understanding the impact of the state biennium budget · 4/25/2015 1 page1 understanding the impact...
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Understanding the Impact of the State Biennium Budget
WASBO Spring ConferenceMay 15, 20158:55AM – 9:55AM
Robert W. Baird & Co. Incorporated is providing this information to you for discussion purposes. The materials do not contemplate or relate to a future issuance of municipal securities. Baird is not recommending that you take any action, and this information is not intended to be regarded as “advice”’ within the meaning of Section 15B of the Securities Exchange Act of 1934 or the rules thereunder.
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Presenters
• 414‐765‐7326 (office)
Robert W. Baird & Co.Public FinanceMike ClarkDirector
• 715‐552‐3567 (office)
Robert W. Baird & Co.Public Finance
Debby SchufletowskiSchool Business Specialist
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State Biennial Budget Considerations
Revenue Limit Per Pupil Increase
Per-Pupil Aid
Equalization Aid Allocation
Parental Choice (Voucher) Program
Other
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Revenue Limit
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Revenue Limit—Why is it Important?
80.0%
20.0%
General Fund Operating Revenue
Revenue Limit Revenue All other operating revenue
The hypothetical example is for illustrative purposes only.
The revenue limit is important as it generally comprises 85% ‐ 95% of a district’s general fund operating revenue.
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Revenue Limit
• Identifies how much revenue a district can generate through the sources of state equalization aid and the local tax levy for funds:
• Fund 10 (General Fund)
• Fund 38 (Non‐Referendum Debt)
• Fund 41 (Capital Expansion)
• Governor’s preliminary budget = $0 / pupil increase
District Membership
Per Pupil $ (set in state
budget)Exemptions
Revenue Limit
Authority
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Analysis Considerations
• $0 per pupil
• Per‐pupil increases are base‐building on your revenue limit worksheets
• Hold Harmless
• With a $0 per pupil, many districts with declining enrollment will qualify for this exemption
• It causes an unusual effect in the first year when increasing/decreasing FTE projections
• Low Revenue ceiling
• Creates minimum per‐pupil revenue amount
• Local FTE and property value assumptions
• FTE = other key revenue limit multiplier
• Property value = mill rate calculations
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• Why would more districts fall into Hold Harmless when the per‐pupil increase is $0?
• Sample scenario:
– In this situation, the district is projected to receive less revenue limit authority if FTE increases; therefore using the lower of the projected FTE figures would not be the most conservative approach.
• Long‐term the additional FTE will benefit revenue limit calculations
Hold Harmless
The hypothetical example is for illustrative purposes only.
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Historical Revenue Limit Per Member
$293$257
$297 $281
$213 $203
‐$544
$50$75 $75
$0 $0
‐$600
‐$500
‐$400
‐$300
‐$200
‐$100
$0
$100
$200
$300
$400
$7,500
$8,000
$8,500
$9,000
$9,500
$10,000
$10,500
2004‐05 2006‐07 2008‐09 2010‐11 2012‐13 2014‐15 2016‐17
Annual In
crease / Decrease
Maxim
um reven
ue / pupil
The hypothetical example is for illustrative purposes only.
Current revenue limit per pupil increases are much lower than historical trends. For many districts, per‐pupil authority in 2014‐15 is below the 2010‐11 level. Also notice that the revenue limit increases are cumulative‐each year building off of the past. The final state biennial budget will determine the actual increase/decrease in 2015‐16 and 2016‐17.
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History of Revenue Limit Referendums
10
30
5
31
8
26
4
30
13
46
2
36
0
5
10
15
20
25
30
35
40
45
50
RR NR RR NR RR NR RR NR RR NR RR NR
2010 2011 2012 2013 2014 2015
Referenda Count
Passed Failed
41%
42%
40%
25%
22%
67%
33%
46%
54%
37%
63%
42%
58%
63%
37%
32%
68%
20%
80%
60%
40%80%
20%
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Non-Revenue Limit Revenue-Per Pupil Categorical Aid
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Per-Pupil Categorical Aid
• Outside of the revenue limit
• Per‐pupil categorical aid history:
• 2012‐13 $50/pupil‐‐only if district levied full revenue limit authority (prorated if applicable)
• 2013‐14 $75/pupil
• 2014‐15 $150/pupil
• 2015‐16 $0/pupil (proposed)
• 2016‐17 $165/pupil (proposed—sum certain amount; prorated if state allocation amount is insufficient)
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Per-Pupil Categorical Aid
The loss in categorical aid does not directly impact the tax levy as these dollars are outside of the revenue limit. The surplus/deficit calculation, however, is affected.
The hypothetical example is for illustrative purposes only.
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Per-Pupil Cat. Aid vs. RL Per-Pupil Increase
Revenue Limit per‐pupil increases are base building and have an impact on your mill rate; per‐pupil categorical aid increases are not base building and will not directly impact your mill rate. Each district, based on FTE projections and Equalization aid position, will be affected differently. It is important to analyze your district‐specific impact.
The hypothetical example is for illustrative purposes only.
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Equalization Aid
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Revenue Limit Composition
56% 56%
5%
53%
45%
36%
53%
62% 61%
$0
$5
$10
$15
$20
$25
$30
0%
10%
20%
30%
40%
50%
60%
70%
Baraboo Reedsburg Wisconsin Dells PortageCommunity
Sauk Prairie Lodi Poynette Mauston Tomah Area
Millions
Revenue Limit Composition/ Aid as a % of Revenue Limit $
Equalization Aid Allowable Limited Revenue (Levy) Aid as a % of Rev. Limit Authority
Baird Budget Model GraphSource: Department of Public Instruction
District’s property wealth and shared costs per member will determine the % of revenue limit authority funded through state equalization aid. Equalization aid does not impact total operational revenue, but does impact the local tax levy/mill rate.
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Equalization Aid
• Current proposal includes a $0 increase in state allocation in 2015‐16 and $104M in 2016‐17.
• Will this increase operational funds for school districts?
• What impact will these increases/decreases have?
• What happens if the district revenue limit goes up without an equivalent increase in EQ Aid (see visual on next slide)?
Choice/Charter monies are included in the above amountSource: DPI*Proposed in the Governor's 2015-17 Budget
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Equalization Aid and the Revenue Limit Tax Levy
$7.34 $7.59 $7.87 $8.15 $8.41 $8.61 $8.76$8.31 $8.37 $8.49 $8.61
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15*
Bill
ion
s
State-wide Revenue Limit Authority
General Aid** Revenue Limit Levy***
*2014-15 will be final in May**General Aid figures include High Poverty Aid***Revenue Limit Levy includes computer aidSource: DPI
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Voucher Program and School Levy Credit
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Voucher Program
• Current proposal expands the voucher program and redesigns how it is funded
• Impacts aid calculation of individual districts starting in the 2016‐17 school year
• How would the resident district’s aid be impacted?
• If resident districts count these students for aid purposes, how might other districts’ aid calculation be affected?
More Aid
• Property Poorer
Less Aid
• Property Richer
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School Levy Credit
• Current proposal adds $105M in 2015‐16 and another $105M in 2016‐17
• This is a direct reduction to the taxes of the local taxpayer
• Will this impact district operational revenue?
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Whole Grade Sharing
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Whole Grade Sharing
• Can share all or a substantial portion of the pupils in one or more grades for all or a substantial portion of a school day
• Agreement outlining fee, transportation responsibilities, pupil record maintenance, etc. between school boards signed no later than February 1 of the preceding school year
• Annual meeting and agreement needed to continue
• Additional aid for the first five years to ensure districts do not receive less aid as a result of the whole grade sharing; additional, but lesser, aid in years six and seven
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Property Assessment Proposal
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Property Valuation - Current
January 1•Assessors submit a final or amended assessment report
August 15•DOR Releases equalized values and posts to the internet
October 1•School District certifications received –to be used for current year levy apportionment
May 15•Final EQ valuation issued – to be used for following year’s EQ Aid calculation
For example, Property value assessed as of January 1, 2015 will be equalized and used for levy apportionment in the 2015‐16 school year and finalized and used in the 2016‐17 aid certification.
Current law requires each municipality is within 10% of market value once every five years.
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Property Valuation – Proposed changes
• Beginning January 2017; county and regional assessments
• Due to Department of Revenue (DOR) by 2nd Monday in June
• DOR will audit and correct values
• Full values will be determined and will be considered equalized values
• All properties assessed at 100% of fair market value annually
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Tax Incremental Financing (TIF) Statutes
SOURCE: Wisconsin State Legislature 2014 Legislative Council Study Committee on the Review of Tax Incremental Financing website (http://docs.legis.wisconsin.gov/misc/lc/study/2014/1192)
On February 11, 2015 the Joint Legislative Council unanimously approved the following committee recommendations:
In regards to: Current Statute Proposed Bill Redetermining Base Value for Tax Incremental Districts (“TIDs)”
A legislative body may request a redetermination of their TID deemed to be in “decrement situation” (meaning the value of taxable property in the district is at least 10% less than the base value for the district) from Department of Revenue (“DOR”), who determines a TID’s base value initially. The TID can be redetermined: In period of “decrement situation” for two years. Can request it only once in the lifespan of the TID. May incur a $1,000 fee for the redetermination. Legislative body of TID must conduct a financial analysis amending the
project plan to meet certain criteria.
Anytime for a single year. Local legislative body’s ability to require redetermination must be
included in the TID’s project plan. Ability of local legislative bond to request multiple redeterminations. Fee of $1,000 would apply to each redetermination.
TIDs "Distressed" Designation
Local government must act by October 1, 2015 to declare a TID distressed or severely distressed.
Extends the deadline by which a local government must declare a TID to be distressed or severely distressed to October 1, 2020.
Limits on TID creation as measured by total TID value
12% allowable ratio of TID value increments to total equalized value of taxable property in a municipality.
15% allowable ratio of TID value increments to total equalized value of taxable property in a municipality.
Generally, a municipality may not create a new TID if that ratio exceeds the statutory limit.
Vacant Land Inclusion and Initial Tax Incremental Base Calculation Revision
Restricts vacant property from comprising more than 25% of the area of a
newly-created TID. All tax-exempt city-owned property is included in the calculation of a
TID’s initial tax incremental base value.
Removes the restriction of vacant property. Revises the calculation of the initial tax incremental base of the district
to exclude all tax-exempt city-owned property.
TIF amendments and Extensions to Life of the District
City or village may, in general, amend the project plan of a TID subject to review of a Joint Review Board. No limit to the number of amendments as long as they are related to the
projects included in the original plan; however, only 4 amendments modifying boundaries are allowed.
A TID must terminate when political subdivision receives tax increments. to pay all of the TIDs project costs, when the political subdivision. dissolves the TID by resolution, or when the TID reaches maximum lifespan – whichever is earlier. Maximum lifespans are based on when the TID was created.
Allows the political subdivision to make any type of amendment to the project plan OR request an additional five-year extension to the TID’s maximum lifespan during the life of the TID or both if the district is adversely impacted by the following: An amendment to the provisions of TIF Statute found under 66.1105, stats. A change made by DOR to the equalized valuation method.
A change made by 2013 Wisconsin Act 145 (2013 Act 145) that increased state aid to technical college districts.
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Tax Incremental Financing (TIF) Statutes Continued:
SOURCE: Wisconsin State Legislature 2014 Legislative Council Study Committee on the Review of Tax Incremental Financing website (http://docs.legis.wisconsin.gov/misc/lc/study/2014/1192)
In regards to: Current Statute Proposed Bill Removal of tax increment sharing by TIDs barriers and places limitations on special purpose district
Positive tax increments may not be allocated from a donor TID to a recipient TID unless the following conditions have been met They are in the same municipal and have the same overlying taxing
jurisdictions. Donor TID has satisfied all current-year debt service and project cost
obligations. Allocation of tax increments is approved by Joint Review Board Additional criteria exists for TIDs established before October 1, 1995.
To be a recipient TID, one of the following must apply: Projects costs are to fund low-cost housing or remediate environmental
contamination. Not less than 50% of real property within the TID is blighted or in need of
rehabilitation. Mix-use or industrial-use district has been designated distressed. It is an environmental remediation TID.
Removes barriers that prevent TIDs from sharing tax increments, specifically allows a TID in existence to become a donor TID and share tax increments with a recipient TID even if the two TIDs do not have the same overlying taxation jurisdictions. Prohibits special districts from participating in the financing of a TID for any TID created on or after the effective date of the bill draft. Allows any type of a TID to be a recipient of donated tax increments.
Joint Review Boards and Annual Reports
Any political subdivision that seeks to create a TID, amend its project plan, have its base redetermined or incur project costs for an area outside the TID’s boundaries, must convene a temporary or standing Joint Review Board (a body with a membership comprised of the city, village or town, county, school district and technical college district and one public member). The political subdivision must prepare and make public annual reports of the TID and its revenue and expenses as well as distribute to overlying taxing jurisdictions by May 1. DOR may deny any request for review of the annual report and must provide notification of its decision. If reviewing, must hold a hearing and send written notification of the hearing to certain officials. If DOR secretary, who holds the hearing, makes a determination of noncompliance, the town must pay back ineligible costs to the district’s taxing jurisdictions or the TID must be terminated.
Requires every Joint Review Board (JRB) to exist during the life of a TID and requires the JRB to meet annually on July 1, or as soon as the Annual Report becomes available. Modifies the Annual Report: Deadline moved to July 1 distributing to each overlying taxing
district as well as DOR. Provides a list of information that must be included in the annual
report including developer information if in agreement. Requires DOR to post on its official Internet site the annual reports
describing the status of a TID no later than 45 days after its receipt. Allows DOR to grant an extension for submitting Annual Report. Requires DOR to charge a fee of $100 per day for each day that the
annual report is past due.
Repeals the DOR ability to deny a TIDs request for review and determination as to whether the money expended, or debt incurred by an industry-specific town TID complies with current Statute.
In regards to: Proposed Bill Industrial zoning requirements, planning commission notice, obsolete references, allocation of tax increments, joint review board review, and calculation of levy limits following dissolution of a tax incremental
Industrial Development Districts: Specification that the requirement that any real property within a TID found suitable for industrial sites and zoned for industrial use will remain zoned for industrial use for the life of the TID only applies to an industrial TID. Planning Commission Notice for TID Amendments: Reduction of the notice required by a planning commission in relation to a TID amendment from a Class 2 notice to a Class 1 notice. Obsolete References: Elimination of certain statutory references relating to TIF Statute that DOR identified as obsolete. Timing Penalty: Extension of a TID’s lifespan and period for allocation of positive TID increments by one year, in certain cases where the timing of the TID’s creation has reduced the maximum number of positive increments that may be allocated to the TID.
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Questions?