxation and has trouble raising current revenue it enters the debt markets and floats bonds in increasing amounts to obtain current funds in exchange for future taxation. (Long term debt financing for necessary and prudent capital projects is one thing, but debt financing for current consumption is a clue that you have entered debt-spiral territory.) The interest payments on these bonds, of course, just make the current problems worse and the public entity finds itself going to the debt markets with increasing frequency just to pay for current services. (This is very much like a family that lives beyond its means and starts to use mortgage debt or a home equity loan to pay for day to day expenses.)
So, how does a public sector entity avoid a debt-spiral? The same way that an individual or a family avoids a debt-spiral: it lives within its means. For a public sector entity, that means that it must keep its expenses below (to be safe, well below) that level of taxation that the relevant taxpayers are willing or able to support. This is the crux of the matter since most people spending public money do not spend such money as if they were spending their own money. They tend to spend it much more freely. Once a public sector entity finds itself in a debt-spiral, how does it get out? There are really only two ways out: some form of debt restructuring (such as bankruptcy) or a bailout from a public sector entity higher up the food chain (also known as "kicking the problem upstairs"). In order to avoid going back into the debt-spiral again, the public sector entity must live within its means.
Calvin Coolidge (one of the most underrated Presidents of the United States) once stated the following: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant."
So, what causes a debt-spiral and how does a state, city, school district (or nation, for that matter) avoid one (or, if it is already in one, how does it get out)? If you boil it down to its root cause, a debt-spiral is caused when an entity (state, city, school district, etc.) refuses to live within its means. Public sector entities are supported by taxes on the private sector (even money printing by a central bank like the Federal Reserve is ultimately a tax). However, there is only a certain level of taxation that the taxpayers (the private sector) are willing or able to support. It is sometimes difficult to determine what that level of taxation is for any given public sector entity since it depends on a multitude of factors. As is all too typical, once a public sector entity starts to bump up against that level of taxation and has trouble raising current revenue it enters the debt markets and floats bonds in increasing amounts to obtain current funds in exchange for future taxation. (Long term debt financing for necessary and prudent capital projects is one thing, but debt financing for current consumption is a clue that you have entered debt-spiral territory.) The interest payments on these bonds, of course, just make the current problems worse and the public entity finds itself going to the debt markets with increasing frequency just to pay for current services. (This is very much like a family that lives beyond its means and starts to use mortgage debt or a home equity loan to pay for day to day expenses.)
So, how does a public sector entity avoid a debt-spiral? The same way that an individual or a family avoids a debt-spiral: it lives within its means. For a public sector entity, that means that it must keep its expenses below (to be safe, well below) that level of taxation that the relevant taxpayers are willing or able to support. This is the crux of the matter since most people spending public money do not spend such money as if they were spending their own money. They tend to spend it much more freely. Once a public sector entity finds itself in a debt-spiral, how does it get out? There are really only two ways out: some form of debt restructuring (such as bankruptcy) or a bailout from a public sector entity higher up the food chain (also known as "kicking the problem upstairs"). In order to avoid going back into the debt-spiral again, the public sector entity must live within its means.
Calvin Coolidge (one of the most underrated Presidents of the United States) once stated the following: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant."
Friday, January 18, 2013
Next Minooka 201 School Board Meeting
The next meeting of the Minooka CCSD 201 school board is
Wednesday, January 23, 2013. 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 the regular Board Meeting at 7 p.m.
Both 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 and here for information regarding issues that will be discussed at the Committee of the Whole Meeting and the Board Meeting.
Monday, January 7, 2013
Five Candidates Run for Four Minooka 201 School Board Seats
Five people have submitted petitions to run for the four Minooka CCSD
201 school board seats that will be filled in the next Consolidated
Election on April 9, 2013. The five people are Jim Satorius (incumbent), Doug Martin (incumbent), Don McKinney, Vicki Allen, and John Clucas.
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.
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