1. Marshall Public Schools #413 Truth in Taxation Hearing for Taxes Payable in 2012

2. Welcome
December 5th, :00 P.M. Board Room-Marshall Middle School Presented by: Bruce Lamprecht Director of Business Services

3. ISD 413, Marshall Truth in Taxation Law
State law initially approved in 1998.
The 2009 legislature made several changes:
Property tax hearing can now be held a regular meeting. Hearing must be at 6:00 PM or later. Levy may be adopted at the same meeting.
Requirement to publish meeting notice was deleted.
All school districts must now hold a hearing. Previously some districts were exempted from the requirement to hold a hearing.
You are here for the school district’s annual required hearing.

4. ISD 413, Marshall Tax Hearing Presentation
State law requires that we present information on the current year budget and actual revenue and expenses for the prior year
State law also requires that we present information on the proposed property tax levy, including:
The percentage increase over the prior year
Specific purposes and reasons if taxes are being increased
District must also allow for public comments

5. Agenda for Hearing
A. Background on School Funding, Property Tax Levies, and Budgets
B. Information on District Budget
C. Explanation of 2011 Legislation to Convert Homestead Credit to Exclusion
D. Information on the District’s Proposed Tax Levy for Taxes Payable in 2012
E. Public Comments and Questions

6. Public Education is Strong in Minnesota……
In Minnesota, the most commonly taken standardized college entrance exam is the ACT. Seventy-two percent of Minnesota high school graduates in 2011 took the assessment.
Minnesota’s average composite score of 22.9 was the highest in the nation among the 27 states in which more than half of the college-bound students took the test in Minnesota has led the nation in average composite ACT scores for five consecutive years. The national composite score was 21.1.
Marshall’s composite score was 22.2.

7. State of MN Constitution
“ARTICLE XIII MISCELLANEOUS SUBJECTS
Section 1. UNIFORM SYSTEM OF PUBLIC SCHOOLS. The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools. The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state.”

8. As a result… School District Funding is Highly Regulated by the State
State sets formulas which determine revenue; most revenue is based on specified amounts per pupil
State sets tax policy for local schools
State sets maximum authorized property tax levy (districts can levy less but not more than amount authorized by state, unless approved by the voters)
State authorizes school board to submit referendums for operating and capital needs to voters for approval

9. State Funding for Schools Has Not Kept Pace with Inflation
Increases in basic general education revenue per pupil have been less than inflation
Per-pupil revenue for fiscal year is projected to be $314 below the inflation adjusted amount
For Fiscal 2012 and 2013, basic per-pupil funding is projected to increase by less than 1% per year, while most districts’ expenses will likely increase, without budget cuts, by 2-3% annually

10. Trends in General Education Formula Allowance for Minnesota School Districts FY 05 – FY 13

11. Impact is budget cuts and levy referendums…
With minimal increase in state funding expected, many districts are facing projected budget shortfalls for FY 2013 and FY 2014 and anticipate the need for budget cuts
To meet local school budget shortfalls, in 2011, 114 Minnesota districts submitted proposals to voters seeking support of increased operating levies
90 districts, or 79%, passed at least 1 operating levy question

12. ISD 413, Marshall School District Levy 2011 Payable 2012
School Year
Fiscal Year 2013

13. ISD 413, Marshall School Levy vs. Budget Cycle
Unlike cities and counties, a school district does not set its budget when setting the tax levy
Property Tax Levy
Final levy set in December
Property taxes levied on calendar year basis
Budget
Preliminary budget approved in June, six months later
School fiscal year is July 1st through June 30th

14. ISD 413, Marshall, Minnesota
Contrast of City/Township/County Levy Cycle to School District Levy Cycle J A N F E B M R P Y U L G S O C T V D
Legislation
City/Twp/County
Tax Levy Decision
Collection of Levy
Budget Year
School District
2013
2011
2012

15. Budget and Levy Adoption Calendar
2011
2012
2013 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D A E A P A U U U E C O E A E A P A U U U E C O E A E A P A U U U E C O E N B R R Y N L G P T V C N B R R Y N L G P T V C N B R R Y N L G P T V C
Audit
2011/2012 Current Budget
12-13 Budget Preparation
Adoption of Budget
Update Current Budget Year
Final Current Budget Year Update
Tax Levy Decision
Collection of Levy
Budget Year

16. Change in Tax Levy Does not Determine Change in Budget
Tax levy is based on many state-determined formulas
Some increases in tax levies are revenue neutral, offset by reductions in state aid
Expenditure budget is limited by state-set revenue formulas, voter-approved levies, and fund balance, not just by tax levies

17. School District Budget
Current School and Fiscal Year

18. MARSHALL PUBLIC SCHOOLS 2011-2012 BUDGET OVERVIEW REVENUES
10-11 Actual Budget % Change
General Fund $21,199,448 $21,042, %
Foodservice $1,263,727 $1,296, %
Transportation $1,119, $975, %
Community Services $1,976,768 $2,290, %
Capital Outlay $744, $673, %
Debt Service $2,774,565 $2,975, %
Total $29,078,944 $29,253, %

19. MARSHALL PUBLIC SCHOOLS 2011-2012 BUDGET OVERVIEW EXPENDITURES
10-11 Actual Budget % Change
General Fund $20,302,034 $21,016, %
Foodservice $1,194, $1,315, %
Transportation $1,139,341 $1,156, %
Community Services $2,016,377 $2,315, %
Capital Outlay $637, $872, %
Debt Service $3,039,336 $3,030, %
Total $28,329,165 $29,707, %

21. 2011-2012 Revised Budget Analysis

22. General Fund Expenditures June 30th, 2011

23. ISD #413, Marshall
Marshall Public Schools
Summary of Staff Employed

24. ISD #413 - MARSHALL GENERAL FUND EXPENDITURES JUNE 30th, 2011

25. ISD #413-Marshall-General Fund Expenditures By Object Code

26. ISD 413, Marshall

27. ISD #413, Marshall

28. ISD #413, Marshall

29. ISD #413 Audit Highlights
The audit results for showed an ending General Fund balance of $3,026,147 or 14.9% of expenditures.
The Transportation Fund showed a zero ending fund balance after a revenue transfer from Fund 01.
The Capital Outlay Fund ended with a balance of $723,542 exceeding the established goal of $400,000 by a goodly amount.
The Foodservice Fund ended with a much better ending fund balance than projected.
The Debt Service Fund balance provides good cash flow for the District and allows us to under-levy.

31. ISD #413, Marshall
The Revised General Fund Budget for shows a $155,365 deficit in revenues over expenditures. This includes a transfer of $181,310 to the Transportation Fund to zero out the fund balance.
This translates into a $2,765,751 ending fund balance or a fund balance percent with a stated, approved goal of 8.0% (fund balance/expenditures) being the minimum.

32. How Much Revenue is State Aid vs. Local Sources?

33. General Fund Revenues By Source

35. General Fund Revenue Sources by Percent

36. ISD 413, Marshall
General Fund Changes in Basic per Pupil Allowance

38. Proposed 2012 Property Tax Levy
Determination of levy
‘Homestead Credit Shift’ (elimination of homestead credit and replacement with homestead market value exclusion)
 Comparison 2011 to 2012 levies
 Specific reasons for changes in tax levy
 Impact on taxpayers

39. Authority for School Levies
ISD 413, Marshall
Authority for School Levies
A School District Tax Levy must be either:
Set by State Formula or
Voter Approved

40. Property Tax Background
Every owner of taxable property pays property taxes for the various ‘taxing jurisdictions’ (county, city or township, school district, special districts) in which the property is located
Each taxing jurisdiction sets its own tax levy, often based on limits in state law
County send out bills, collects taxes from property owners, and distributes funds back to other taxing jurisdictions

41. School District Property Taxes
Each school district may levy taxes in up to 30 different categories
‘Levy Limits’ (maximum levy amounts) for each category are set either by:
State law, or
Voter approval
Minnesota Department of Education (MDE) calculates detailed levy limits for each district

42. Property Tax Background
School District Property Taxes
Key steps in the process are summarized on the next slide
Any of these steps may affect the taxes on a parcel of property, but the district has control over only 1 of the 7 steps

44. The Homestead Credit Shift
The 2011 legislature repealed the Homestead Market Value Credit
In its place, the Legislature implemented a Homestead Market Value Exclusion

45. The Homestead Credit Shift
Repealed law (homestead market value credit)
Provided a reduction in the amount of taxes due, after the counties had calculated tax rates and initial tax bills
Depended only on the value of the property (not on the tax rate)
Amount ranged from a maximum of $304 on a $76,000 home, declining based on value to zero at $413,000
Affected only homestead properties with values less than $413,000
Credit was subtracted proportionally from the portions of the tax bill attributed to each city or township, county, and school district

46. The Homestead Credit Shift
New Law - homestead market value exclusion
Reduces the calculation of “tax capacity” on residential homesteads with a market value of less than $413,000, by excluding a portion of the value from tax capacity
Formula very similar to homestead credit – maximum “exclusion” is for a $76,000 home, declining to $0 for homes with a value of $413,000 or more
The exclusion reduces the total tax base (tax capacity) for the political subdivision and therefore affects tax rates and the taxes of all properties

47. Overall Impact of The Shift
Increases in property taxes for almost all taxpayers
Impact will vary widely across the State
Tax increases will be largest in communities where a large share of the tax base is lower-valued homes (exclusion causes a larger reduction in tax base)
For lower-valued homes, impact will vary based on the combined tax rate
In areas with high overall tax rates, lower valued homes may see an overall tax decrease
In areas with low overall tax rates, lower valued homes may see a larger tax increase than other types of property

48. Homestead Credit Shift
There are three reasons why taxes will commonly increase for 2012:
State money is no longer reducing total taxes: saving the state an estimated $260,000,000. Since there will be no state property tax credit the entire property tax levy will be paid by taxpayers.
Reduction in taxable value increases tax rates: With total value being reduced by the exclusion, raising the same total levy as the prior year requires a higher property tax rate.
Exclusion provides less benefit in low tax rate areas than the credit: In lower tax rate areas (below the state average) the excluded value provides less benefit than the homestead credit.

49. Homestead Credit Shift – Impact on Our School District’s Taxes
The next table shows the impact of this shift on the school district portion of the bills, if the shift had been implemented for 2011 taxes
Assumptions:
No change in the dollar amount of the district’s levies
Tax rates adjusted upward to adjust for reduction in tax capacity and homestead credit eliminated
For our district, the exclusion reduced total tax capacity by 5.6%, compared with a state average of 4.7%, so the impact on our taxpayers will be slightly greater than in the average school district

51. Impact on Taxpayers
Following are a table and graphs showing examples of changes in the school district portion of property taxes from 2009 to 2012
Examples include school district taxes only
All examples are based on a 4.0% increase in property value over this period
Actual changes in value may be more or less than this for any parcel of property
These figures are intended to provide a fair representation of what has happened to school district property taxes over this period for typical properties

52. Impact on Taxpayers Examples for property in the City of Marshall
school taxes in other parts of the district may be slightly higher or lower, due to variations in the impact of the state homestead and agricultural credits
Figures for 2012 are preliminary estimates, based on the best data available now – final figures could change slightly
Estimates were prepared by Ehlers, the district’s financial advisors

56. ISD 413, Marshall
How are the Proposed 2012 School Taxes Spent?

57. Pay 2011/Pay 2012 Levy Comparison
Fund
10 Pay 11
11 Pay 12
Increase
% Change
General
2,601,978.70
2,666,738.77
64,760.07
2.49%
Community Service
153,843.69
172,604.86
18,761.17
12.19%
General Debt Service
2,820,498.90
2,904,919.61
84,420.71
2.99%
OPEB Debt Service
138,117.00
135,923.00
-2,194.00
-1.59%
Total
5,714,438.29
5,880,186.24
165,747.95
2.90%

59. ISD 413, Marshall Basic general education aid and levy formula (1) NTC
2010
14,219,358
(2)
Sales Ratio
2009
93.0%
(3)
ANTC
2009
15,289,632
(4)
Standard Levy Limit
FY 2013
0.0%
(5)
Gen Education Basic Levy Limit
2010
0.00
AMCPU
Formula Allowance
Pay 2012
5,224.00
(6)
Basic General Education Revenue
13,293,303.84
(7)
Basic General Education Aid Revenue
FY 2013
13,293,303.84
(8)
General Education Aid Percentage
FY 2013
100.0%

60. District #413 Proposed Property Tax Stmt. for 2012
ISD 413, Marshall
District #413 Proposed Property Tax Stmt. for 2012

61. ISD 413, Marshall 2.90% The School District Levy is increasing by:
$165,747.95 or
2.90%

62. Tax Levy History 1999 Pay 2000 $5,149,862.38 2.60% Decrease
2003 Pay 2004 $3,568, % Increase
2004 Pay 2005 $3,556, % Decrease
2005 Pay 2006 $4,253, % Increase
2006 Pay 2007 $4,442, % Increase
2007 Pay 2008 $5,427, % Increase
2008 Pay 2009 $5,560, % Increase
2009 Pay 2010 $5,489, % Decrease
2010 Pay 2011 $5,714, % Increase
2011 Pay 2012 $5,880, % Increase

63. ISD 413, Marshall
What are the main variables that cause property tax increases and decreases?
Changes in market values
Changes in class rates/history
Market Value Homestead Exclusion
Voter Approved Referendums
Ongoing Legislative Action

64. ISD 413, Marshall Changes in Market Value
The market values are final and are not a subject for the upcoming budget hearings. They were discussed at the local board of review and county board of equalization hearings held earlier this year. The final taxable market values may reflect a reduction under the limited value law. If this property is a qualifying homestead, the final taxable market values may exclude improvements which you made to this property.

66. Net Tax Capacity Property Comparison
Description
Residential Homestead
Commercial Industrial
Agricultural Homestead (Land & Buildings)
Property Value
$200,000
Tax Rate Pay 2011
1.00 %
2.00%
.50%
Net Tax Capacity Amount
$2,000.00
$4,000.00
$1,000.00

67. State Property Tax Refunds
State of Minnesota has two tax refund programs and one tax deferral program available for owners of homestead property
These programs may reduce the net tax burden for local taxpayers, but only if you take time to complete and send in the forms
For help with the forms and instructions:
Consult your tax professional, or
Visit the Department of Revenue web site at

68. State Property Tax Refunds
Minnesota Property Tax Refund (aka “Circuit Breaker” Refund)
Has existed since the 1970’s
Available to all owners of homestead property
Annual income must be approx. $99,240 or less (income limit is higher if you have dependents)
Refund is a sliding scale, based on total property taxes and income
Maximum refund is $2,370
Especially helpful to those with lower incomes
Fill out state tax form M-1PR

69. State Property Tax Refunds
Special Property Tax Refund
Available for all homestead properties with a gross tax increase of at least 12% and $100 over the prior year
Refund is 60% of the amount by which the tax increase exceeds the greater of 12% or $100, up to a maximum of $1,000
No income limits
Fill out state tax form M-1PR
Minnesota Department of Revenue
(651)

70. Senior Citizen Property Tax Deferral
Allows people 65 years of age or older with a household income of $60,000 or less to defer a portion of the property taxes on their home
Taxes paid in any year limited to 3% of household income for year before entering deferral program; this amount does not change in future years
Additional taxes are deferred, but not forgiven
State charges interest up to 5% per year on deferred taxes and attaches a lien to the property
The deferred property taxes plus accrued interest must be paid when the home is sold or the homeowner(s) dies

71. ISD 413, Marshall General Fund $2,666,738.77 Community Service
Whereas, Pursuant to Minnesota Statutes the School Board of Independent School District No. 413, Marshall, Minnesota, is authorized to make the following proposed tax levies for general purposes:
General Fund
$2,666,738.77
Community Service
$172,604.86
Debt
$3,040,842.61
Total Proposed School Tax Levy
$5,880,186.24
Now Therefore, Be it resolved by the School Board of Independent School District No. 413, Marshall, Minnesota, that the amount to be levied in 2011 to be collected in 2012 is set at $5,880,186.24The clerk of the Marshall School Board is authorized to certify the proposed levy to the County Auditor of Lyon County, Minnesota.

72. Next Steps
Tonight-Board will accept public comments and questions on proposed levy
December 19th-Board will conduct subsequent hearing (if necessary) and certify final amount of tax levy payable in 2012

73. ISD 413, Marshall
Public Comments and Questions

74. THANK YOU FOR ATTENDING!
THE END
THANK YOU FOR ATTENDING!