Marshall Public Schools #413 Truth in Taxation Hearing for Taxes Payable in 2015

Welcome December 1st, 2014 6:01 P.M. Board Room-District Office Presented by: Bruce Lamprecht Director of Business Services

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/decrease over the prior year Specific purposes and reasons if taxes are being increased/decreased District must also allow for public comments

Agenda for Hearing A. Background on School Funding, Property Tax Levies, and Budgets B. Information on District Budget C. Information on the District’s Proposed Tax Levy for Taxes Payable in 2015 D. Public Comments and Questions

Public Education is Strong in Minnesota…… In Minnesota, the most commonly taken standardized college entrance exam is the ACT. 74% percent of Minnesota high school graduates in 2014 took the assessment, compared with 54% nationally Minnesota’s average composite score of 22.9 was the highest in the nation of the 29 states in which more than half of the college-bound students took the test in 2014 Minnesota has led the nation in average composite ACT scores for nine consecutive years among states where more than half of high school seniors took the test. The national composite score was 21.0 Marshall’s composite score was 22.7

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.”

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

State Funding for Schools Has Improved over the Past Few Years Increases in basic general education revenue per pupil have been less than the inflation rate over the past ten years There has been overall improvement the past four years Per-pupil revenue for fiscal year 2015-16 is projected to be $343 below the 2004-05 inflation adjusted amount Most districts’ expenses will likely increase, by at least 2-3% annually, unless budget cuts are made

Trends in General Education Formula Allowance for Minnesota School Districts FY 05 – FY 15

Impact is budget cuts and operating referendums… Even with these increases in state funding expected, a third of districts continue to face projected budget shortfalls for FY 2015 and anticipate the need to do some budget cuts* To meet local school budget shortfalls, voters in all but 2 of Minnesota’s 332 districts, have approved at least a penny of operating authority The estimated state average amount for the 2016 fiscal year is $786 per pupil unit Of thirty-nine questions proposed this year, twenty-eight passed or 72% *Survey by Minnesota Association of School Business Officials (MASBO)

ISD 413, Marshall School District Levy 2014 Payable 2015 2015-2016 School Year Fiscal Year 2016

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

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 district fiscal year is July 1st through June 30th

Budget Information Because approval of the budget lags certification of the tax levy by six months, the state requires only current year budget information and prior year actual financial results to be presented at this hearing

Budget Information •All school districts’ budgets are divided into separate funds, based on purposes of revenue, as required by law •For our district, 6 funds: •General •Food Service •Community Services •Capital Outlay •Debt Service •Transportation

School District Budget Comparison of 13-14 Actual and 14-15 Revised Budgets

MARSHALL PUBLIC SCHOOLS 2014 ACTUAL and 2015 BUDGET OVERVIEW REVENUES 13-14 Actual 14-15 Budget % Change ---------------- ----------------- ------------- General Fund $22,067,652 $23,734,930 7.6% Foodservice $1,365,737 $1,378,834 .9% Transportation $1,558,298 $1,419,984 -8.9% Community Services $2,124,584 $2,301,014 8.3% Capital Outlay $752,030 $843,483 12.2% Debt Service $3,215,944 $2,753,466 -14.4% Total $31,084,245 $32,431,711 4.3%

MARSHALL PUBLIC SCHOOLS 2014 ACTUAL and 2015 BUDGET OVERVIEW EXPENDITURES 13-14 Actual 14-15 Budget % Change ---------------- ----------------- ------------- General Fund $21,841,878 $23,636,300 8.2% Foodservice $1,353,529 $1,377,293 1.8% Transportation $1,346,660 $1,430,000 6.2% Community Services $2,143,121 $2,175,200 1.5% Capital Outlay $722,882 $884,478 22.4% Debt Service $3,803,489 $2,726,738 -28.3% Total $31,211,559 $32,230,009 3.3%

Revenue % All Funds 2014-2015 Budget

ISD #413 - MARSHALL GENERAL FUND REVENUE 2014-2015 BUDGET

ISD #413 14-15 General Fund Expenditure Budget By Program Code

ISD 413, 14-15 General Fund Expenditure Budget by Object Code

Proposed 2015 Property Tax Levy •Determination of levy •Comparison of 2013 to 2014 levies •Specific reasons for changes in tax levy •Impact on taxpayers

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 sends out bills, collects taxes from property owners, and distributes funds back to other taxing jurisdictions

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

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

Proposed Levy Payable in 2015 Schedule of events in approval of district’s 2014 (Payable 2015) tax levy •Mid-September: Dept. of Education prepared and distributed first draft of levy limit worksheets setting maximum authorized levy •September 15th: School board approved proposed levy amounts •Mid-November: County mailed “Proposed Property Tax Statements” to all property owners •December 1st: Public hearing on proposed levy at regular meeting •Following hearing school board will certify final levy amounts at the December 15th meeting

Overview of Proposed Levy Payable in 2015 •The total 2015 proposed property tax levy will increase from 2014 by $463,056.24 or 8.27% •State law requires that we explain the reasons for the major increases in the levy •We will also highlight any decreases, if there are any of significant amount

Legislative Changes Do Affect Tax Levy The 2013 and 2014 Legislatures approved significant changes in school funding formulas which affect tax levies payable in 2015 Local Optional Revenue was extended to all school districts which affords them the opportunity to levy operating dollars up to $424 per pupil unit Increased safe schools levy by $5 per pupil unit Increased Building Lease Levy authority by $50 per student State added a new Student Achievement Levy which will fund some of the basic general education revenue for all districts Increased CTE Levy authority

Explanation of Levy Changes •Category: Local Optional Levy •Change: +$86,992 •Use of funds: general operating expenses •Reason for increase: This is a new category of revenue created through state legislation, for all district’s that opt in, to receive additional general fund revenue The district’s existing referendum revenue was adjusted accordingly but the net amount does reflect an increase in general fund levy

Explanation of Levy Changes •Category: Equity Levy and Adjustment •Change: +$66,000 •Use of funds: general operating expenses •Reason for increase: Funding is based on a legislatively set formula for each district’s “equity allowance” multiplied times enrollment of students served in the district Revenue is increasing because of an increase in the state-determined equity allowance

Explanation of Levy Changes •Category: Student Achievement Levy •Change: +$61,367 •Use of funds: general operating expenses •Reason for increase: New levy for 2015 Levy used to fund basic revenue allowance Balance of basic allowance funded by state aid Does not increase revenue, only replaces basic allowance state aid

Explanation of Levy Changes •Category: Operating Capital •Change: +$48,518 •Use of funds: Technology, facility maintenance, other capital expenses •Reason for increase: Funding for this program is provided through a combination of state aid and local tax levies Levy ratio increased from .43351517 to .50567172 along with a larger base amount due to increased enrollment

Explanation of Levy Changes Category: Career Technical Levy •Change: +$31,353 •Use of funds: Provide additional revenue support for the various career and technical programs •Reason for increase: The Legislature increased the per pupil funding for this program in 2014 Funding for this program is provided through a combination of state aid and local tax levies

Explanation of Levy Changes Category: Building/Land Lease Levy •Change: +$93,718 •Use of funds: Provides funding for the annual payment to SMSU for the Track and Field Complex and for the MA-TEC rental agreement •Reason for increase: The District previously did not levy for the total available amount but with the increased square footage at MA-TEC compared to MECLA it needed to access all available funding The Legislature increased the per pupil funding, also

Explanation of Levy Changes Category: Reduction for Debt Service Excess •Change: +$90,417 •Use of funds: To pay for debt service on all school bonds financing •Reason for increase: In anticipation of paying the initial QZAB financing payment

Impact on Taxpayers Actual tax impact on a particular, individual property will vary from case to case as many factors affect impact Check your Truth-in Taxation statement sent from the County to see preliminary tax impacts in the different categories

ISD 413, Marshall What are the main variables that cause property tax increases and decreases? Changes in value of the individual property Changes in class rates/history Increases or decreases in levy amounts caused by changes in state funding formulas, local needs and costs, voter-approved referendums, and other factors Changes in the total value of all property in the district

School District Funds GENERAL FUND LEVY COMMUNITY SERVICE FUND LEVY The school district has three revenue and expenditure funds that receive local tax levies to help support the various programs included in the funds. GENERAL FUND LEVY The lease levy to pay the rent for MA-TEC and the lease for the track complex The local operating referendum is also part of this fund Equity and Transition Levy are two more components of the total Lost Interest, Safe Schools, Unemployment and Career & Technical Levy make up part of thi Provides funding for facilities maintenance and instructional equipment Provides funds for Health and Safety code compliance, asbestos removal, underground storage tank replacement and safety requirements Achievement and Integration revenue and QComp Levy are also part of this COMMUNITY SERVICE FUND LEVY Based on the adult population in the District Early Childhood Levy is based on the number of children under 5 years of age DEBT SERVICE FUND LEVY Based on annual debt retirement schedules. Annual levy is what is needed to pay off bonds OPEB (Implicit Rate Subsidy) funding is included in this category

How are the Proposed 2015 School Taxes Spent? General Fund Amount Provides funding for the district instructional programs, alternative compensation, integration program, also part of the costs for the maintenance of technology infrastructure and for the purchase of instructional equipment , building maintenance and Health and Safety $3,063,295.61 Community Education Fund Levy for Community Education Programs such as ECFE $192,747.86 Debt Service (Including OPEB) Levy for repayment of principal and interest on district debt $2,806,481.95 Total Levy $6.062,525.42

Pay 2014/Pay 2015 Levy Comparison Fund 13 Pay 14 14 Pay 15 Increase or Decrease % Change General 2,691,877.44 3,063,295.61 371,418.17 13.80% Community Service 187,117.65 192,747.86 5,630.21 3.01% General Debt Service 2,590,059.97 2,675,556.97 85,497.00 3.30% OPEB Debt Service 130,414.12 130,924.98 510.86 .39% Total 5,599,469.18 6,062,525.42 463,056.24 8.27%

ISD #413, Marshall Proposed Property Tax Statement for 2015 Actual 2014 Property Tax Proposed 2015 Property Tax Voter Approved Levies $3,287,674.87 $2,987,692.79 Other School Levies $2,311,794.31 $3,074,832.63 School District Total $5,599,469.18 $6,062,525.42

ISD 413, Marshall 8.27% The School District Levy is increasing by: $463,056.24 or 8.27%

Tax Levy History 1999 Pay 2000 $5,149,862.38 2.60% Decrease 2003 Pay 2004 $3,568,330.76 111.68% Increase 2004 Pay 2005 $3,556,922.39 0.32% Decrease 2005 Pay 2006 $4,253,869.00 19.59% Increase 2006 Pay 2007 $4,442,638.19 4.44% Increase 2007 Pay 2008 $5,427,675.70 22.17% Increase 2008 Pay 2009 $5,560,578.16 2.40% Increase 2009 Pay 2010 $5,489,763.14 1.27% Decrease 2010 Pay 2011 $5,714,432.29 4.09% Increase 2011 Pay 2012 $5,880,186.24 2.90% Increase 2012 Pay 2013 $6,181,076.99 5.12% Increase 2013 Pay 2014 $5,599,469.18 9.41% Decrease 2014 Pay 2015 $6,062,525.42 8.27% Increase

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.

Net Tax Capacity Property Comparison Description Residential Homestead Commercial Industrial Agricultural Homestead (Land & Buildings) Property Value $200,000 Tax Rate Pay 2015 1.00 % 2.00% .50% Net Tax Capacity Amount $2,000.00 $4,000.00 $1,000.00

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 www.taxes.state.mn.us

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. $105,500 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 $2,580 Especially helpful to those with lower incomes Fill out state tax form M-1PR

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) 296-3781

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

ISD 413, Marshall General Fund $3,063,295.61 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 $3,063,295.61 Community Service $192,747.86 Debt Service $2,806,481.95 Total Proposed School Tax Levy $6,062,525.42 Now Therefore, Be it resolved by the School Board of Independent School District No. 413, Marshall, Minnesota, that the amount to be levied in 2014 to be collected in 2015 is set at $6,062,525.42. The clerk of the Marshall School Board is authorized to certify the proposed levy to the County Auditor of Lyon County, Minnesota.

Next Steps Tonight-Board will accept public comments and questions on proposed levy December 15th-Board will conduct a subsequent hearing (if necessary) and certify the 2015 property tax levy

ISD 413, Marshall Public Comments and Questions

THANK YOU FOR ATTENDING! THE END THANK YOU FOR ATTENDING!