We call this meeting the order. This is now our work session for which we don't have an agenda, but
what we're here for tonight is to hear from Stiefel about our bonding capacity, our finances going forward
related to debt service, what we may have the capacity to do, what, you know,
impacts that we'll have and so we can look at what our next steps would be, what kind of a bucket, so
to speak, we might have to work with. Then we're gonna look for as long as we can. We need to have a
hard stop at 645 for this meeting and we'll go as far as we can into the actual
facilities needs that we have. But for the most part, we really want to hear from Stiefel and get, looks
like we're gonna get a SEA-1 update. And so we appreciate that part and capital financing scenarios.
So with that, I'll turn it over to... Yeah, let's just turn it over to Chad
Thank you, Chad. Good to see all of you. Yeah, so the first part of the presentation, I'm excited to,
you know, just kind of, oh, yes, sorry. Yeah, Chad Blacklock with Stiefel. Gosh, we've worked with the
school district five, six, seven years now on most of your capital financing stuff. And so what we've
spent a lot of time doing
This year is really talking aboard superintendents, business managers, understanding a little bit about
the SEA-1 impact that was passed last year. So it's almost been kind of the first half of the presentation,
or really the majority of the presentation, going over a lot of that and how that impacts overall finances
as well as your debt scenarios.
You guys know me, I'm very informal. Please ask questions as we go through here. I wanna make sure you
guys leave here tonight with really kind of a thorough understanding of how this impacts Edgewood Community
Schools, okay? All right, let me, okay. Just kind of a real basic fund slide analysis here going back
over the funds. Most of you are gonna know this and understand this thoroughly, but I always like to just
Go over this slide as kind of a foundational understanding that we operate using fund accounting in
Indiana public schools. All public schools have to use fund accounting. The state of Indiana tells us
what revenue has to go into each fund and then what expenses come out of each fund. And so up here I've
got just really our major funds
And tonight, I'm gonna really probably be focused more on our property tax supported funds. But I just
wanna kinda quickly go over these. In the blue, that is our education fund. I call that the instructional
fund. The reason that I call that the instructional fund, that is the fund that we pay all
of our instructional expenditures out of, as do all public schools. The revenue that goes into that
fund is state tuition support.
The state tuition support is guided by two things. The enrollment of the school district, which is counted
every six months, and what our legislators establish as the per kid funding amount. So we simply every
six months take account how many kids you guys have. We multiply that by the legislator established
per kid amount. That tells us the amount of revenue that is going into the education fund.
that is for instructional purpose, okay? The next fund as we work to the right is the operations fund.
The operations fund funds all of our operational expenditures in the school district. That includes
transportation, custodial, maintenance, utilities, central office staff, any kind of capital outlay
that you wanna cash fund. If you wanna buy a new school bus, you wanna put a new roof on a building,
you can pay for those things.
out of the operations fund. Most school districts today don't have a lot of money left to pay for capital
expenditures once we fund all of the things that I mentioned in the beginning. The operations fund is
funded by two primary sources of revenue. The main source of revenue is property tax.
The second source of revenue is we are allowed to transfer some money from the education slash instructional
fund over to the operations fund statutorily. Every school district, I work with 140 school districts
in the state. Every school district I work with transfers something and you guys are doing a transfer
as well. There is a cap.
on the amount that we can transfer. But that is a fairly large source of revenue going into the operations
fund. So property tax and the transfer from the education fund. As we move to the next to the right
is the debt fund. The debt fund, just as it is titled, all we pay for out of the debt fund is debt.
You guys have outstanding bond payments that we pay twice a year. You pay those out of the debt fund.
pretty much 100% property tax funded, okay? The next slide to the right, you guys don't have, it's not,
I put this up here, a lot of my clients have an operating referendum. You guys don't have an operating
referendum, that is property tax funded. It's its own separate fund if a school district has an operating
referendum. Down and below in the kind of that salmon color is the rainy day fund. The rainy day fund
does not have an ongoing source of revenue.
The only revenue source that goes into our rainy day fund is we can transfer dollars out of the education,
the operation, or the operating referendum fund into the rainy day fund. Property tax doesn't get receded
in the rainy day fund. State tuition support, none of that gets receded directly into the rainy day
fund. Any time that a rainy day fund transfer is made out of a fund into the rainy day fund, it must
be board approved through a resolution.
Yes, yes, sir. Yep. With our current situation. And this help art, the two new board members to coming
on January, the art, we're not doing the 15%, correct? Debbie, we're doing, we stopped it. We stopped
it for now, right? But it was 10% last year, right? I think it was close to 15.
Okay, but we've stopped doing that for the time being. Okay. Okay. And then in the rainy day fund, we're
right at a half a million right now. Okay. All right. Other questions about this is just kind of the
foundational understanding. Correct.
of all of this, yeah. Okay, I wanna dig down a little bit deeper into the two property tax supported
funds, okay? The reason I personally think this is very important for all of us to understand is that
these two funds work very differently. Although they're supported by property tax, the property tax
that goes into them, that mechanism is very different, and I wanna explain that.
On the right is your debt service fund. The debt service fund is what I call a needs-based fund, and
I'm gonna define what I mean by that. The levy, the property tax levy that goes into the debt service
fund is a factor of your annual debt payments. And so the reason that I call it a needs-based fund is
that for the most part,
and some of the attorneys don't like it when I say this, but it is really true, is that there's not
necessarily a cap on the amount of debt that a school corporation can take on. That's why I call it
needs-based. Usually this fund is driven by the needs of the school district. What are our capital needs?
All school districts have some kind of capital needs, and so as you bring on new debt payments, that
really determines
the property tax levy that we're levying the taxpayers to repay that debt, okay? That debt service fund
has its own property tax rate and its own separate property tax levy, okay, that we establish every
year when you guys go through the formal budget process that you just went through that you guys submit
to the state, okay? On the other side of this is the operations fund.
So the operations fund is different because the operations fund has a maximum property tax levy. The
need doesn't matter. So if you have a need, let's say your school district, when you add up transportation,
maintenance, central office, utilities, let's say your need and all of those expenditures is eight million.
But your maximum property tax levy is only six. You can't levy the taxpayers for eight. You can only
levy them for six. So you see how those two funds, although property tax driven, work very differently.
The debt fund, bring on your debt payments and you fund your capital needs. There's not necessarily
really a cap. The operations fund
You gotta keep expenses within the property tax revenue that you bring in, which is capped. That's what
is causing a lot of schools some heartburn over the last six or seven years, because think about the
things that I said that we pay for out of operations. Utilities, bus fuel, buses, all of those things
are very sensitive to inflation, and inflation has been at an all-time high over the last five or six years.
that has caused expenses in the operations fund to rise quickly while the revenue isn't necessarily
keeping up with that, okay? Now the other thing of note is that Richland Beam Blossom Schools, their
maximum levy, property tax levy in the operations fund does increase every year by a factor given to
you by the state
that is called the max levy growth quotient. It's just a, it's a percentage, it's a multiplier. And
so every year we can grow that, grow that factor and grow that levy, but the levy that MLGQ has not
really kept up with when you match it up with inflation over the last several years. So this is a snapshot.
This slide gives you an indication of what your maximum levy is and what that growth factor has been.
So starting at that little chart at the top that we come on and use the acronym MLGQ. In 2023, you guys
were able to grow your property tax levy in the operations fund. So I'm gonna say your revenue by 5%.
5% was the state MLGQ given to every school. Every school gets for the most part the state, the same
growth factor. However, the starting levy is different for everybody, okay?
In 24, 25, 26, the MLGQ, the growth factor was 4% every year. Statutorily, the growth quotient is a
calculation, and it's based on the change in non-farm personal income for the whole state. So as that
changes, we take a six-year average, that becomes that growth factor. In 2023, the legislators capped
kind of put the formula to the side and they capped that growth factor at 4% in 24, 25, and 26. It would
have been around 5.5% every year had the formula stayed in place. That was a part of a property tax
relief bill that was passed in 2023 to keep property taxes down. And it did because you guys would have
levied probably the full 5.5%. We reduced
that levy and so we only levied 4% every year. So when we think about your operations fund, we think
about that inflationary cost, you could have levied, you would have been able to levy 5.5% over a three
year period where we only levied the four. So that suppressed revenue for three years. Thankfully in
2027, the formula's back into place and the state MLGQ in 27 is 6%.
So you guys were able to raise your operations fund levy going into 2027 by 6%. That next set of numbers
right below that, I'm just showing you so you have an idea of what your maximum operations levy is.
So in 24, we had a 4% MLGQ, your levy was 5,406. So you levied the taxpayers for 5.4 million revenue
into your operations fund. And that was a 207,000 increase from 23.
So the 4% essentially got you 200,000 in new revenue and operations. Then in 25, the growth factor was
4%. That got you 216,000 in new revenue. In 26, the growth factor was 4%. That got you 224,000. And
the 6% in 27 is gonna get you 350,879 in additional revenue in your operations fund. So it's simply
how the operations fund levy works.
If they don't come back and cap that growth factor, for the next two or three years, it should be around
five and a half to six percent again, just if you kind of look at what the non-farm personal income
has done in the state, okay? Questions about that? So my takeaways there, the operations fund has a
maximum levy, and you guys max out that levy every year as you should, as all schools do. You don't
want to leave that money on the table.
Okay? So when we're working on your budget, when I think about your total tax rates, I'm going to go
back to this slide. In the middle, we've got the debt fund and the operations fund feeding into that
gray box. That gray box is your total tax rate. I'm going to first, when we think about your total tax
rate, we're going to max out the operations fund tax rate and levy every year because you don't want
to leave those dollars on the table. Okay? Brad, I saw your hand go up.
Yes. And I think you were that presenter, maybe it was Matt. That's a one year deal, right? The 6% to
offset. It's a great question. The SCA one. Is that right, Paul? Yeah. So that's a great question. That's
yeah. Make sure I understand. I think yes. What you guys said. Yeah. So that's an interesting. That's
an interesting question. Um, so you have to look at it like this.
Indiana state statute says there is a formula to calculate the MLGQ. That's in state statute. And the
state statute says on my fourth bullet point, the MLGQ is based on the change in the state's six-year
rolling average of non-farm personal income. That's a statute, okay? So what they did in 24, 25, and
26 is they came out with a piece of legislation that said
for 24 and 25, 24, 25 and 26, the statute, the MLGQ formula still is in statute. We're just not gonna
use it. What we're gonna do instead is we're just gonna cap it at 4%. No matter what the formula says,
we're gonna cap it at 4%. So what, in 2026, when we were going through legislative session in 26, we
kept waiting for a piece of legislation to come out because
When they did that, it sunset in 26. That's when that additional piece of language ended. So we're like,
okay, so what are they going to do with the MLGQ in 27? And session kept going and session kept going
and it was never addressed. So what that means, Brad, is that other statute that was put into place
that put the formula aside, it just sunset and it faded into the sunset. And so now, statutorily, the
formula just kicks back into place.
So what we all need to watch for is in 27 session, do they come back and say, we're going to cap the
formula again. So as of right now, our best guess is the formula is in place again. We'll just have
to see what they did. I think that's something, this is just my opinion legislatively. We've seen several
bills introduced over the last four or five years where
It's kind of a one year deal. And then you have to kind of wait and see what are they gonna do in the
next session. So it's just always kind of, there's several pieces of legislation out there that are
like that, that we're just always watching every session because they have a financial impact on our
schools. And this is one of them. Prior to 2023, I've been doing this 19 years. I don't remember them
ever messing with that calculation. That was never a,
That was never a go-to mechanism in the past to bring down property taxes. That was something new. I
never saw that one coming in 23. So I think we have to keep our eye on that. All right. OK. All right.
I just put this chart up here. I just want to kind of go through this. This is a snapshot of Edgewood
School's historical assessed value tax rates tax
Okay. So if we start in 2019, our certified net assessed value was 853 million. And that was a 3.7%
increase in AV from from 2018. Remember me saying each one of our funds has its own tax rate, and then
we have our total tax rate. Okay. So in 2019, our debt service tax rate was 49 cents. So our
Our payments, our debt payments that year warranted a 49 cent tax rate based on the AV. We used to have
something called a pension bond fund. You paid all your pension bonds off in 2019. That was about a
two penny tax rate and operations was 49 cents. And then you could see the levies below. So I wanna
go down to the operations fund to that 4,195,379 to just again drive home the point
That was your maximum levy in operations that year. And based on your assessed value, you needed a tax
rate of .4914 to raise that amount of tax levy, okay? And I'm gonna dive in a little deeper
to the calculation, how net assessed value, tax rate, and tax levies play together when we talk about
the calculation, because that's really important when we start talking about
And then so you can just see if you go from the right over to, or from the left over to the right, you
can see how your net assessed value has increased or the change every year. You can see what your tax
rates have done by fund and total. And you can see what your tax levies have done over the years. I'm
a numbers guy, so I track things year to year to year. You know, and I'm always looking for trend. I'm
looking for the change.
Because that starts to tell me your financial story. And that tells me a story as I start to look at
that from left to right. Okay? All right. Now, let's get into some math. So, I want to talk a little
bit about SEA 1 impact and net assessed value tax rate and tax level. Okay, so let's start at the top.
When we take your tax rate, so think back to that previous slide when I said like your operations fund
tax rate is 49 cents in 2019. In Indiana, we apply our tax rate, our property tax rate, to every $100
of net assessed value. So if we take your net assessed value, divide it by 100, and then we multiply
it by the tax rate, that gives us the tax level.
levy is more of an actual indicator of the property tax bill to the taxpayer than the tax rate. So I
want to say that again. The property tax levy that is spit at is more in line with the actual taxpayer
property tax bill than the tax rate. The tax rate is just calculating it's getting to the levy, but
the levy's the most
levies go up and down, taxpayers are paying more or less, okay? So I'm gonna give you an example in
this next, in that next line. In 2026, your total tax rate when we took operations plus debt service,
your total property tax rate this year was 1.0398. So $1.0398. Your assessed value was 1,508,248,511.
So if I take the $1,508,248,511 and divide it by 100 and I multiply it by that $1,398, I get $15,682,000.
That's the math, the calculation in calculating tax limits. The reason this is important and what I
want you to start to understand is this in my chart. If tax rate stays flat, which you control,
But net assessed value drops, levy drops, revenue to the school district drops. If tax rate stays flat,
net assessed value goes up, levy goes up, you get additional dollars, okay? That's important when we
start to talk about SEA-1. So in the chart below, I'm just simply showing you that. If a school district
has an AV of a billion, they have a tax rate of a dollar,
they're going to net 10 million in revenue. If a school district has 1.1 billion in AV and a tax rate
of a dollar, they're going to net 11 million in revenue. However, if the assessed value goes down to
900,000, tax rate stays at a dollar, we bring in less lead. The last slide, the last row there says
that if AV drops to 900,000,
$900 million, the tax rate has to go up to $1.11 to collect just the same amount of revenue.
Not more revenue, just the same. The reason this is important is that moving forward, there is a good
chance that your assessed value declines. Your assessed value here has not declined in many, many years.
but that's the impact of Senate Bill 1. But as we move forward and talk strategy about tax rate and
tax levy here, which we've had a lot of conversations with this board over the years about tax rate
and tax levy, multiple conversations, the game's a little different now because AVs could start to decline
and you guys can't necessarily afford to have revenue decline with them. So that means tax rates could
start to go up
to not necessarily get you more money to get you the same amount of money. That's the key to managing
this moving forward, okay? And remember, I'm going to say this several times, the property tax levy
is what tracks more with what your taxpayers are paying, not the rate. So I drive that home to say in
that last example, just because the tax rate went up to $1.11, the taxpayer in that situation didn't
pay anymore. It's the same.
to clarify the 15 million that we're collecting for our tax. That's to pay our debt service and our
operations fund. Yes sir. Okay. That 15 six is a combination of debt levy and operations levy. Okay.
As far as timing is concerned, this is where I was getting confused. When do we get, when do we know
our assessed value? Is it before we have to know it before we do our final tax rate, right?
That's the way it should be. But is it though, is the question. Great question. Statutorily, we're supposed
to know our assessed value by August 1st. That doesn't typically happen. There have been some years
that we've gotten them by August 1st. In the last few years, it's come in sometime in August. So that's
normally when we would know our assessed value. And when we're talking August and September,
You guys are in the budgeting process at that time. I mean, you started the budgeting process in June
and July. You're starting to make the forms. You're working through the process. You have to adopt your
budget by November 1. So you've typically had your adoption in October. You had the hearing in September.
And so hopefully, but you have to advertise for the hearing 10 days before the hearing. So it kind of
lines up about the time you're going through all
process. So sometimes we're making our budgets based on an estimated assessed value because we just
don't know. So we could be blindsided. You could. You could. And there's some we have some. Yeah. Yes.
And so, you know, there's some things in place for those of us that have been doing budgets for a very
long time. You know, there's some tips and tricks that we always put in place to make sure that we can
maximize your revenues that we
Yes, we might get blindsided, but we try to build things into that process so that we can still maximize
our windows. Good questions. Okay. All right. Property tax caps. Let's talk a little bit about that.
Not a new word for you guys, just to kind of go back over this, because when I start talking about Senate
Bill 1, I don't want to lose sight of what I call traditional property taxes, tax caps.
Property tax caps, just a little history lesson, put into place 2010. We voted them into the Constitution,
so they're not going away at this point. And they put a cap on the amount of property tax that a property
owner pays. It's a percentage of the assessed value. Puts a ceiling, okay? The cap is calculated as
one, two, and three percent based on a residential, farm ground, or commercial property.
If somebody is at their property tax cap, but the governmental entity does their budget. So let's say
you guys do your budget and you apply the tax rate to every parcel, every piece of farm ground,
every home, every business. And let's say that I live in your district and I have a home and my property
tax cap is $2,000 on my house. That's 1% of my assessed value is $2,000.
I get my property tax bill, and I'm paying for you guys, and I'm paying for Ellisville town, I'm paying
the library, I'm paying all these property tax rates. And let's say my bill says I owe $2,500. If my
cap is $2,000, I only pay $2,000. I don't pay $2,500. So I want you to think about that. Where you lose
those dollars are in your operations
Because you are only levy the taxpayer and the operations fund for your maximum tax levy. But if I only
pay 2,000 and not 2,500, there's some money that you statutorily could get in your operations fund that
I'm not paying. Because if my tax bill says 2,500 and your operations fund tax levy was part of that
2,500, I only pay 2,000. So you're not getting some money in your operations fund because of that.
That's called circuit breaker or property tax cap revenue loss. It's property tax revenue that you're
simply not receiving, mainly in your operations fund, okay? And I just kind of show you up here your
DLGF estimates of what 25 and 26 are. In debt service, in 25 it was 58,000, in operations it was 146,000.
If I go back to that maximum levy that you levy the taxpayer for in 25 and operations, you didn't collect
146,000 of that. In 26, you did, you're probably not gonna collect about 111,000 and those are state
DLGF estimates, okay? And so we gotta take that revenue off the top when we're doing your budget, okay?
Chad, I've had people ask about bullet three. I think some of the,
taxpayers get confused on gross assessed value. That's prior to their standard homestead exemption and
all that, correct? They're always thinking, they think it's the cap is on that bottom number.
It's on the top, okay. It's really, we don't use gross assessed value much in school finance, but when
we're calculating your tax cap, gross assessed value is one of the two times we use it.
Got it. And remember, gross assessed value in Indiana is market. The system is market based, meaning
that our county assessors are supposed to be trending the gross assessed value of property to the market.
Your gross assessed value should be somewhat in line with what you would put your house on the market
for today. Fifteen ish plus years ago, that wasn't the case.
That wasn't the case. But it is supposed to be trended. It is supposed to be in line with the market
and trend with that. Then off of the gross in Indiana, and I'm going to get more into this in a little
bit, we have deductions that bring us down to our net. The net is the taxable value. But Brad's right.
The property tax cap is a percentage of your gross assessed value, which is on your tax bill. Your tax
bill tells you your gross and your net assessed value.
and I can see the dollar amounts of our cap loss, but I have no idea what to compare that to. How do
we compare to the other corporations you work with? Are we getting killed by that? I don't know. Let
me look here. I thought I put in a percentage. I think I have in here, so how I look at that, Brad,
is I look at that 111,000
what percentage is that loss of your total operations fund tax levy? While that's a large dollar amount
as a percentage, honestly, it's not that big of a percentage. When I say a large percentage, I'm gonna
use the example in my previous life, I was a CFO of Franklin Township Schools. Our property tax cap
loss every year, and they still have this amount of loss,
was around 45 to 50% of our max levy. So our max levy was in the 15 million range. We didn't receive
50% of it. Whereas your max levy, if I go back, in 26, is 5,845, and you're not receiving 146,000
of it. As a percentage, it's a couple percent. It hurts, I'm not gonna say it doesn't hurt, but it's
a manageable amount.
So we have several districts losing well above 20% of their levy to circuit breaker loss. So I hate
to lose any, but actually that's a decent number. If I gotta lose a number, I'm okay with that one.
What is going right for that number to be low versus being in a situation like Franklin Township that's insane?
So there are several things that drive property tax cap loss. Here's what you have to understand is
the base to how this works. You guys are not the only taxing entity, right? And so when I drive around
and I look at every one of your properties on my way in and I see all your houses, I see a bucket of property
And since it's capped, there's only so much revenue you can get from them. But that property tax,
that bucket, you know, like when I go back to saying, I pay, my cap was $2,000. I'm paying part of my
$2,000 to Edgewood Schools. I'm paying part to Ellitsville Town. I'm paying part to the library. So
everybody fills the bucket up, right? So one thing that we see that's different
is that when all your constituents that live within a town, they're paying multiple tax rates. There
might be a library, there might be a county tax, a school tax, multiple taxes. When you go out into
your outlying districts, they typically aren't paying a town tax. They might not be paying a library
tax. A lot about in your outlying areas, you're paying city and county tax. It may be a, yeah.
So a couple things that we see, if you have a school tax rate and levy that's high, and you have a town
tax rate and levy that's high, that fills the bucket up quicker. Well, as the bucket fills up, more
circuit breaker loss. You see what I mean? So one thing is when you have more overlapping taxing units,
and the overlapping taxing units have high tax rates and levy,
that fills the bucket up quicker, that makes property tax cap loss go up faster. Franklin Township is
unique in that in Marion County, outside the donut, Franklin Township is about 95% homes. It's all corn
fields that are now subdivisions. They're all capped at 1%. There's no businesses. So that's the other way.
You guys have some businesses that are capped at 3%. You still have some farm ground. You have some
rental properties. And rental properties and farm ground are at 2%. And then you have homes. I haven't
seen the exact makeup of your assessed value. I'm going to say your AV is a good mix of homes, 1%. Farm
ground or rental is 2% and commercial 3%. When you have a balanced assessed value like that, that's
when we see circuit breaker loss pretty well.
It's when you get into that other situations or heavy residential, high tax rates, circuit breaker loss
goes up. So who keeps track of thinking about that bucket? Who keeps track of, let's say in our area,
how many of those households or how many of those commercial properties, we are taxing them to their cap or
how many were leaving, not that I want to get into that window, but how many are we leaving a window
there for? Now you're thinking circuit breaker law strategy, that's right. So you guys have in the past
engaged with policy analytics and they are the ones, in my opinion, they are the organization in Indiana
and you guys have had an agreement with them before where
they actually have a model that they do a parcel by parcel analysis. And they are able to tell a school
district or a city or a town exactly what you asked. How many of your taxpayers are at the cap and where
are they? And typically, like I said, you would see, and I would probably say the same thing here, the
majority, probably the majority of that circuit breaker loss is within the town of Elizabeth, would
be my guess.
and then you're gonna have very little. So most of those, not most, but more of those people are at
their cap. Your people that are outside of Ellitsville town, I would say probably none of them are at
their cap. But there really, there's not really a good place to like go onto a website to find that.
You gotta have somebody like Paul Zanalytics do that. With the reorganization passing,
yesterday. They are you got we got a report. If the past we don't pass what's passed out that's going
to affect that bucket too. Cuz they're going to pull the ball pull from Peter else over the ball. I
was reading a little bit about that and there was a fiscal analysis done and it sounds like here but
the numbers were wrong though Jerry right we the numbers that should the town user we use are different. Right
That scared me. That's when we had our second board. Right. We shared the board. That was about 350,
350,000, something like that. Yeah, and then 2030 it levels off. OK.
Okay. So meaning that the circuit breaker for us is going to increase by about 350,000 because we're
going to have more people getting additional taxes, meaning that the property tax cap is going to come
in to play there. Okay. Between Richland and Eltsville. Right. And then beam blossoms affected because
of the fire district change, correct? My tax rate is going to change to beam blossoms because we're
now part of Monroe County Fire and yours works there.
So in this, did the town of Ellitsville expand boundaries? Is that essentially what happened? So back
to my original point, yes. I think probably what's going to happen is that additional circuit breaker
loss that we need to take a look at. As the town of Ellitsville, I'm assuming, expanded its boundaries,
now you're going to have people that weren't paying town tax now that are now paying town tax. It could
cause them to go up to their circuit breaker cap.
Okay. Yes. Just mathematically, I'm thinking through my mind. That's probably what is going to happen.
But the trade off there is that yes, you have more loss because of some increase in assessed value,
assessed value. Total tax collected because they're now paying the town tax. So we get nothing from
Richland Township as of right now. Well, as of yesterday, no, we
We still. But how does it change what we are getting it won't change ours. It'll help. It'll help the
tap. Yeah. We just now the objective. Yeah. And actually their AV is going to go up. You were already
you there. That township was already in your A.D. Ultimately in my opinion I haven't read the whole
doc. Right. It's probably going to help the town.
because they're not going to expand. Their AV's gonna go up. And their tax rate may decrease.
To start with, the existing town boundaries is going to be an urban district, and the rest of it's gonna
be an urban district, or a rural district. So the town district will have a different tax rate and a
higher tax rate. So with the increase in the tax rate, that's where we're going to have
more hit the circuit breaker because of that. They at some point will expand the boundaries and that's
what I debated with him over on. That makes sense. As a resident of Ritalin Township, so I won't get
into that. But yeah, so there can be changes down the road, but we don't know what those will look like.
Is it the best thing to say? Yep. Definitely something to keep our eye on. So my point to this slide,
you guys have been dealing with circuit breaker laws going back to 2010. This isn't anything new for
you, but I just wanted to drive the point home in SCA 1 when I start talking about it. This is still
there. Like this $111,000 doesn't go away. Like we're still going to continue to deal with that. Nothing
with traditional circuit breaker changed with Senate Bill 1. OK? OK.
So let's start to get into a little bit about Senate Bill 1. The first thing I want to talk about is
the change in assessed values. So when I said potentially assessed values could decline, here's why.
Let's first talk about the 1% properties. What Senate Bill 1 does, it's a six year phase in on residential
properties. Starting in 2026, net assessed values, remember what I talked about before,
You have your gross assessed value and then your net. Well, what brings our gross down to our net are
deductions. Deductions are state statute driven deductions, okay? The net assessed value is our taxable
value. What Senate Bill 1 does is it takes the deductions starting in 26 and it grows them every year,
okay? So think about that.
The gross assessed value is going to trend with the market just like it has. That doesn't change. But
the deductions are going to get bigger and 26, bigger deductions. 27, bigger deductions. 28, bigger
deductions. So as the deductions get bigger, it could start to drive down the net or the taxable assessed
value of the home. Okay? Does that make sense how that's going to trend?
It's a six-year phase. So right now, as of 2025, let me go back, as of 2025, because of the deductions,
our net assessed value was about two-thirds of the gross assessed value because of the 25, because of
deductions that were placed in 25. That means our taxable value was about two-thirds of the gross. As
Senate bill starts to get implemented, the end result is
that our net assessed values go down to one-third of our gross. So that means now we're only paying
taxes on one-third of the gross assessed value, whereas in 25 we were paying taxes on two-thirds of
the value. See what I mean? And so the deductions get bigger by about two to three percent every year.
And at the end of the six years, it adds up to about 33 percent in new deductions.
So that could, over the years, start to drive down your net assessed value. Where you've seen growth
in the past, we could start to see a decline. So go back to my slide about tax rate. Tax rate could
have to go up to just net the same amount of revenue. We also have our 2% properties. I call those the
non-homestead and farmland properties. The non-homestead are our
rental properties. They fall into the 2% bucket. They have a 2% cap on their AV. And then farm ground
has a 2% property tax cap. Well, what's interesting with these two classification or these two properties
is that in the past, they didn't have deductions. Their gross assessed value was equal to their net.
Okay, so farmers and rental property owners
their taxable value was the same as the gross. Net and gross the same. Senate Bill 1, what it does for
them, puts deductions in place. So starting in 2026, our farmers and our rental property owners get
a deduction. So now they have a net assessed value. At the end of the six-year implementation, they
go from their taxable value being 100% of the gross
to two-thirds of the gross. So they're gonna get a one-third or a 33% increase in deductions over the
next six years. That's gonna bring down your net assessed value, okay? The next piece of property are
the commercial property. Impacts commercial property a little bit differently, I'm just gonna quickly
summarize it. Part of your net assessed value when it comes to a commercial property
is what we call business personal property. To use a simplistic example, I own a factory and inside
that factory is a forklift and a bunch of conveyor belts and machines and desks and chairs and all of
that. That's all business personal property. If I'm a business owner and I buy a forklift or a front
end loader, when I buy that, there's a IRS tax table that I
that I reduce the taxable value of. I depreciate is the term that we use. That business personal property,
they pay property tax on. And that's part of your net assessed value. Moving forward, any piece of equipment
purchased that is $2 million or less, they don't pay any property tax on it at all.
Okay. The other thing that happens is we used to depreciate property down to a 30% of its original purchase
price. That goes away and now we can depreciate it down to zero. So what that means is if I've got a
piece of equipment that I've had in place for five or six years, I've been deducting it. And before
SEA-1, once it got down to 30%, I continued to pay property tax on 30%
of the original purchase value. Starting in January 1 of 26, if I buy that piece of equipment, I get
rid of the old one and I buy a brand new one, I depreciate it down to zero and I pay no property tax
on it. That's going to drive down your net assessed values. So that's how every one of these properties
are getting these deductions in place that are going to start to drive down their taxable values, which
drives down your net assessed value, okay?
And again, I just want to go back to you recalling tax rate, tax levy, net assessed value. This slide
kind of like the one I had before. So in that bottom line, where this, in this example, the AV dropped
from a billion down to 900,000, that's a potential result of SEA 1 moving forward. Your AV grew by 1.25%
in 27, but the last several years, it's grown substantially more than that.
And so I think we starting to see, by it only growing a little over percent this year, the impact of
Senate Bill 1. We have several schools that had declining AV in 26. We had several schools that grew
by seven or 8%. But I think as these new deductions start to get into place, we're gonna have to really
keep an eye on your AV as we move forward, okay? Declining AV, I wanna drive this point home. Declining
AV does not necessarily mean declining revenue.
It doesn't mean your revenue is going down because a visa. It's the tax rate and the tax levy that we
have to play with. Okay. Um, so this is just kind of a prime example. I'm showing you an example of
if I've got a gross assessed value home in 2025, the standard deduction was 48,000 brings me down to
my net, but I also got a supplemental deduction of 37%. So my net assessed value on my $250,000
home was 126,000.
I paid taxes in 25 on the 126. That was on your net assessed value. Same gross assessed value. Let's
say the gross assessed value doesn't change. Here's what the two middle columns are SEA 1. The standard
deduction starts to phase out. Well, the standard deduction was $1. It was $48,000, $48,000 this year.
But then in 2031, the standard deduction goes down to nothing. It's gone. It's still in statute.
But it's down to zero. But look what happened to the supplemental deduction. It goes up 33%. Well, let's
think about the math in this. Now that my deductions are based on a percentage, what does that mean?
If my home is a $600,000 home, now I'm getting a 66% deduction off of $600,000. My deduction's a whole
lot bigger on my
than if I have a 250,000 home property. So what we're starting to see is our areas that have higher
priced homes on average, those homes are getting a much larger deduction, bringing their taxable values
down much lower. So we're shifting from a dollar to a percentage in all deductions.
Debt service tax rate. Starting in, this is part of SCA 1, starting in 2026, any school district with
a property, a debt service only property tax rate over 70 cents, any bond issue they do moving forward
must go on the ballot. There's no option. I'm gonna say that again.
It doesn't matter if it's a $100,000 bond issue or a $75 million bond issue. You can't issue the debt
without it going on the map. In 2026, your debt service tax rate was 0.6522. Moving forward, this is
going to have to be a guideline and a conversation for your school district. And remember what I said
before, AB goes down, tax rate goes up.
Starting in 2026, this is the other biggie for you guys. Starting in 2026, every homeowner is receiving
a dollar for dollar credit on their tax bill. So you can go in the night and take a look at your tax
bill. There's a new line on our tax bill that says homestead credit. Here's what this is. This is only
for our 1% residential properties. You get a dollar for dollar credit that is the lesser of 10% of the
total tax bill up to $300.
So let's go back to my original example. I have a 2,000. My property tax bill is $2,000. I fall into
the 10% category. My tax bill is 2,000. I'm going to get a 10% credit off of that. Now I only pay 1,800.
It caps out of the $300 credit. Now remember, originally my tax bill was 2,500, but I only paid 2,000
because of the property tax cap. Well guess now what?
Now I get another $200 off. That is basically mathematically increased circuit breaker loss. It's not
circuit breaker, but it's, hypothetically, it's increased circuit breaker loss for a governmental list
because now I only pay each month. You're losing on that $200, you're leasing more money in your operations
fund because of this homestead credit, okay?
2026, the DLGF estimate for you is 741,435. When we add up all the $200, your revenue, your, so go back
to that maximum levy in the operations fund, you're not collecting the 111,000 from Circuit Breaker,
but then you're probably also not collecting 741,435 from the new home state.
So now we're up to, what, almost a million dollars that you're not collecting of the maximum lending.
So I think this is a piece of legislation we have to keep our eye on because the 10% or $300, in my
conspiracy theory, could be tweaked. Statutorily, it could be raised to $500. It could be raised to $700.
And if that happens, that makes that 741 bigger, but it gives property tax relief. That's the biggie
for you guys. We have to decide moving forward, as does every school, can our current operations fund
budget handle losing another $742,000 in revenue? If not, that's where we've got to start making budget
adjustments, because again,
get this expenses back in line with the record. So I think what we have to do is, in my opinion, our
December tax collection, when we get that, what we have to do is we have to take our max, our levy that
we levy, and we've got to look at what did we not collect in the whole calendar year to see how close
we are to this $741,000. That's the state estimate for you is $741,000. It could be more, it could be
less. And I think that's our new baseline
That's already been factored in. Well, yes, the $741,000 is a revenue loss. So yes, as the levy goes
up 6%, you're going to lose the $740,000 of that. That number's somewhat fixed, Brad. The $740,000 isn't
going to vary much over the years unless we have some new subdivisions going on.
new subdivisions mean new homes, which mean new credits. So I know you guys have some subdivisions going
in. At some point when those are fully assessed, they're going to start getting a 10% or $300 credit.
And what's crazy about this, every county in the state, it all depends on the assessor. Honestly. Yeah.
I mean, there's no checks and balances between county to county.
Not yet. They are only state funded for education funds, so they are only getting the per pupil. What
do they do for operations fund? So a couple different things. I'm not sure that you guys meet the threshold,
but there is a threshold in place that if you're losing X amount of your kids to the charter, then you
have to actually start giving some of your operations fund to the charter.
I don't think you guys, I'll double check that tomorrow. I don't think you guys are in that bucket.
We're close. We're close, aren't we? I'll connect with Jerry and Debbie and Paul. We'll do some math
on that just to make sure. Maybe you guys are getting there. So starting in 2029 or 2030, the new statute
kicks in that I think it's
the lesser of 100 kids or a certain percentage of your ADM, if they're attending a charter school in
29 or 30, you have to start sharing your operations fund levy with the charter. So where do they, if
they don't have that till 20, 29, where, what extra bucket do they have? They have to pay for it out
of their state tuition support. They can't, as of today, a charter school, public charter cannot levy
property tax as of today.
Does that answer your question? Yeah. Yeah. Yeah. As of today? And as of today, if we went above 0.7
on the debt service and we get a vote, that vote doesn't apply to the charter school, right? No. OK.
That's just us. But operate referendums would. Yes. OK. Same. Yes. If you're above the charter school
threshold, that threshold again, you have to share operating referendum dollars with the charter school
as well. All right.
Those are all new things that I think we all have to keep our eye on that I feel are going to get extinct.
All right. Is your $741,000 loss there, is that pretty up to date? That's off the most recent DLGF estimate
that came out about three months ago. OK, because the 1782 notice talks about 1.4 million, and that's
the number I had in the projection
But the 1.4 million does include the 100 million. It does. Yes, it does. Yes, it does. Yes. But it's
still significantly higher than the 75 million. I'm anxious to get the second this year's 78 million
to see how that plays out in the second year. That's a big number. If it's 1.4 million, we've got some
talk in front of us.
But you went in intentionally conservatively. And so if it turns out to be 741, that's good for us.
Well, I'd take that. Well, yeah. I like Chad's number better. Yeah. Tell me why yours is 1.4. Well,
the 1782 notice that you get after your budget, it's in here. It shows your projected revenue or levy.
which was about 5.8 million in operations. They take 1.4 out of it. So it really drops that number.
When we look at our cash flows, you're going to get an updated one this and that. The DOGF does an estimate
in that, the Department of Local Government Finance, and that's where that number comes from. But my
number is from the DOGF as well.
And I'm not sure of the timing of when they do these different calculations. OK. This would have been
over a century. OK. I'm holding it real tight. Yeah. We are, too. Yeah. And that includes the 6% this
year? No. 60% is for 2020. 2020. 2027, yeah. OK. Yeah, I'm not used to getting that new side before
it comes out this year. OK. Every month just gets more and more fun with finances. Uh-huh. Yeah.
I'm having you around for the birthday party every day. Thanks, I think. Reserve comment, Paul. Yeah.
Down in the last section here, license excise tax. So they've done some interesting things with license
excise tax. That's the tax that we all pay when we go buy a person's place. There's a little receipt
that you get. There's a license excise tax. The schools receive some of that.
In the past, we received a license excise tax and debt in operations. Before we go any farther, can
we take a short break? Yeah, sure, absolutely. Okay, we're gonna take a quick recess. We have about
10 minutes before we need to. Oh, you're telling me. Yeah. Oh, okay, that's what you're telling me.
Okay, you got 10 minutes. 10 minutes, yeah. Okay, I'm sorry, I thought that. No, no, no. Okay. License
excise tax in the past we put into debt in operations. Moving forward, you are gonna have the choice
put it into debt or operations, okay? I will tell you most of the schools I work with are choosing to
put none in debt and all in operations for obvious reasons. So in 2026, you're going to receive approximately
967,000 of license excise tax and operations and approximately 498,000 into the debt service fund. Starting
in 27, you can choose
to take the 498,000 and put it all in debt or in operations and not in debt. However, there's always
a good and a bad, a pro and a con. Having me around is like a birthday party too. It is, I mean it's
just, it's fun all the time. Right now, when I go back up to the top and I say that your debt service
tax rate is 65 cents and the levy reflecting that,
includes the 498,000 in miscellaneous revenue. That means moving forward, if we don't put 498,000 in
licensed excise tax and debt, your property tax levy has to go up by $498,000 to replace that lost revenue.
Gets you $498,000 in the operations fund, but it puts us probably a penny or two closer to 70 cents
a day. See what I mean?
I think every year that's going to have to be a strategy. You can make the choice. I feel like for you
guys right now, the 70 cents, we've got to play with that to make sure we don't go over that. It gets
more fun all the time. Well, yeah. Sitting next to Brad is just a ball of laughs down here, so.
All right. I'm going to pause there, and I've just got a couple more slides, but it's about the debt
part. So I'm going to pause there because I'm giving you guys
Yeah, yes, yes, yes, I will send it to Jerry. Okay, so, and he can, yeah, he sure. It's not top secret
or anything. It's not top secret. No, this is very helpful. Good, yeah. And if you guys need to like,
I've had a couple boards say I need to think about this for a couple months. Hey, Chad, come back and
give us the summarized version in a couple more. Happy to do that any time. You guys know I'll help
you however you want me to help you. Okay, right now, here are your current debt payments
and the debt service levy to repay those, okay? So down at the bottom, we've got three, four, five,
six, we've got seven bonds. You have seven bond issues outstanding, all kind of color coded there.
So in 2026, that represented your debt service levy of right at around 10 million to repay all of those
debt funds, okay?
As of right now, we had a call this past week, we're probably not doing a bond issue in 26. And so your
2027 debt service levy should be right around 10 million again in 2027 with no new debt. Okay,
no new debt. And I would probably recommend, I think that's a good call. If we can get by not doing
a bond issue this year, that's probably the right thing to do. Then you're gonna have a small drop in 28
and then a small drop in 32, and that's just because we're paying off pens, right? Remember,
not cash rate, this is the actual debt service level, okay? All right. So by 2028, the smoke will have
cleared with everything else a little bit. With all the SCA. I think every year that goes by, we're
gonna have a little more clarity on, okay, what was truly the home state credit loss? What truly is
the circuit breaker change? What are we doing with this excise tax credit?
I think every year, I think the theme that I am giving the school boards and superintendents and business
majors more, we've gotta remain, we gotta remain flexible. Whereas before maybe we had some steadfast,
here's our tax rate, here's our levy, it's flexibility moving forward. And it's adapting and adjusting
as this goes. Let's put as many cards in your favor as we can and adapt and be flexible moving forward.
Understand all the strategies
So that when we come to you and say, okay, remember that one strategy we talked about, now's the time
to go with that strategy. I think that's what we're gonna have to do. Okay, Matt in my office, he was
gonna be here tonight, but he has a wife and a child with the stomach flu. So he's like, I don't think
I can make it. I said, I understand. So he ran a couple scenarios for you.
Basically what we're trying to show you here is that moving forward with your maximum capacity, if we
take your debt service levy up to 10.2 million, you can basically see that your maximum, you've heard
me talk about maximum debt capacity before, in the blue, we just kind of filled in that if you guys
moving forward want to manage your debt service levy to 10.2 million, you've got about 15 million
capacity, starting at 27 out through 46. Which, I mean, that is a pretty good one. The next illustration
is, okay, well, what if we brought your, in 20, in 2027, your actual debt service levy's gonna be 9.7,
just shy of 10. And so he just wanted you to see the difference in the max capacity.
So managing moving forward a $9.7 million debt service levy, that brings that $50 million down to $40
million. So which is still a decent number for you. I think what we have to watch is the tax rate. We've
got to watch the tax rate. Let's say AV hypothetically drops 8% next year. You're going to probably
go pretty close
We got to watch what he does. Is there a point where we should stop talking about the tax rate and talk
about our levy and say, look, you know, this board has always, right? Yeah, it always has. But I'm just
saying with
everything's gone on. You too. That is the new conversation now, Dana, is it's really moving forward,
we've got to manage the work. Now, if I'm presenting to a school board and I'm saying your debt service
tax rate today is 48 cents, then the 70 cents isn't really, that's really not a factor. But when I'm
talking to a school board and your current rate's 65, I think for you guys,
Yes, it's right, but we're not necessarily managing to the right. We need to really kind of manage that
levy. But the 70 cents is kind of our guiding factor. But I agree with you. I don't think you guys are
going to build it. In the past, we've said we want our total tax rate to be this. I think those conversations
are wrong. I was just thinking that we want to say, hey, we're not taking any more money this year than
we took last year.
And, you know, and just, I think that's more the story because I don't think we can say what as much
about the rate. So. You've got to get a term that your constituents can understand. Correct. Yeah. Last
year's taxes versus this year, the dollar amount's comparable. The rate may have gone up to get to that.
Yeah. That's where it's confusing. You were talking about the 50 and 40 million. That's 50 and 40 million
dollars that we can bond and use to do something with the school. Right. And that's if you issue it
all at once. And you guys are going to do that, right? You're not adapting anymore. But I think what
this does show you gives you a little bit of relief that, hey, if in two years we need a couple million
to do some small things around the district, we can do those things. And I'm going to give you
guys on debutate has worked out where we are with our different bond projects. And you're gonna see
that we've been, it's been very favorable in terms of the amount of funds we've been able to generate
through interest. And this may, I think this will help you to decide what we're going to do. Because
I think we have enough money
that we'll be able to take care of projects with the money we already have. Right. And we've got, as
far as school corporations done a good job of getting all the roads replaced, HVAC, the maintenance
has been kept up to date, correct? We've spent a lot of money on AC furnaces, for sure.
What's that? At some point, we'll have to buy a bus. Yeah, maybe. Yeah, maybe. When we potentially be
looking at reaching that $0.70 threshold on the taxi. How do you know? I mean, but the reason I say
that is I don't want to wait two years down the road and say, hey, we need to go ahead and bond
six, seven million here for these pieces and have to go through a referendum on a ballot in order to
get six or seven million, is there a, is there, I wanna be careful about that, that as we're getting
to that point that we potentially are reaching that, that we're having the bond conversation before
that so that we don't have to put that onto a ballot and potentially run ourselves into a situation
where it's not
To be on the ballot, yeah Right
Well and constituents then are mad and they're mad at a public school and It's just we've seen this
this is just another way To go after public schools and this is another way for Citizens to be angry
at public schools not realizing that a lot of the reason that we're in this situation Close here
So I agree. I think we need to be looking at our priority list and seeing if there are some priorities
that we really want to take care of and maybe go ahead and put them on a plate and get them on there.
But be strategic about how we bond them, what the payments are, when the payments are due to, like we
have been doing to maintain as much flexibility as possible.
We've done so well over the last several years of getting things up to stuff. But there's still some
to go. And we'll have another work session to arrange to go to that. So OK, with that being said, we
will end this work session. And this is adjourned.