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

2012

WELCOMEDecember 20, 2011

Presented by:Rochel Manders

Director of Finance

Agenda for Hearing

A. State Funding of Schools

B. Current District Budget and Prior Year Actual Financial Results

C. Homestead Credit vs Exclusion Programs

D. District’s Proposed 2012 Tax Levy

E. 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

Formula Change Formula Allow. AnnualFormula CPI-U Allowance Since if Adjusted for Funding

Fiscal Year Allowance (2009=1.0) * in 2013 $s 2004-05 Annual Inflation Shortfall

2004-05 4,601 0.8929 5,538 0 4,601 0

2005-06 4,783 0.9268 5,546 8 4,776 -7

2006-07 4,974 0.9511 5,620 82 4,901 -73

2007-08 5,074 0.9860 5,530 -8 5,081 7

2008-09 5,124 1.0000 5,507 -31 5,153 29

2009-10 5,124 1.0093 5,456 -82 5,201 77

2010-11 5,124 1.0298 5,347 -191 5,307 183

2011-12 5,174 1.0559 5,266 -272 5,441 267

2012-13 5,224 1.0747 5,224 -314 5,538 314

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.

Trends in General Education Formula Allowancefor Minnesota School Districts, 2004-05 through 2012-13

Adjusted for Inflation

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

2010-11 ACTUAL 2010-11 ACTUAL JUNE 30,2011 2011-12 BUDGET 2011-12 BUDGET JUNE 30,2012

FUND REVENUES AND EXPENDITURES & ACTUAL FUND REVENUES AND EXPENDITURES & PROJECTED

TRANSFERS IN TRANSFERS OUT BALANCE TRANSFERS IN TRANSFERS OUT FUND BALANCE

General/Restricted $5,879,024 $5,707,378 $606,842 $5,695,040 $5,643,288 658,594

General/Other 29,162,529 29,277,992 1,858,255 29,084,530 29,354,876 1,587,909

Food Service 1,461,452 1,464,216 90,998 1,584,329 1,542,207 133,120

Community Service 1,904,358 1,942,672 (128,492) 2,219,932 2,118,225 (26,785)

Building Construction 940,365 397,930 884,798 820,454 854,227 851,025

Debt Service 2,396,974 2,321,096 455,547 2,510,622 2,481,894 484,275

OPEB* Debt Service 581,534 564,828 16,256 593,647 565,828 44,075

Internal Service 303,777 636,597 202,287 300,000 362,308 139,979

OPEB* Trust 286,148 474,825 5,000,596 334,000 537,200 4,797,396

Total - All Funds $42,916,161 $42,787,534 $8,987,087 $43,142,554 $43,460,053 $8,669,588

* Other Post-Employment Benefits

Fridley Public Schools ISD #14District Revenues and Expenditures

Actual for FY 11, Budget for FY 12

General$34,779,570

80.6%

Food Service$1,584,329

3.7%

Community Service

$2,219,9325.1%

Building Construction

$820,4541.9%

Debt Service (incl. OPEB)$3,104,269

7.2%Internal Service

$300,0000.7%

OPEB Trust$334,000

0.8%

Fridley Public Schools ISD #14Revenue - All Funds

2011-12 Budget $43,142,554

Levy$5,866,090

16.9%

State Aid$26,823,073

77.1%

Federal$1,544,359

4.4%

Other$546,048

1.6%

Fridley Public Schools ISD #14 General Fund Revenue

2011-12 Budget $34,779,570

Salaries and Wages$19,733,479

56.4%

Employee Benefits$6,493,442

18.6%

Purchased Services$4,731,245

13.5%

Supplies$1,068,125

3.1%

Equipment$1,278,136

3.7%

Debt Service$397,304

1.1%Other

$1,296,4333.7%

Fridley Public Schools ISD #14 General Fund Expenditures by Object

FY 2011-12 Budget $34,998,164

Administration$1,040,004

3.0%

Support Services$1,323,151

3.8%

Regular Instruction$14,990,434

42.8%

Vocational Instruction$268,656

0.8%

Special Education$6,724,959

19.2%

Instructional Support$2,159,892

6.2%

Pupil Support Services$3,687,432

10.5% Facilities$3,262,478

9.3% Other$1,541,158

4.4%

Fridley Public Schools ISD #14 General Fund Expenditures by Program

2011-12 Budget $34,998,164

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 #14Comparison of Proposed Tax Levy Payable in 2012 to Actual Levy Payable in 2011

Actual Levy - FY 12 Proposed Levy - FY 13 FY 13 FY 13

Fund Levy Category Payable in 2011 Payable in 2012 $ Change % Change

General FundVoter Approved Operating Referendum $2,676,478 $2,515,370 ($161,108)Equity 367,099 333,301 (33,798)Capital Projects 820,454 741,000 (79,454)Operating Capital 326,549 292,509 (34,040)Alternative Teacher Compensation 214,135 187,107 (27,028)Integration 127,555 133,284 5,729Safe Schools 100,457 106,538 6,081Deferred Maint./Health & Safety 974,979 378,262 (596,718)Instructional Lease 75,216 77,848 2,631Other 123,793 162,583 38,789Adjustments for Prior Years (278,407) 23,075 301,482Total, General Fund $5,528,310 $4,950,876 ($577,433) -10.4%

Community Service FundBasic Community Education $120,813 $120,409 ($404)Early Childhood Family Education 55,482 53,505 (1,978)School-Age Child Care 210,000 178,874 (31,126)Other 1,688 1,704 16Adjustments for Prior Years 63,378 111,681 48,303Total, Community Service Fund $451,361 $466,173 $14,812 3.3%

Debt Service FundVoter Approved Debt Service $1,230,200 $1,234,951 $4,751Other Debt Service 1,374,739 1,503,259 128,520Abatement Adjustments 5,511 17,801 12,291Other Post Employment Benefits 593,647 588,660 (4,987)Reduction for Excess Fund Balance (99,827) (113,550) (13,722)Total, Debt Service Fund $3,104,269 $3,231,122 $126,852 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 #14Estimated Changes in School Property Taxes, 2009 to 2012

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

Taxable Actual Taxable Actual Taxable Actual Estimated Change ChangeMarket Taxes Market Taxes Market Taxes Market Without in Taxes in Taxes

Value for Payable Value for Payable Value for Payable Value for Approved Approved 2009 to 2011 toType of Property 2009 Taxes in 2009 2010 Taxes in 2010 2011 Taxes in 2011 2012 Taxes Referendum* Referendum* Total 2012 2012

$117,404 $510 $112,708 $611 $102,564 $573 $100,000 $376 $146 $522 $12 -$51176,106 823 169,062 978 153,846 920 150,000 632 231 863 40 -57

Residential 234,808 1,135 225,416 1,346 205,128 1,267 200,000 889 316 1,205 70 -62Homestead 293,510 1,448 281,770 1,714 256,410 1,614 250,000 1,145 402 1,547 99 -67

352,212 1,761 338,123 2,082 307,692 1,962 300,000 1,402 487 1,889 128 -73410,914 2,073 394,477 2,450 358,974 2,309 350,000 1,658 573 2,231 158 -78469,616 2,371 450,831 2,807 410,256 2,656 400,000 1,915 659 2,574 203 -82528,318 2,689 507,185 3,165 461,538 2,989 450,000 2,159 742 2,901 212 -88587,020 3,031 563,539 3,570 512,821 3,334 500,000 2,399 825 3,224 193 -110704,424 3,715 676,247 4,381 615,385 4,104 600,000 2,971 1,006 3,977 262 -127

$117,404 $594 $112,708 $687 $102,564 $630 $100,000 $468 $162 $630 $36 $0Commercial/ 293,510 1,635 281,770 1,882 256,410 1,708 250,000 $1,288 428 1,716 81 8 Industrial # 587,020 3,426 563,539 3,952 512,821 3,604 500,000 $2,754 890 3,644 218 40

880,530 5,218 845,309 6,022 769,231 5,501 750,000 $4,220 1,351 5,571 353 701,174,040 7,009 1,127,078 8,091 1,025,641 7,397 1,000,000 $5,687 1,812 7,499 490 102

Apartments $234,808 $1,368 $225,416 $1,622 $205,128 $1,539 $200,000 $1,144 $363 $1,507 $139 -$32(4 or more units) 469,616 2,737 450,831 3,244 410,256 3,078 400,000 2,289 728 3,017 280 -61

704,424 4,105 676,247 4,866 615,385 4,617 600,000 3,433 1,091 4,524 419 -93

Tax Rates Tax Capacity Rate 31.176 38.795 41.054 36.939 6.771 43.710 Referendum Market Value Rate 0.19304 0.23462 0.23707 0.11044 0.09716 0.20760

* "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 Notes1. 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.

Estimated Taxes Payable in 2012*

Fridley Public Schools ISD #14Estimated Changes in School Property Taxes, 2009 to 2012Based on -14.8% Cumulative Changes in Property Value from 2009 to 2012 Taxes

Example 1: $150,000* Residential Homestead Property

$823$978 $920

$632

$231

$863

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2009 2010 2011 2012 est.

Sch

oo

l P

rop

erty

Tax

es

Year Taxes are Payable

* 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