1. Taxes and TIF’s A School District Perspective

2. What is the Tax Cap? What is the Tax Cap? (PTELL) The tax cap limits the extension of a taxing body’s budget applied to existing property in aggregate to the previous year’s extension plus the Consumer Price Index (CPI) or 5%, whichever is lower. To set a tax rate, extensions from a current year are increased by this rate and then divided by the EAV that was the same group of property that was used in the previous year. New Property then increases the taxing body’s extension by applying the new rate as determined by the PTELL extension.

3. Example Previous Years Extension CPI= 2% Multiply by 1.02% New Tax Capped Extension Divide by existing EAV New Tax Rate Rate per Thousand $10,000,000 X 1.02 $10,200,000 $400,000,000.0255 2.55%

4. What is EAV? Your Equalized Assessed Value (EAV), as determined by the township assessor, is equal to the 3 year average of one third of your property’s fair market value less any exemption you receive multiplied by any equalization factor. Your updated EAV (from your assessment card in the fall) plus all of the other existing assessments within a taxing district are used to determine the new tax rate.

5. What happens to my tax bill when my EAV changes? In a “perfect world” if your assessment increases at the same rate as all other EAV in your assessment area, your taxes would only increase by the CPI increase. If your EAV increases higher than the other properties, you will receive an increased burden of taxes.

6. What year is what? 2009 EAV is determined in 2010 and sent to you in approximately September or October of 2010 Your 2009 EAV is then used for your 2010 bill and is paid in 2011

7. Year One Property A EAV = 100,000 Tax rate = 2.55% Tax bill = $2,550 Property B EAV = 100,000 Tax rate = 2.55 % Tax bill = $2,550

8. Year 2 Year 2 Assessment Changes by House Property A Flat CPI no budget increase Assessment Increased to $120,000 Tax Rate: 2.55% Tax Bill = $3,060 Property B Flat CPI no budget increase Assessment protested and reduced to $80,000 Tax Rate = 2.55% Tax Bill = $2,040

9. The Effect of Assessment Revaluation Changes With a 0% CPI: -Increased assessment values will decrease the tax rate but the total bill will be the same -Decreased assessments will increase the tax rate but the total bill will remain the same

10. Example Budget =$10,000,000 EAV= $400,000,000 Tax Rate = 2.5% Budget =$10,000,000 EAV= $380,000,000 Tax Rate = 2.63%

11. How does a Tax Increment Financing (TIF) change the District Dynamics? TIF’s are originally formed for 23 years but can be extended up to 35 years without additional approval from the taxing districts. The Equalized Assessed Values of Properties inside the TIF are frozen at the value of the first year of the TIF.

12. Property Taxes within the TIF Taxing bodies do not receive the tax benefit effect of New Property until after the TIF is dissolved. Properties within the TIF continue to pay the same tax rate as properties outside of the TIF, but all monies collected beyond the frozen EAV rate are collected for the TIF district. This will slightly inflate the tax rate each year.

13. Property Taxes Outside of the TIF Due to the fact that the TIF properties equalized assessed values are frozen, there is a shift of the burden of taxes out of the TIF district and on to all other tax payers in the district. This shift starts out small and compounds annually based on tax cap CPI increases and the ever growing disparity in EAV values.

14. Proposed Marengo TIF’s Eastern Corridor: EAV of $1.6 million or.36% of the school district EAV Downtown TIF: EAV of $9.4 million or 2.09%

15. Assumptions Used for Financial Analysis For the 23 years: EAV increases in assessment: 2.5% CPI Increases: 2.5% New Property as provided by Ehlers TIF reports Taxes collected for bonds are not included in any calculations and would be additional shifting to taxpayers outside of the TIF district

17. Effect on a Referendum If a referendum was passed in Year 4 of the TIF, a loss of additional new property tax revenue would be:

19. School Board Concerns If any housing is involved, the district will not receive additional property taxes to support this student without an additional agreement. If a referendum is needed, will this have any effect on it?

20. School Board Concerns TIF’s can annex property without consulting the school district. Although TIF districts can be dissolved early, they can also be legally extended for up to 35 years without input or agreement from the taxing bodies.

21. School Board Considerations What is the size of the TIF relative to the size of the school district EAV? How much and how will my constituents feel about the shift of the burden of taxes out of the TIF district and on to those outside of the district?

22. School Board Concerns With multiple cities/villages in the school district, will we allow similar TIF’s in the other cities/villages? If so, have we considered the additional effect?

23. Are there any Alternatives? Property Tax Abatements such as the current model in place at the City of Marengo Sales/Hotel Tax Rebate Incentives

24. If the current 5 year Business Incentive Program (BIPM) was used instead of a TIF, tax distribution over 23 years would be: