Fridley Public Schools ISD #14 Public Hearing for Taxes Payable in 2012

WELCOME

December 20, 2011 Presented by: Rochel Manders Director of Finance

Agenda for Hearing

A.

B.

C.

D.

E.

State Funding of Schools Current District Budget and Prior Year Actual Financial Results Homestead Credit vs Exclusion Programs District’s Proposed 2012 Tax Levy Public Comments and Questions

School Funding is Highly Regulated by the State

• • State sets formulas which determine revenue mostly driven by pupil counts • State sets property tax levy caps • State requires school boards to submit referendums for operating and capital needs to voters for approval

State Funding for Schools Has Not Kept Pace with Inflation

• Increases in basic general education revenue per pupil have been less than inflation • For Fiscal 2012 and 2013, basic per-pupil funding is projected to increase by 1% per year, while district expenses will likely increase (without budget cuts) by at least 2-3% annually

Trends in General Education Formula Allowance for Minnesota School Districts, 2004-05 through 2012-13 Adjusted for Inflation Fiscal Year

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Formula Allowance

4,601 4,783 4,974 5,074 5,124 5,124 5,124 5,174 5,224

CPI-U (2009=1.0) *

0.8929

0.9268

0.9511

0.9860

1.0000

1.0093

1.0298

1.0559

1.0747

Formula Allowance in 2013 $s

5,538 5,546 5,620 5,530 5,507 5,456 5,347 5,266 5,224

Change Since 2004-05

0 8 82 -8 -31 -82 -191 -272 -314

Formula Allow.

if Adjusted for Annual Inflation

4,601 4,776 4,901 5,081 5,153 5,201 5,307 5,441 5,538

Annual Funding Shortfall

0 -7 -73 7 29 77 183 267 314 SOURCE: Formula Allowance and CPI-U are from Minnesota Department of Education,

Referendum Cap Inflation Estimate 2011

* Consumer Price Index for all urban consumers for the Minneapolis-St. Paul area.

Impact is Budget Cuts and Levy Referendums

• With minimal increases 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, on Nov. 8, 2011, Fridley school district submitted two questions on the ballot seeking renewals of a referendum and capital projects levy • Both questions passed with approximately 73% voter approval

Budget Information

• • All school districts’ budgets are divided into separate funds, based on purposes of revenue, as required by law • • • • • • • • For our district, 8 funds: General Food Service Community Service Building Construction General Debt Service OPEB Debt Service Internal Service OPEB Trust

Fridley Public Schools ISD #14 District Revenues and Expenditures Actual for FY 11, Budget for FY 12 FUND General/Restricted General/Other Food Service 2010-11 ACTUAL REVENUES AND TRANSFERS IN 2010-11 ACTUAL EXPENDITURES & TRANSFERS OUT JUNE 30,2011 ACTUAL FUND BALANCE 2011-12 BUDGET REVENUES AND TRANSFERS IN 2011-12 BUDGET EXPENDITURES & TRANSFERS OUT JUNE 30,2012 PROJECTED FUND BALANCE $5,879,024 $5,707,378 29,162,529 29,277,992 1,858,255 29,084,530 1,461,452 1,464,216 $606,842 90,998 $5,695,040 1,584,329 $5,643,288 658,594 29,354,876 1,587,909 1,542,207 133,120 Community Service Building Construction 1,904,358 1,942,672 (128,492) 2,219,932 2,118,225 (26,785) 940,365 397,930 884,798 820,454 854,227 851,025 Debt Service OPEB* Debt Service Internal Service 2,396,974 581,534 303,777 2,321,096 564,828 636,597 455,547 16,256 202,287 2,510,622 593,647 300,000 2,481,894 565,828 362,308 484,275 44,075 139,979 OPEB* Trust Total - All Funds 286,148 474,825 5,000,596 334,000 537,200 4,797,396 * Other Post-Employment Benefits $42,916,161 $42,787,534 $8,987,087 $43,142,554 $43,460,053 $8,669,588

Food Service $1,584,329 3.7% Fridley Public Schools ISD #14 Revenue - All Funds 2011-12 Budget $43,142,554 Community Service $2,219,932 5.1% Building Construction $820,454 1.9% Debt Service (incl. OPEB) $3,104,269 7.2% Internal Service $300,000 0.7% OPEB Trust $334,000 0.8% General $34,779,570 80.6%

State Aid $26,823,073 77.1% Fridley Public Schools ISD #14 General Fund Revenue 2011-12 Budget $34,779,570 Federal $1,544,359 4.4% Other $546,048 1.6% Levy $5,866,090 16.9%

Purchased Services $4,731,245 13.5% Supplies $1,068,125 3.1% Fridley Public Schools ISD #14 General Fund Expenditures by Object FY 2011-12 Budget $34,998,164 Equipment $1,278,136 3.7% Debt Service $397,304 1.1% Other $1,296,433 3.7% Employee Benefits $6,493,442 18.6% Salaries and Wages $19,733,479 56.4%

Fridley Public Schools ISD #14 General Fund Expenditures by Program 2011-12 Budget $34,998,164 Instructional Support $2,159,892 6.2% Pupil Support Services $3,687,432 10.5% Facilities $3,262,478 9.3% Special Education $6,724,959 19.2% Other $1,541,158 4.4% Administration $1,040,004 3.0% Support Services $1,323,151 3.8% Vocational Instruction $268,656 0.8% Regular Instruction $14,990,434 42.8%

The Homestead Credit Change

• • • • The 2011 legislature Repealed the Homestead Market Value Credit Created the Homestead Market Value Exclusion Effective with calendar year 2012

The Homestead MV Credit (old law)

• • • Affected only homestead properties with market values less than $413,000 Maximum credit of $304 on a $76,000 home Credit declined as market value increased

The Homestead MV Exclusion (new law)

• Excludes a portion of the market value on residential homesteads with a market value of less than $413,000 • • Formula is 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

Overall Impact of The Change

• Increases in property taxes for almost all taxpayers due to the uneven exchange in programs • 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

increasing tax

rates

)

Fridley Public Schools ISD #14 Comparison of Proposed Tax Levy Payable in 2012 to Actual Levy Payable in 2011 Fund Levy Category General Fund

Voter Approved Operating Referendum Equity Capital Projects Operating Capital Alternative Teacher Compensation Integration Safe Schools Deferred Maint./Health & Safety Instructional Lease Other Adjustments for Prior Years Total, General Fund

Actual Levy - FY 12 Proposed Levy - FY 13 Payable in 2011 Payable in 2012 FY 13 $ Change FY 13 % Change

$2,676,478 367,099 820,454 326,549 214,135 127,555 100,457 974,979 75,216 123,793 (278,407) $5,528,310 $2,515,370 333,301 741,000 292,509 187,107 133,284 106,538 378,262 77,848 162,583 23,075 $4,950,876 ($161,108) (33,798) (79,454) (34,040) (27,028) 5,729 6,081 (596,718) 2,631 38,789 301,482 ($577,433) -10.4%

Community Service Fund

Basic Community Education Early Childhood Family Education School-Age Child Care Other Adjustments for Prior Years Total, Community Service Fund

Debt Service Fund

Voter Approved Debt Service Other Debt Service Abatement Adjustments Other Post Employment Benefits Reduction for Excess Fund Balance Total, Debt Service Fund $120,813 55,482 210,000 1,688 63,378 $451,361 $1,230,200 1,374,739 5,511 593,647 (99,827) $3,104,269 $120,409 53,505 178,874 1,704 111,681 $466,173 $1,234,951 1,503,259 17,801 588,660 (113,550) $3,231,122 ($404) (1,978) (31,126) 16 48,303 $14,812 $4,751 128,520 12,291 (4,987) (13,722) $126,852 3.3% 4.1% Total Levy, All Funds $9,083,940 $8,648,171 ($435,769) -4.8%

Overview of Proposed Levy Payable in 2012

• The total 2012 proposed property tax levy will decrease from 2011 by 4.8% or $435,769 • Total proposed levy includes the operating referendum and capital projects levy approved by voters that was not included in the proposed levy in September 2011

Explanation of Levy Changes

• • • • Category: Voter Approved Operating Referendum Change: ($161,108) Use of funds: general operating expenses • • • • Reason for decrease: Funding is based on the voter-approved allowance of $412.52 multiplied times resident pupils in the district and is provided through a combination of local tax levies and state aid Voters approved the operating referendum renewal included on the November 8 ballot Because the district’s total property value decreased the share of funding provided through the tax levy is decreasing State aid will increase by a similar amount so there will be little net change in revenue

Explanation of Levy Changes

• • • Category: Capital Projects Change: ($79,454) Use of funds: facility maintenance projects and technology • • • • Reason for decrease: Funding is based the voter-approved rate of 5.47% multiplied times the district’s net tax capacity Voters approved the capital projects levy renewal included on the November 8 ballot Because the district’s total property value (net tax capacity) decreased the funding provided through the tax levy is decreasing

Explanation of Levy Changes

• • • • Category: Deferred Maintenance/Health & Safety Change: ($596,718) Use of funds: State-approved capital projects related to deferred maintenance and health & safety projects • • Reason for decrease: The levy is based on the estimated cost of qualifying state approved projects The estimated cost of approved projects is lower than the previous year

• • • •

Explanation of Levy Changes

Category: Adjustments for Prior Years Change: $301,482 Use of funds: various purposes • • • Reason for increase: Each year the amounts for many levy categories are based on estimates of values and expenses for future years In later years the estimates are updated and levy amounts are changed through adjustments to the current levy A negative TIF (tax increment financing) adjustment of $442,780 was included in the prior year levies and no such adjustment in included in the 2012 levies

Explanation of Levy Changes

• • • • Category: Other Debt Service Change: $128,520 Use of funds: Payments on bonds • • Reason for increase: Alternative facilities bonds were issued in 2007 to provide funds for health and safety projects which were approved by the Commissioner of Education Planned increase in payments on alternative facilities bonds per the amortization schedule

Impact on Taxpayers

• Following is 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 14.8% decrease in property value over this period

Fridley Public Schools ISD #14 Estimated Changes in School Property Taxes, 2009 to 2012

Based on -14.8% Cumulative Changes in Property Value from 2009 to 2012 Taxes

Type of Property

Residential Homestead Commercial/ Industrial # Apartments (4 or more units)

Taxable Market Value for 2009 Taxes

$117,404 176,106 234,808 293,510 352,212 410,914 469,616 528,318 587,020 704,424 $117,404 293,510 587,020 880,530 1,174,040 $234,808 469,616 704,424

Actual Taxes Payable in 2009

$510 823 1,135 1,448 1,761 2,073 2,371 2,689 3,031 3,715 $594 1,635 3,426 5,218 7,009 $1,368 2,737 4,105

Taxable Market Value for 2010 Taxes

$112,708 169,062 225,416 281,770 338,123 394,477 450,831 507,185 563,539 676,247 $112,708 281,770 563,539 845,309 1,127,078 $225,416 450,831 676,247

Actual Taxes Payable in 2010

$611 978 1,346 1,714 2,082 2,450 2,807 3,165 3,570 4,381 $687 1,882 3,952 6,022 8,091 $1,622 3,244 4,866

Taxable Market Value for 2011 Taxes

$102,564 153,846 205,128 256,410 307,692 358,974 410,256 461,538 512,821 615,385 $102,564 256,410 512,821 769,231 1,025,641 $205,128 410,256 615,385

Actual Taxes Payable in 2011

$573 920 1,267 1,614 1,962 2,309 2,656 2,989 3,334 4,104 $630 1,708 3,604 5,501 7,397 $1,539 3,078 4,617

Estimated Market Value for 2012 Taxes

$100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 600,000 $100,000 250,000 500,000 750,000 1,000,000 $200,000 400,000 600,000

Estimated Taxes Payable in 2012* Without Approved Referendum* Approved Referendum* Total

$376 632 889 1,145 1,402 1,658 1,915 2,159 2,399 2,971 $146 231 316 402 487 573 659 742 825 1,006 $522 863 1,205 1,547 1,889 2,231 2,574 2,901 3,224 3,977 $468 $1,288 $2,754 $4,220 $5,687 $1,144 2,289 3,433 $162 428 890 1,351 1,812 $363 728 1,091 $630 1,716 3,644 5,571 7,499 $1,507 3,017 4,524

Tax Rates Tax Capacity Rate Referendum Market Value Rate

31.176

0.19304

38.795

0.23462

41.054

0.23707

36.939

0.11044

* "Approved referendum" includes additional taxes for approved renewal of the operating referendum and capital projects levy.

+ Figures above are for property in the City of Fridley. Since the portion of the homestead credit deducted from school district taxes varies across municipalities, school taxes may be slightly different than shown above for homestead property in other portions of the school district.

# For commercial-industrial property, school taxes may also be slightly different in other municipalities in the district, due to the varying impact of the Fiscal Disparities Program.

General Notes

1. The figures in the table are based on school district taxes only, and do not include taxes for the city or township, county, state, or other taxing jurisdictions.

2. All estimates for 2012 taxes are preliminary estimates, based on the best data available as of the date above.

3. For all examples of properties, taxes are based on changes in taxable market value of -4.0% from 2009 to 2010 taxes, -9.0% from 2010 to 2011, and -2.5% from 2011 to 2012. 6.771

0.09716

43.710

0.20760

Change in Taxes 2009 to 2012

$12 40 70 99 128 158 203 212 193 262 $36 81 218 353 490 $139 280 419

Change in Taxes 2011 to 2012

-$51 -57 -62 -67 -73 -78 -82 -88 -110 -127 $0 8 40 70 102 -$32 -61 -93

Fridley Public Schools ISD #14 Estimated Changes in School Property Taxes, 2009 to 2012

Based on -14.8% Cumulative Changes in Property Value from 2009 to 2012 Taxes

Example 1: $150,000* Residential Homestead Property

$1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0

$823 $978 $920 $863 $231 $632

2009 2010 2011

Year Taxes are Payable

2012 est.

* The value shown in the title of the chart is the estimated market value for taxes payable in 2012. Taxes are calculated based on changes in market value of -4.0% from 2009 to 2010 taxes, -9.0% from 2010 to 2011, and -2.5% from 2011 to 2012.

** The darker portion of the 2012 bars represents the estimated taxes associated with approved renewal of the operating referendum and capital projects levy.

Public Comments and Questions