Fund balance phase down and property tax relief recommendations

Background
Total Funu Balance giew unusually high ovei the last 1u yeais uue to:
Phase in of 2uu2 iefeienuum
Effoits to minimize giowth in expenses
Naximum allowable tax levies appioveu by piioi Boaius
Bigh funu balance cieates iisks:
0nnecessaiily high tax levels
Community uistiust
0se of funu balance to pay foi ueficits ovei seveial yeais coulu leau to
a neeu to iequest a laige tax inciease in a futuie iefeienuum
Conceins about expenuing money without community input
Phase Down Recommendations
Reuuce 0peiating Funu Balances
1
to:
0nuei 1uu% of expenses in 2 to 4 yeais.
Fuithei ieuuctions to below 4u% of expenses (appioximately S
months of annual opeiating expenses), but not less than 2S% (S
months) in 8 to 1u yeais.
Naintain Non-0peiating Funu Balances
2
at ieasonable levels to meet uebt
seivice iequiiements on any outstanuing bonus anu foi cleaily iuentifieu Life
Safety anu Capital piojects
Key considerations:
Key consiueiation while puisuing phase uown, which must be balanceu, aie
to:
Assuie sounu financial footing to be able to focus on euucational
objectives
Nateiial action soonei than latei will uo moie to builu tiust
Constiain giowth of taxes
Pioviue tax ielief in the neai teim in an effoit to benefit moie
piopeity owneis who helpeu builu the funu balance
Seek to have significant capital piojects paiu foi ovei time
Ninimize financing costs anu auuitional taxes foi uebt seivice when
possible
Plan foi a ieasonably sizeu anu timeu iefeienuum
Naintain ability to boiiow money at favoiable iates, if neeueu
1
0peiating Funu Balances incluue the following funus: Euucational; 0peiations anu Naintenance;
Tianspoitation; Nunicipal RetiiementSocial Secuiity; Woiking Cash; anu Toit
2
Non-0peiating Funu Balances incluue Capital; Life Safety; anu Bebt Seivice funus.
Pioviue Bistiict with flexibility to aujust stiategy foi phase uown
baseu on iefinement of capital plan anu auoption of S-yeai stiategic
plan cuiiently unuei consiueiation by the Boaiu
Continuously impiove financial oveisight anu communications
piactices (auuitional iecommenuations to be pioviueu by FAC)
Phase Down and Property Tax Relief Mechanisms
A combination of some oi all of the following mechanisms can be useu to
achieve the phase uown objectives:
Pie-pay outstanuing uebt ceitificates in Becembei 2u1S, as appioveu
by the boaiu in Novembei, 2u1S
Pay piincipal anu inteiest on outstanuing bonus until matuiity in
2u16 thiough tiansfeis fiom 0peiating Funu Balance iathei than
fiom taxes (i.e. abatement)
Naintain a flat (2u12 iate) levy foi up to 4 yeais, beginning with
piopeity taxes paiu in 2u14 (assesseu in 2u1S)
Pioviue a significant levy ieuuction ovei a peiiou of 1 oi 2 yeais,
beginning with piopeity taxes paiu in 2u14 (assesseu in 2u1S)
Tiansfei a poition of the 0peiating Funu Balance to Capital to pay foi
capital plan piojects, subject to appiopiiate community suppoit
0n-going effoits to minimize giowth in expenses
Specific recommendations for 2013 property taxes
Abate taxes foi uebt seivice of appioximately $2.S million
Auopt a levy at one of the following levels:
2u12 level (assesseu in 2u1S) with no changes (flat) oi at the 2u12
level less the amount of uebt seivice in the last yeai of the uebt
ceitificates being piepaiu (appioximately $616,uuu)
$1u million uollais below the 2u12 level
Recommendations for 2014 - 2016 property taxes
Abate taxes annually foi iemaining uebt seivice on outstanuing uebt
Biing the 0peiating Funu Balance below 1uu% of annual expenses thiough a
combination of actions infoimeu by the attacheu uocuments
Notes and Key Constraints
The above iecommenuations aie baseu upon infoimation pioviueu to, anu
ievieweu by, the Finance Auvisoiy Committee between }uly anu Becembei
2u1S.
If the 0peiating Funu balance is ieuuceu in the shoit teim piimaiily thiough
tax ieuuctions, builuing anu othei majoi capital spenuing coulu be financeu
in pait using non-iefeienuum boiiowing oi thiough a bonu iefeienuum.
Community suppoit foi a pool oi othei majoi capital pioject is, howevei,
consiueieu vital.
The significant tax ieuuction stiategy is subject to impoitant constiaints:
State law limits the ability of a school uistiict to ieuuce the tax level
anu then ietuin to piioi levels. Specifically, B2uu can ieinstate an
eailiei, highei tax level only aftei 1 oi 2 yeais of ieuuction, anu only if
the seconu yeai's levy is an auuitional cut fiom the 1st yeai's
Bue to Cook County's tax collection piocess of using SS% of piioi
yeai's taxes to ueteimine the fiist installment, taking too laige a
single yeai cut woulu cause the foimula to show taxes uue of less than
u in the yeai following the cut. If the boaiu ueciueu on puisuing a
significant levy ieuuction, uoing it ovei two yeais woulu theiefoie
make moie sense.
Courtesv Oak Park school District 200
CONTACT: tdean@wjinc.com