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 Property Value, Tax Levy, and Taxpayers – The Confusing Questions  Equalization Aid  Summer School Fees Agenda

 Sample District Simplified Percentage Method (#1)  District-Specific Simplified Percentage Method  District-Specific Formula Positioning (color grid)  District-Specific Analysis of Equalization Aid Formula Components  2 Focus Articles (used with permission from the Wisconsin Taxpayer’s Alliance)  School Property Tax Overview Extra Resource Referenced: DOR 2014 Guide for Property Owners

Property Value, Tax Levy, and Taxpayers

Explaining the Tax Levy Questions You’ll Likely Be Getting Soon 1.How can the school levy on one residential taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%? 2.How can a residential tax bill show an increase in the school district tax levy of 5.8% when the % year over year increase on the PI-401 was only 2.98%?

1.How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%? A.They live in different municipalities in the school district. (the obvious answer, but may not be the only thing going on……) Reasons (so far) That Answer Question #1

Explaining the Tax Levy What Really Matters How your share of the total valuation is changing relative to other taxpayers. 1.) your property vs other properties within the same municipality 2.) your municipality vs other municipalities within the school district The total tax levy is divided among individuals according to each individual’s share of total municipal property value.

Equalized & Assessed Valuation Why Both? 1.) Assessment practices differ across the state. Property can be assessed at different percentages of market (equalized) value. 2.) Not all property is re-assessed every year. Only requirements are: 1.) the assessment is within 10% of market value; and 2.) there is equity between taxpayers within the municipality. Each year, the Department of Revenue turns local assessed valuations into equalized valuations. All school finance computations use equalized valuations.

Apportioning Taxes Assessed Value % of Total $40,000 Levy Tax Using Assessed Value Muni #1$2,100, %$40,000$11,831 Muni #2$4,500, %$40,000$25,352 Muni #3$500,0007.0%$40,000$ 2,817 School District$7,100, %$40,000 Assessment Ratio (assessed ÷ equalized) 105% 90% 91% Equalized Value % of Total $40,000 Levy Tax Using Equalized Value Equalized Mill Rate Muni #1$2,000, %$40,000$10, Muni #2$5,000, %$40,000$26, Muni #3$550,0007.3%$40,000$2, School District$7,550, % $40,000

Muni A Muni B Muni C Most School Districts Have Many Underlying Municipalities …differing sizes, differing types of taxpayers (residential, forest, commercial, manufacturing, etc), differing concentrations of taxpayers, and differing local assessment practices…

Change in Assessed Valuation 2 Residential Taxpayers Total Municipal Assessed Property Value = $200,000 $100,000 50% $2,000 $100,000 50% Each shares in the total property value at 50%, so each pays 50% of the total levy. Total Municipal Levy = $4,000

Change In Assessed Valuation 2 Residential Taxpayers Total Municipal Assessed Property Value = $300,000 Total Municipal Levy = $4,000 $2,320$1,680 $174,000 58% $126,000 42% Assessed rate = $4,000/$300,000 = mils ($13.34 per $1,000 of assessed property value). $126,000 x.01334$174,000 x.01334

Explaining the Tax Levy Misconceptions 1.Higher assessments don’t necessarily mean higher taxes. Depends on how your assessment is changing in relation to the rest of the municipality.

How Assessed Valuation Works 2 Residential Taxpayers Total Municipal Assessed Property Value = $300,000 Total Municipal Levy = $4,000 $2,900$1,680 $174,000 58% $126,000 42% $126,000 x.01334$174,000 x Assessed rate = $4,000/$300,000 = mils ($13.34 per $1,000 of assessed property value).

How Assessed Valuation Works 2 Residential Taxpayers Total Municipal Assessed Property Value = $500,000 Total Municipal Levy = $6,000 $3,600$2,400 $300,000 60% $200,000 40% $200,000 x.01200$300,000 x Assessed rate = $6,000/$500,000 = mils ($12.00 per $1,000 of assessed property value).

Explaining the Tax Levy Misconceptions 1.Higher assessments don’t necessarily mean high taxes. Depends on how your assessment is changing in relation to the rest if the municipality. 2.Lower tax rates don’t necessarily mean lower taxes. Depends on how the total levy and your assessment is changing.

1.How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%? A.They live in different municipalities in the school district. B.Individual property owner’s value increases as a percent of the municipality. C.Municipal levy increases and/or individual property owner’s value increases as a percent of the municipality. Reasons (so far) That Answer Question #1

Levy Apportionment and Tax Rates The school district apportions the levy to the underlying municipalities based on equalized values. Then, each underlying municipality apportions its portion of the school district levy to the underlying properties based on assessed values.

Apportioning the Levy Muni A Muni B Muni C School District Divides the Levy Over Municipalities Based on Equalized Value (PI-401) Equalized Muni Value (equalized rate) Equalized Muni Value (equalized rate) Equalized Muni Value (equalized rate) Apportions the dollar amount needed to be raised from this municipality over the assessed value (assessed rate). $ $ $

Municipal Re-Valuation Equalized Value % of Total $40,000 Levy Tax Using Equalized Value Muni #1$2,000, %$40,000$10,000 Muni #2$5,000, %$40,000$25,000 Muni #3$1,000, %$40,000$5,000 School District$8,000, % $40,000 Equalized Value % of Total $40,000 Levy Tax Using Equalized Value Muni #1$2,000, %$40,000$10,596 Muni #2$5,000, %$40,000$26,490 Muni #3$550,0007.3%$40,000$2,914 School District$7,550, % $40,000

1.How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%? A.They live in different municipalities in the school district. B.Individual property owner’s value increases as a percent of the municipality. C.Municipal levy increases and/or individual property owner’s value increases as a percent of the municipality. D.Municipality goes through a re-valuation. Reasons That Answer Question #1

Muni A Muni B Muni C Most School Districts Have Many Underlying Municipalities …differing sizes, differing types of taxpayers (residential, forest, commercial, manufacturing, etc), differing concentrations of taxpayers, and differing local assessment practices…

Tax Base Composition Shifting (what happens within just 1 municipality) One Final Thing to Consider Brown Deer School District

Item % Change Residential % % 1.41% Commercial % % -4.13% Manufacturing % %9.93% Agricultural.00019% 1.17% Personal % %4.47% % 0.00% Brown Deer School District Tax Base Composition

Residential Brown Deer School District Tax Base Composition in

Residential Shifting Value, Shifting Tax Burden Even Without Considering Any Tax Levy Increases or Residential Property Value Changes! Tax Base Composition in

Reasons That Answer Question #2 1.Tax base composition shifting. 2.The percentage the credits (School Levy, Lottery and Gaming, First Dollar) were of the total changed from to

Tracking the details that cause property tax changes, given the many underlying municipalities in a school district, is virtually impossible. But, now you have a list of items that could be the cause. Conclusion

Equalization Aid

Under Article 10 of WI State Constitution, the State Legislature is responsible for establishing school districts which are to be: “as uniform as practicable … ” “free and without charge for tuition to all children” “each town and city shall be required to raise by tax, annually, for the support of common schools therein……” “each town and city shall be required to raise by tax, annually, for the support of common schools therein……” How does the Legislature achieve this? Why Equalization Aid?

Equalization Aid The State provides financial assistance in the form of Equalization/General Aid to school districts in order to: Reduce the reliance upon the local property tax as the sole source of revenue for educational programs. Guarantee that a basic educational opportunity is available to all pupils regardless of the local fiscal capacity of the district in which they reside. A student should not be unfairly disadvantaged as a consequence of where he or she lives.

Equalization Aid Property Tax Base

Why do you need to know how to calculate aid when DPI calculates it for you? Because you will be asked by your board members, constituents, and the media. So you can figure out why your aid has changed AND explain why. Because you may want to do estimates and run “what if” scenarios …

State “shares” in district cost. Aid is based on a district’s ability to pay, as measured by its property wealth per member. Basic premise: The more property wealth per member a district has, the lower the percent (proportion) of shared costs that will be aided by the state through the equalization aid formula. Equalization Aid

District Factors - shared cost - equalized property value - membership State Factors - cost ceilings - guaranteed valuations per member - total amount of funding available for distribution What determines where a district is in the formula? Equalization Aid

Positive Primary Aid Positive Secondary Aid PositiveTertiaryAid District Value per Member 10%90% 75%25% 50% 50% Equalization Aid Formula

$900 + $6,000 + $1,500 = $8,400 x 500 = $4,200,000

Positive Primary Aid Positive Secondary Aid PositiveTertiary Aid Aid Negative Tertiary Aid Equalization Aid Formula

$700 + $2,000 - $1,500 = $1,200 X 500 = $600,000

Positive Primary Aid Positive Secondary Aid PositiveTertiaryAid District Value per Member Equalization Aid Formula

Bonduel’s property value is fairly consistent, but their membership is really dropping, causing their value per member to increase over time. As value per member increases, the formula gives less aid.

Equalization Aid Resources on the School Financial Services Website “October 15, 2014 Equalization Aid Computation – Percentage Method – Algebraic Format” Location: SFS Homepage > Longitudinal Data > Equalization Aid “ Equalization Aid Formula Position” “Multi-Year Longitudinal Analysis of General and Equalization Aid Formula Components”

Suggested Monitoring Activities (after the summer program)  Confirm fees collected  Confirm expenditures for eligible supplies  Compare fees collected with actual costs  If you have an excess of revenues over expenditures then refund the under spent portion of the fee  This is done on a course by course basis Summer School Fees

What will auditors ask for? PI-1804W-2 (Worksheet) Summer school list of classes and fees Should not be a flat fee (difficult to link a flat fee to actual expenditures) Expenditures (by course) for the classes that charge fees Run a detailed report of the appropriate function and object and identify for auditor those used for summer school May be asked to pull some invoices Summer School Fees

What will auditors test for? Fees are not charged as a flat fee across all courses Costs identified by course are eligible costs Costs that are eligible do not exceed fees charged (by course) For full presentation from WASBO Accounting Conference - March 18-20, 2014 go to: ppt/Summer%20School_March% pptx Summer School Fees

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