Not Looking Pretty

If you caught the State Journal yesterday, you really couldn't miss the front page, full cover graphic showing the 2012 Madison assessment picture.  Everyone believed that last year would be our last  negative blip on the equalized valuation.  Things had to tick upward...right?

The Sun Prairie school district even "conservatively" used a figure of 0% change in the equalized valuation that may not have anything to do with the district tax levy, yet has EVERYTHING to do with effective (district-wide) mill rate.

Remember folks, that if spending remains the same as last year, and equalized valuation of district property also remains the same (0% growth), then the mill rate remains what it was last year.  If spending remains the same and valuation drops 3 %, then the effective mill rate GOES UP 3%.

So let us take one little happy dream away from you. Do not think for one second that school district expenses will either drop or stay the same.  They WILL spend more folks.  District Administration was even nice enough to set aside 2% of this year's salary expenditures for raises next year!

Now...most of us (and the district too) are hoping that new construction such as the Woodman's will help push the equalized valuation of all real property above 0%.  We can't say for sure that won't happen, but a big piece of the puzzle is in:  Madison assessments.  And it sure looks like the area of Madison which falls within the Sun Prairie School district (a significant chunk thereof) looks to be DOWN at least 4% and as much as -5.9%.

Ruh Roh, Raggy.

Act 10 Reduces Property Tax Bills? Not in Sun Prairie!

We've all heard reams of rhetoric declaring that Gov. Walker's Act 10 reduces spending and gives communities the "tools" to reduce property taxes.  Well....we must not have used all the tools.   Or not used them properly. Or something.  Clearly WE must have screwed up...right?   Because surely the Governor means what he says and says what he means...right?

Or maybe like some Stephen King novel, Sun Prairie has somehow been trapped under a dome immune from the curative powers bestowed upon other districts.  Why? Because we  took a gander at the tax bill for the one home in the district that Culver et al have paraded for years as being the representative home.  Not only did the overall property tax bill increase by 2.6% ($150) over last year, but the assessed value DROPPED by 4.3% (over $10,000)!

Barring any huge new valuations added to the tax roles, even a flat tax levy will result in increased property taxes if property values shrink.  So this year we got the double whammy.   The net effective mill rate (property tax bill divided by assessed value/1000) amounts to a 7.2% increase.

The property tax bill for this "model" home has risen over 15% over the past 5 years, adding an additional $753 to the property tax bill.   We should be on The Biggest Loser what with all the pizza we've had to give up!

Some Good News! Equalized Values Not as Low as Predicted.

The Department of Revenue issued it's preliminary Equalized Valuation reports this week.  While the cities of Sun prairie and Madison valuations were down -0.79% and -1.11% respectively, other communities (Town of Bristol, Town of Sun Prairie) in the district saw their valuations rise.  While we won't know for sure until tax time, our estimate now looks to be a district-wide Equalized Value reduction of just -0.5%.  That's a good sight better than early estimates which suggested the numbers might be as low as - 2 to -2.5%.

An equalized valuation decrease of 0.5% (where the district had been basing its estimates on 0.0%) would mean that the projected district-wide mill rate will rise another 0.5%.

Statewide, property values feel for the third consecutive year, dropping 1.8 percent, or $5.7 billion.
---http://www.channel3000.com/houseandhome/28871405/detail.htm

Dane County property values dropped 0.92%
---http://www.revenue.wi.gov/equ/county.html

CLICK for link to DOR map

Monday July 18th Agenda: Attend Public Hearing on the Schools Budget

Note:  The district wants to spend more money and wants to exceed the school board's budget parameter of having the tax levy increase not exceed 3.5%.  Of course, they don't want to give anything up to accomplish this, they just want to raise property taxes.  


The Sun Prairie School Board Finance Committee will hold another Public Hearing on the proposed budget on Monday, July 18, at 7 pm at the School District Office (501 S. Bird St.).  We were pleased to see more than 40 community members at the June public hearing and hope even more will be able to attend on July 18th. Your input is very important to the budget process and the future of Sun Prairie's schools!
 
Recent developments since the last public hearing include:

1.  The State of Wisconsin released it's first state aid estimate for our school district.  Unfortunately, Sun Prairie's state aid is projected to decrease by 6.2%, which represents an additional $730,000 loss in aid than was discussed at the June public hearing.

2.  The total loss in state aid from 2010-2011 to this year will be over $2 million.  We had expected and planned for a loss in aid of $1,300,000, but did not expect to lose the additional $730,000.

3.  The School Board will be discussing options to address the loss of state aid.
 
More information is available on the district website.  Link is:  
http://www.sunprairie.k12.wi.us/budget_planning_2011_12.cfm#d159570

Statewide, School Portion of Property Taxes Rises 3.4%

In a report by the Wisconsin State Journal, the school portion of property taxes increased 3.4 percent this year. This represents the smallest change since taxes dropped a half a percentage point in 2006.

The average school tax rate is $9.11 for every $1,000 in property value. That is up 55 cents from last year.

The report says part of the reason for the increase is a 3 percent drop in the value of property taxed.

Nearly $4.7 billion was levied in taxes by school districts this year. That is 1.6 percent below the maximum that could have been sought under the law.

http://host.madison.com/wsj/news/local/education/local_schools/article_2d1010a8-0ac8-11e0-9602-001cc4c03286.html

Anomaly? Or Start of a Trend?

District Administrator Tim Culver has characterized what the community did last year---a 2-1 majority vote to reduce the school district's proposed tax levy by $2M--- as an "anomaly".
Was it an anomaly?  Or the start of a trend?  Guess we'll find out for sure this October 11th, when the school district brings it's budget and a tax levy projected to rise at least 4.5% over last year, to the community at the annual elector's meeting.


This is what the school district proposed last year:
SAMPLE MOTIONS FOR 2009 – 2010

Tax Levy
I move to approve a tax levy in the amount of Forty six million, two hundred forty nine
thousand, four hundred sixty one dollars ($46,249,461) upon all taxable property in the Sun
Prairie Area School District for the purposes of operating and maintaining the district schools
and for paying for debt for school projects.

...and this is what occurred
MINUTES OF THE 2009-10 ANNUAL ELECTOR'S MEETING

Set property tax levy for the 2009-2010 school year
It was moved by Gordon Anderson, 217 E. Goodland, Sun Prairie, and seconded by Lori Hansen, 962 Broadway Dr., Sun Prairie, to approve a tax levy in the amount of forty four million, two hundred forty nine thousand, four hundred sixty one dollars ($44,249,461) upon all taxable property in the Sun Prairie Area School District for the purposes of operating and maintaining the district schools and for paying for debt for school projects. Motion carried on a ballot vote: yes – 124; no – 60.


That's a solid 2-1 margin.  The community was hurting a year ago, and the community is STILL hurting.  The economy has NOT recovered.  As board member David Stackhouse pointed out this week, "Take a look at the downtown and the amount of office space for rent".  Good point.  No business and salary/job cuts means no tax revenues and no tax revenues means state aid for schools declines.  And that means that schools have to rely on the pockets of its community members.
Yes, we are opening a new high school, and yes, it is a historic event to open a new school and be under the revenue limit--let alone $3M under the revenue limit.  But these are historic times.  And historic changes are the order of the day.
Kinda makes you wonder if maybe NOW the district/board see that building a slightly lesser TajMah High School may have been a wiser move.  Aaaaahhh...but unlike our investment returns, hindsight remains 20/20.

Some Bad News: Equalized Values Lower Than Expected

On Friday August 13, the Department of Revenue released their annual Equalized Values report. This report is a major piece of the property tax puzzle.  Once we know what the tax levy will be, the mill rate is determined by dividing Tax Levy by the Equalized Value of all real property in a district or community.

The equalized values are based on data from January 1, 2009 and January 1, 2010, when the national economy and housing market dipped to its lowest point. In Wisconsin residential property values fell by 3.5 percent, or $12.9 billion, over that time period.
Equalized values are calculated annually to ensure statewide fairness and equity in property tax distribution. An equalized value represents an estimate of a taxation district's total taxable value, and provides for the fair apportionment of taxation district levies (including school districts and counties) to each municipality. Changes in equalized value do not necessarily translate into a change in property taxes.

8-yr Trend (City of Sun Prairie)
A quick glance of the 8 yr track record of equalized values for the city of Sun Prairie show the phenomenal growth, including a maximum of 25% increase in equalized value in 2004.  However, things have changes since the recession took hold in fall 2008.  For 2009, the net change in equalized value was flat (0%).  For 2010, we saw a drop of 5%.  That is amazing given an average increase in equalized value of 13% for the 5yr period from 2003 to 2008.


Total Equalized Values for SPASD communities 2010
If one averages the change in equalized values for all the communities that make up the Sun Prairie Area School District, we see that the average reduction for all is  -4.04% .
But....that involves the TOTAL values.  And clearly, while Madison has a total equalized value of over $23 billion, only a small portion of Madison lies within the Sun Prairie Area School District.  So, we need to re-apportion these values to a more proper reflection of their contribution to the whole "pie".

While the town of Blooming Grove actually experienced a 1.6% increase in equalized value over 2009, less than 1% (0.83%) of Blooming Grove's property falls within the SPASD.   Therefore, that increase will not impact us much.

"Re-apportioned" Equalized Values for SPASD communities 2010
Clearly we don't have all the keys to the magic kingdom, but it is equally clear that we know, from  annual school tax levy reports, exactly how much tax levy from each of the 10 cities and towns that make up the Sun Prairie Area school district.

And once we know that, we can take the percentage share from THIS year's equalized values and project the new equalized value for the district.
For instance, last year, we know that only $623,820,761 of the City of Madison's  equalized value contributed to the Sun Prairie Area School district.  While this accounted for 15.84% of the total equalized value for SPASD, it only represented 2.7% of Madison's total equalized value.  Therefore, we can take 2.70% of Madison's 2010 Equalized value ($22,212,095,800, a 3.97% LOSS), and apply that dollar amount to SPASD's total for 2010.  We can use this same approach for the other 9 municipalities that comprise SPASD.)

We may be off by a small degree, but it would take some major corrections to turn -4.4% into 0%.  Not gonna happen, folks.
Fall 2009 School District Certification of Full Equalized Value - Tax Apportionment

Why do you even care?
You should care, because the equalized value is the "denominator" in the mill rate equation.  For the less math-minded, as the denominator shrinks, the mill rate INCREASES by the same amount.
Projected mill rate as of 8-27-2010 was $11.90.  This is based on a 0% growth in the Equalized Value ($3,937,400,000).  If we know the result (mill rate) and the denominator (Equalized Value), then the numerator (tax levy) has to be $46,850,000, give or take a few thousand $.
If the equalized value drops 4.4% to $3,760,000,000, then the mill rate increases 4.4% to $12.46.  That's a net increase of $0.56, which translates to an extra $112 on a $200,000 home.
Looking at it another way, assuming our equalized value projections are accurate, in order to retain the mill rate of $11.90, the tax levy must be reduced by another 4.4%, or about $2.1M.


What is "Equalized Value"?
The estimated value of all taxable real and personal property in each taxation district, by class, as of January 1 and certified by the Department of Revenue on August 15 of each year. The value represents market value (most probable selling price), except for agricultural property, which is based on its use (ability to generate agricultural income) and agricultural forest and undeveloped lands, which are based on 50% of their full (fair market) value.
--2010 Guide for Property Owners ( http://www.revenue.wi.gov/pubs/slf/pb060.pdf )

Board Switches From "What Can We Cut?" to "How Can We Sell This Budget?"

The special school board working session to review the budget last night began with another 30 minute slide show. Just in case the school board doesn't recall what the mission is, or how the budget has progressed.

Then, for about 30 minutes, board members kicked around possible areas where the budget could be trimmed.

That done, the tone suddenly changed. All five school board followers in attendance felt the change very clearly in the air. The discussion at the table changed. Only newest board member John Welke (showing clearly that he hasn't sipped from the KoolAid ) wanted to discuss budget reductions. For the rest of the board, the discussion for the last 90 minutes focused intently on "How Can We Sell This Budget to the Community?".

We should mention of course, to be fair, that Caren Diedrich did propose one cost cutting measure: not having an attorney present during expulsion hearings. Shee...YAH! McFly!!! Isn't that like the ONE venue in which you absolutely positively WANT legal representation? We may not LIKE paying those expensive legal beagles...but...we're talking about going off the road at a serious mile marker on a student's life highway. Just maybe we want an attorney present to make sure we don't...you know...fail to follow policy or something. Ya know?

The undertone of the evening was essentially, "Bring it on, community. This is the best it's going to get...and it's better than what we told you it would be during the referendum planning (more on that to come)!". We wonder if these board members are poker players. Not big gamblers, here, but that would be a game we'd want in on.

Oh...the evening wasn't without SOME reductions. There WAS consensus to use $500K of fund balance (interesting figure, about exactly equal to the projected increase from where it started last year) to lower the tax levy.  Gee...the prodigal saviors of fund balance might finally be getting it.  But $500 K?  When you had a $1.3 MILLION surplus?  Good luck with that.  Beware the Ides of October.

The bottom line is that with some minuscule snipping, it is expected that the proposed tax levy will be just about 5% over last year.

The good news....that's less than the 8% we heard back in March.

The not-so-good news...it's still 5%.  Anyone ...wait...anyone who does NOT work for the school district get a 5% raise this year?  Anyone get a raise, period?

Stay tuned for more info from last night's meeting....

Will State Superintendent Tony Evers' School Funding Plan Work?

Admittedly, State Superintendent Tony Evers tells us that he has withheld the intricate details of his plan. His hope is that over the summer, people will at least get talking about school funding. Mission accomplished, Mr. Evers; you have our attention.

Evers points out that about $900M in school tax levy "credits" is given to municipalities to lower property tax bills. If it were split evenly to the approximately 450 public school districts, that would amount to about $2M per district. Currently, Sun Prairie, a larger school district, gets about $4.4M. Of course the credit would not be equally distributed.

Evers' plan --at least the extent of which he has shared is essentially based on returning the "School Tax Levy Credit"-- which you may or may not recall seeing on your property tax bill-- where it belongs: schools. Presently, the school tax levy credit dollars are paid from the Department of Revenue directly to municipalities, who in turn apply it, according to a formula, to each property owner's property tax bill. School districts see not one thin dime of that money--although the money is "counted" as a state aid towards schools. Evers' plan is to instead pay out that money directly to school districts, who in turn will apply it against their budget to reduce the tax levy.

With that as a very basic lead-in, and understanding that none of us knows exactly what Mr. Evers has in mind just yet, let's see if, on the surface anyway, it passes the smell test.

* DISCLAIMER *

We are using real numbers, but applying them as best we can tell from information we have at this time. Until we get detail from Evers, this remains conjecture, not fact. The numbers are factual; the way they are applied may change once we learn the details of Evers' plan. We are also simplifying it by using ONLY City of Sun Prairie numbers. In theory, we should be entitled to a larger pool of school tax levy credit dollars from based on a portion of tax levy credit provided to other municipalities within the Sun Prairie School district.

Superintendent Evers wanted to generate discussion. This is our 2 cents.

What are the key numbers?

• In December 2009, for the 2009-10 school year, the City of Sun Prairie received a little over $4.4M in school tax levy credit.
• The Sun Prairie school district's "average" home (which they have used for years to demonstrate Referendum impacts is assessed) at $255,400 for 2009.
• This "average" home paid property taxes of $5,546.85 for 2009.
• This "average" home received a "School Tax Levy Credit" of $455.09 for 2009.
• The effective mill rate "credit" of the school tax levy credit was $1.78 per $1,000 assessed value.
• The actual -after credits-- Sun Prairie school district portion of the property tax for our average home was $ 2,556.94
• The after credit effective mill rate of the SPASD portion of property taxes (for all SP homes) was $10.01 per $1,000 assessed value.
• The 2009 tax levy for SPASD was $ 44,249,461.

Key Assumptions

1. We remove the school tax levy credit ($ 455.09).
2. We reduce the tax levy by the amount of the Sun Prairie school tax levy credit ($ 4,430,336)
3. This reduces the tax levy required by the same amount to $ 39,819,125.
4. Using the re-calculated $ 9.01 effective mill rate, the new SPASD portion of the property tax for our average home is $ 2,300.93.
5. All other property tax portions remain the same.

The Result

Based on the assumptions above, the property tax for an average home in Sun Prairie actually INCREASES by just a hair under $200, or a 3.6% increase from what this average homeowner actually paid.

Does it really help the schools?

Again, we lack the details of Evers' plan because he has not released them. On the surface, it would seem that there is simply a trade-off as the tax levy needed to run schools is reduced by the amount of the tax levy credit. If the plan calls for just simply giving the tax levy credit directly to the school district as an additional state aid, then we're just substituting tax levy dollars with levy aid dollars. No new revenue is being generated. It's the same revenue, with more coming from the state.

Why it doesn't appear to work

Two big reasons:

1. Unless the plan allows for more spending (increases revenue limits), it has a net zero effect on schools.

2. It actually INCREASES property taxes -- at least for Sun Prairie under this scenario.

Go back to one key figure: the effective mill rate of the school tax levy credit - $1.76.

Now consider that the SPASD portion of the property tax bill is reduced by $256.01. That amount translates to an effective mill rate credit of only $1.00. That means that by trading away our school tax levy credit for the ability to directly apply the entire credit against the district's tax levy, we are effectively trading away a $0.76 mill rate credit. That's a loss of $76 per $100K home value.

The reason for this MAY be the missing piece of the Evers plan. Because Sun Prairie's tax levy is so high: $44.25M, the net effect of the tax levy credit ($4.3M) represents only a 10% reduction to the tax levy. However, the school tax levy credit for our average homeowner, $455 represents a 17.8% decrease in the school district portion of average homeowners tax bill.

What We Don't Currently See in the Evers Plan

What seems to be missing is how exactly this plan gives more money to schools. With the information we have at this time, it appears that Evers' plan simply trades one dollar source for another. The tax levy credit actually has more value to a property owner when it comes directly off the top rather than after it is diluted by the overall tax levy.

Of course, that depends on the absolute value of the tax levy, wouldn't it? For instance, if the school district tax levy was only $4.3M - the same as the total value of the tax levy credit-- then the adjusted tax levy would be zero, meaning the school district portion of the property tax would be reduced to zero.

Where's the Spendability?

What's missing from the Evers Equation is the basic spendability. If he wants to provide more money to schools, then the plan has to be more than just placing the school tax levy credit on a different line of the property tax bill. In short, the money allocated to municipalities to reduce property tax bills must be ADDED to each given school district's revenue limit. That's the only real way that "more money" can be given to schools. They have to be able to SPEND it. And, that, folks is scary monsters with the captains we have at the helm.

What does Raising the Revenue Limit Mean?

Remember the old "See Dick. See Dick run. Jane likes to watch Dick run" book?

Here's an updated version.

See the Revenue Limit.

The Revenue Limit "limits" how much a school district can spend.

See Revenue Limit expanded.

See school district budgets expand as allowed by expanded Revenue Limit.

School district budgets are 80-85% personnel costs.

See school districts hire more people and pay them even more ridiculous salaries and raises.

See Dick lose his school tax levy credit.

See no change to the school district portion of Dick's property tax bill because the school district won't be taxing any less.

See Dick's property tax bill go way up.

See taxpayer Dick take it in the shorts.

Does Madison Property Assessment Decline Affect Us?

The headline of today's Wisconsin State Journal rang loud and clear:
property assessments declined for the first time in 35 years . The average drop is 3.1%.

That's bad news for homeowners on two fronts:

1. If you're trying to sell your home, plan on getting less for it.

2. Also plan on paying higher property taxes.

What? Hold on a sec! If my property is assessed less, don't I PAY LESS property tax?
Wrong. Dead wrong.
Property taxes don't go down unless spending is increasing at a rate less than that of property assessments. This includes, of course, both existing properties and new (from the previous year) developments/construction. When that happens, the costs are spread over a larger tax base, meaning each individual property owner pays a smaller share.

New values don't directly bring higher taxes but shifts the burden among taxpayers, said Todd Berry, president of the Wisconsin Taxpayers Association. "Falling assessments don't mean falling tax bills," he said. "We're probably going to be paying more property taxes.

Because the recession deepened last year, assessed values for every type of real estate - homes, condos, apartments, commercial buildings - dropped for 2010. Only personal property assets, like business equipment, which account for a sliver of the city's value, rose slightly for 2010.

Mill Rate Review
The mill rate is calculated as: Tax Levy ÷ Equalized Value
Tax Levy (of the taxing authority)
divided by
Equalized value (of all real estate in the district)
...and remember, the units are dollar per dollar of assessed value.
You typically see the mill rate expressed in dollars per $1,000 of assessed value.
To get this figure, simply multiply the calculated mill rate by 1000.

All things being equal...
If the Tax Levy does not change
and the Equalized Value DROPS 1%
then the Mill Rate RISES 1%

so if we do not want a drop in equalized value to affect property taxes, the only solution is to REDUCE the Tax Levy by the same amount as the reduction in Equalized Value
...and that means the budget needs to be trimmed.

Simplified Property Tax Scenario
Imagine a fictional school district:
• 1000 houses each valued at 200,000; total property value = $ 200,000,000
• 25 businesses, total property value = $200,000,000
• Total Equalized Value=$400,000,000

• School district budget: $8,000,000
• State Aid (remains constant from last year) = 50%, $4,000,000
• Tax Levy= $4,000,000 (make up difference between budget and state aid).

• Mill rate = 4,000,000/400,000,000 = 0.01
• Mill rate = $10.00 per $1000 assessed value
• $200,000 home pays.........$ 2,000.00

If property values drop 2%
Now Equalized value= $ 392,000,000

…and school spending doesn't change…
• Tax levy (unchanged from proposal)= $ 4,000,000
• Mill rate is now $ 0.010204
• Mill rate (per $1,000 assess value) $ 10.20
• $200,000 home now pays $ 2,040.82
…which is 2% more than if Equalized Value stays flat

Does this affect Sun Prairie?
The school district budget --at least the "rough draft" we've seen to-date---is based on the assumption of a 1% rise in the "Equalized Value" (which is the total value of all property in the district). If Madison property assessments are dropping an average of 3.1%, what's the likelihood that Sun Prairie assessments (and Equalized Value) will RISE 1%?

Obviously, we don't know the total yet (although the individual cites and towns in the district could give us their projected totals--hint, hint).

BUT...what we CAN do is check the Sun Prairie city assessor's website and look at the property assessments which are now complete and on-line.. A cursory glance of a handful of properties seems to suggest a FLAT assessment....meaning a 0% increase.

That means that the school district "rough draft budget" (for lack of a better term) is planning on spreading the tax levy over 1% more value than will actually result. Since the denominator (equalized value) appears to be lower than expected (0% growth vs. 1% growth), that means the result of the mill rate equation will INCREASE. Begging 1000 pardons for forcin' y'all to remember your long division rules.

Sun Prairie Now 3-Year Champ of Property Tax Rates

You may have missed it. The Wisconsin State did it's annual fair comparison of area property taxes. Guess what, chicken butt? Sun Prairie came out on top. Well..technically, Edgerton did, with a $25/$1000 rate. BUT.....that really reflects a correction due to an oops of Sun Prairie School Boardian proportions on last year's tax bills. So... actually, we take the top slot again. Note for those slow on the uptake: being the property tax leader is NOT a good thing.

2009 fair tax rate comparison chart

2008 fair tax rate comparison chart

2007 fair tax rate comparison chart

Oh yeah...but we DID get named one of the top 10 cities for families this past summer. Or did they mean one of the top 10 cities for WEALTHY families.

Administration Works to Resolve Property Tax "Bounce-back"...NOT!

Remember that ultimately annoying, but maniacally gleeful cry of "NOT!" shouted out by characters Wayne Campbell or Garth Algar (of SNL's "Wayne's World" fame) immediately following any insincere comment? That's what immediately comes to mind as we read through the district's proposals for "budget reductions".

Oh yes...the proposed "budget cuts" have been released, and will be up for discussion at next Monday's (11-23-09) school board meeting.

You'll recall that ultimate goal was to respond to the school board directive to "find" at least $1.1M in budget cuts for this year (2009-10) in order to limit the amount of fund balance required to balance the budget to about $800K.

"Logic would dictate...", as Spock so frequently began his monologues, that any such "cuts" would have been geared towards those permanent in nature. Permanent cuts are necessary to avoid the "bounce-back" to property taxes next year. Of course, since when does the district administration proceed according to some logical path?

The annual operating budget for 2009-10 is $68,800,000.
The amount of permanent cuts proposed: $21,000.

That's right. We didn't forget any zeros. These proposed "permanent" measures trim this year's spending by 0.023% and future spending by no more than 0.03%. And actually, that percentage will drop lower due to the District's propensity for increasing it's budget at a rate of 5-6% annually.

Guess the school board needed to be more clear in their directive.
Or does administration really see what transpired at October 12's annual meeting as an isolated "glitch", and the community will gladly dig deep into their pockets next year, and all future years, to shell out phenomenal property tax increases?

Of course, if we all received compensation approaching $150,000 per year, we might feel that way, too. NOT!!!!

What Are Similar Size Districts Doing Budget-Wise?

The Sun Prairie school board and district administration like to play the role of the lonely victim. Reality is that EVERY school district in the state is facing the same challenges as Sun Prairie. How other school boards rise to the challenge, however, is a distinguishing characteristic.

SP-EYE reviewed the top 5-6 districts both with lower and higher enrollments as ours and took a peek at THEIR budget process. We wonder how come our own board doesn't do this kind of due diligence. These other districts haven't yet removed the words "cut", "reduction", or "freeze" from their vocabularies.

Interesting take on the subject of cuts.

5 districts just larger in size than Sun Prairie
Beloit
Beloit Daily News article 10-7-09

Board gets first look at potential 5.94% levy hike"I’m very concerned about increasing mill rate knowing how many individuals in Beloit are currently struggling," member Shannon Scharmer said.
Initial projections show the tax levy could increase by 5.94 percent, or just under $700,000. The total levy would be $12,484,843.The School District of Beloit board cut nearly $4 million last spring but, like districts across the state, received a whammy when the governor’s budget reduced education funds by 3 percent. "How do you not tax knowing that the way that the state has now rigged the game you can’t continue to reduce to fix this?" he said. "You don’t want to be forced into ‘you have to tax to the limit of your funding position.’"

The board may need to cut another $506,671, but noted he has yet to factor in the federal stimulus money, among other details. He and Thompson also are learning about the district’s staffing needs, which was also brought into focus after the Third Friday Count showed Beloit Memorial High lost 63 students.

Board member John Winkelmann suggested the executive team develop possible reduction items so the board can begin discussions before the budget adoption meeting.Perhaps this is the year the district discusses its priorities with the community and whether it needs to provide everything to everybody, Winkelmann said. For example, he said, does Beloit need to have every Advanced Placement course, or is it OK to let the students take that class elsewhere."We’ve got to think about that question because the ability to pay is not out there right now," Winkelmann said. "Everything is going down." As member John Acomb said, "We’re open to a lot of ideas."

La Crosse
Article on LaCroose budget 7-21-09

The property tax rate for La Crosse public schools would go up by $1.43 under a proposed 2009-10 budget presented to the school board Monday.

The proposed tax rate would be $12.09 per $1,000 of assessed property value, compared with $10.66 in the 2008-09 budget year, according to figures presented by Janet Rosseter, executive director of business services.

District officials expect the $12.09 tax rate to be "the worst-case scenario" for 2009-10 but won't know until factors such as enrollment, state equalization aid and school levy credits are determined. Recent numbers from the state Department of Public Instruction show the tax rate could be closer to $11.70, Rosseter said.

Final figures won't be known until October, when the district's final enrollment figures are in and the state sets its equalized property values. Rosseter used a 2 percent decrease in equalized value.


West Bend
West Bend article

West Bend School District Superintendent Patricia Herdrich blamed talk radio for driving much of the crowd that packed Badger Middle School for Monday's annual meeting, where a recommended 12.1% tax increase was rejected.

West Bend- MKE Journal-Sentinel 10-6-09

The School Board is recommending making $300,000 in changes to its proposed 2009-'10 budget in an attempt to minimize property tax increases. West Bend School District Superintendent Patricia Herdrich said the changes may mean a levy increase of 9% over the 2008-'09 school year, which is still less than previously had been suggested.

Going into its annual meeting last week, district administrators had recommended a property tax increase 12.1% higher than the year before. District electors rejected the recommended levy at the annual meeting, in a vote that is advisory to the school board.
District officials revised its estimated levy increase to 9.9% by the time of Monday's work session for the school board, where they recommended further budget changes.

Half of the recommended reduction in the estimated levy would come from reducing cleaning in buildings. The second largest item recommended by the board would be a salary freeze for district administrators, estimated to save $80,000 in 2009-'10. The board also recommended raising $20,000 in revenue from increasing facility use fees for the community and restricting salaries for custodial and technical staff, for a saving of $50,000.

In an e-mail announcing the recommendations, Herdrich said the changes would mean the district would be levying below state-allowed revenue limits. "This will make the gap larger next year as we plan for next year's reductions," she wrote. "It is highly likely the 2011-12 and 2012-13 budgets will be equally challenging due to loss of stimulus dollars."

Wauwatosa
Wauwatosa NOW 6-17-09

A first look at the Wauwatosa School District's 2009-10 budget proposal reveals many variables, all waiting on firm numbers from state legislators. John Mack, district director of business services, said the current version of next year's proposed $77.2 million budget is one of the most difficult he's ever created because of that ongoing uncertainty.

As of right now, the district's 2009-10 budget calls for a $43.4 million property tax levy, an 8.59 percent increase over the $40 million levy for the current budget. Property tax rates would increase to $8.09 per $1,000 of equalized property value, a hike of 64 cents per $1,000 of value.
Superintendent Phil Ertl said next year's property tax rate ultimately might be lower than proposed, but district officials won't have solid guesses about amounts until the dust settles at the state level. State lawmakers have said they expect a finished budget in July.
Mack said he and district administrators carefully considered each expenditure, including all staffing positions, to make the estimates included in the proposal. At $64.1 million, staff salaries and benefits make up 83 percent of the proposed budget, up from 80.12 percent this year. Mack suggested that School Board members consider reining in staffing costs in the future to help reduce the overall budget.

Neenah
Neenah article

The 2009-10 Neenah school budget calls for a 7 percent increase in property taxes but still shows spending exceeding revenues, a practice that officials had sworn off in recent years. The Board of Education reviewed a draft of the $84.1 million budget Tuesday. It would require the owner of a $150,000 home to pay $1,298 in school taxes. That's $89 more than last year.

The budget has a structural deficit of $600,000. That means if savings cannot be found during the school year, the school district will have to use cash reserves to fund ongoing operations. Neenah had structural deficits from 2003-04 to 2006-07, with the shortfall reaching a high of $3.7 million in 2005-06. The practice was criticized at the time as unsustainable.

"I am not so upset that we might take out $600,000 this year," Lehman said. "We put $3 million into the kitty over the last two years." Neenah's cash reserves rose from $7.9 million in 2007 to $10.9 million this year. The balance was helped by a referendum that empowered the school district to levy an extra $2.6 million in 2007-08, $2.2 million in 2008-09 and $1.2 million in 2009-10 to cover operational expenses.

Neenah's budget accounts for a 1.8 percent decrease in staff (12.65 fewer positions) and a stable enrollment.

5 districts just smaller than Sun Prairie

Oak Creek-Franklin
Franklin NOW article 9-2-09

A Franklin School District resident with a home valued at $200,000 can expect to see a $62 increase in school taxes this fall as residents have approved a 2009-10 budget that includes a tax levy hike of 3.9 percent. About 25 district residents approved the $30.6 million levy at the district's annual meeting last week. Because some factors have not yet been determined, the budget could change between now and when it becomes official later this fall.

The tax rate is expected to increase by 2.9 percent, to $11.35 per $1,000 of assessed property value. The district's total operating budget will be about $49 million, a 2.4 percent increase over last year's $47.8 million budget.

School Board member Dave Szychlinski said it was a tough budget to prepare in light of the recession, especially given many residents' own financial battles. "We know that people are struggling, many people in our community have lost their jobs, and yet we have an obligation to prepare our young people for their futures," he said.

The district was forced to make some tough decisions because of losses in state aid, and officials made about $833,500 in cuts, he said. Next year will likely bring more cuts, Szychlinski added.
Officials also decided not to begin a 4-year-old kindergarten program after the state withdrew funding for start-up programs.

The district picked up about $379,700 in additional revenue by adding 67 seats through the state's Open Enrollment program, which allows non-resident students to attend Franklin schools.

D C Everest Area
DC Everest Annual Meeting booklet

Tax levy increases 0.24%; mill rate unchanged at $9.52.

Wisconsin Rapids
Wisconsin Rapids Tribune 10-20-09

The Wisconsin Rapids School District tax rate will increase for the first time in six years this fall -- the result of falling property values and state aid cuts, administrators said.

District residents will see a mill rate of $8.93 per $1,000 of equalized property value, about 12 percent higher than last year's figure of $7.98. The district's total tax levy in Business Services Director Dan Weigand's proposed budget was about $19 million, about a 9 percent increase from 2008.

Manitowoc

Manitowoc article 10-14-09

At its October 13th meeting, the Board of Education approved a $71.7 million budget for the current school year, a 2.24% increase from last year. The total property tax levy will increase 4.35% to $18.6 million, but the net tax levy rate (homeowners' cost-per-thousand) is expected to be relatively flat due to an increase in area property value overall.

Since budget planning began in February 2009, the Board made $2.3 million worth of reductions to keep the numbers under the state-imposed revenue cap. Cost-control decisions included a reduction of one central office administrator, a 5% across-the-board reduction in supplies and materials, reduction of 5.5 teachers, reduction of 3.5 paraprofessionals, elimination of EXCEL advocates and library aides, and a superintendent salary freeze, among others. Not all union contracts are finalized, but some employee groups have made voluntary concessions in light of the tight budget

Hudson
Hudson website Annual meeting document

Board makes $2.35 M in cuts to avoid a 20.25% mill rate increase. Mill rate of $7.82 represents an 11.06% increase. Tax levy of $28.4M represents an 8.25% increase. Proposal includes reducing

The Numbers You Need to Know

Hopefully many of you can attend Monday's annual elector's meeting to cast your vote regarding the school district budget for 2009-10.

We all want to have the best education possible for our children. But we lso believe that we don't have to break the bank to do so. In tough economic times, we have to be particularly vigilant with regard to spending and impose some fiscal conservatism on our free-spending school board.

We're not anti-education. In fact, nothing could be further from the truth. We believe in a strong quality eduication delivered with fiscal restraint and fidelity to funding.

Please keep these numbers in mind Monday:

$46,249,461 - That's the amount of tax the school board proposes to levy. YOURE VOTE decides how much of a levy they can actually set.

$8,000,000 - The amount in "fund balance", some of which COULD be used to offset the tax levy...but your school board voted not to do that.

$5,160,700 - The amount by which district spending exceeds revenues.

$1,454,892 - SPEA(teachers) contract increase

$640,000 - net deficit due to 4K program start-up

$183,060 - The cost of procuring the last installment of high school funds, which should have been taken out of the debt service or special project accounts, but your school board voted to add it to your tax levy.

$161,348 - Total compensation of Dr. Culver

$110,693 - Approximate cost of 3.8% raise for administrators

$110,000 approximate additional state aid from increased enrollment--which has yet to be discussed.

$83,685 - additional Microsoft technology money which COULD have been used to lower the mill rate, but wasn't.

$80,000 - Cost of Admin Support raises (ranged as high as 13%)

12.56% - the increase in tax levy over last year

7.6% - the increase in the Dane county property tax portion

$11.85 - the proposed mill rate for 2009-10 (if you vote to approve the proposed tax levy)

$1.32 the proposed mill rate increase over last year

$0.97 - The portion of the mill rate increase resulting from increases in spending.

$0.36 - The portion of the mill rate increase resulting from high school construction project.

Explaining the Mill Rate Increase

So...by now many of you have become more informed.
You know that the school tax levy mill rate is increasing by about $1.32

But why?

Is it the high school construction? Or something else?
The answers can be found if you pry into the Annual Meeting Booklet"

The total tax levy is proposed to be $46,249,461
The increase in levy over last year is $5,160,700
This is broken down into 2 "portions":
.......The "general budget" levy increase: $ 3,778,246______ $ 0.97
.......The debt service levy: $1,386,766_______ $ 0.36

The high school construction accounts for only $0.36 (28%) of the proposed $1.28 mill rate increase. Clearly, it's not the construction that causing the large increases.

Hmmm...big salary increases coming home to roost?

What a Difference a Year Makes!

When you start digging into the Annual Meeting Booklet, it's amazing what you find.

Last year, we projected that the debt service payment portion of this year's (2009-10) tax levy would be about $7,500,000. Wind the clock a year forward and suddenly we're paying $9,500,000!

Last year, the highest projection for the debt service portion of future year tax levies would be a hair under. $10,000,000. Suddenly, the projection calls for a 40% increase to a maximum of almost $14,000,000.

Last year, the projection was that taxpayers would see relief from the debt service portion of the tax levy beginning in 2016 (dropping to about $6,000,000). This year, the debt service portion of the tax levy is not projected to drop below $9,500,000 until 2020!

Of course, that picture could change as the district refinances its debt. But isn't it a little odd to see this degree of change in one year's time?

But, even if we do re-finance, re-financing isn't free, as those of you who have re-financed your mortgages over time well know. Toss some more costs onto the budget.

Why should you care? The total proposed tax levy for this year (2009-10) is $46.25M. Of that total, $9.25M is the portion used to pay down district debt - "the "debt service" levy.

So, debt service levy is 20% of the total tax levy. That means that of the $11.85 mill rate, $2.37 goes to paying down the debt. As that debt service levy rises, so will your property taxes! Remember that, at least for this year, the mill rate rises about $0.25 for every $1,000,000 of tax levied. If the debt service portion is to rise to $14,000,000 (from it's current $9.25M), then the mill rate will rise about $1.15 just from the debt service portion alone! That's without considering any other budget costs (the other 80% of the tax levy).

Last Year at this time, when the Annual Meeting Booklet came out, and we were about to set the tax levy for 2009, the debt service payment picture looked like this:

And now, one year later it looks like this:

The Perfect Storm Draws Ever Closer

Remember that "perfect storm" we talked about a while back? Well...Dane County released its budget late this week and announced the largest property tax increase in 10 years. Ad that on top of the $11.85 mill rate the SPASD is preparing to set. Be sure to be sitting down with an adult beverage in your hand when your tax bill comes in.

Wait! You CAN do something. It's NOT too late. But you DO have to attend (and vote at) the Annual Elector's meeting on Monday October 12, 2009. 7:00 pm at the Sun Prairie High School.

Most people think their civic duties ends with voting in April and November (plus associated primaries). But THIS meeting is the ONE opportunity you have to DECIDE the mill rate. YOU can vote on how much the school district spends on its budget for 2009-10.

No MNF of interest. It costs you about 1.5-2 hours of time maximum.

WSJ article on Dane County tax increase

" Dane County property owners would see the biggest increase in their property taxes in more than a decade under the $490 million budget proposed by County Executive Kathleen Falk today. The budget calls for a property tax levy of $128.6 million, a 7.9 percent increase from 2009.

During Falk's previous 12 budgets the highest percent increase had been 5.05 percent in 1998. That means the average Madison home valued at $245,000 would pay $625.83, a $38.07 increase from 2009. The previous highest increase on the average home was $25.68 in 2004.

Increasing for the first time in more than a decade was the property tax rate, which is determined based on the equalized value of all property in the county. The tax rate per $1,000 of assessed value is $2.55 up from $2.37 in 2009. Overall, the equalized value of property in Dane County grew a paltry 0.79 percent, the lowest in recent memory. "

--Wisconsin State Journal 10-1-09

So...the Sun Prairie Areas School District is reaching a 10-year high with its mill rate, and so is Dane County. At least the City of Sun Prairie alders are showing restraint by talking cuts and keeping the mill rate down. The school board could learn a lesson there.

Why NOT use Fund Balance to lower the mill rate?

The school board keeps telling you that they must not use fund balance to lower the mill rate because it adversely impacts our bond rating, making it harder or more expensive to borrow money. Wait...aren't we DONE borrowing large amounts of money after this last set of bonds for the final phase of high school construction?

The school board's own policy says that there is money available in fund balance.
School board policy #DIBA, UNRESERVED, DESIGNATED FUND BALANCE says,

" The Board’s goal for the unreserved designated fund balance shall be ten percent ( 10%) of the annual proposed level of expenditures. All unreserved, undesignated funds shall be used for this purpose. "

Hold on...if there was $8,003,169.28 in the general "fund balance as of 7/1/09 (page 21 of the annual meeting booklet

...and the projected expenditures for this year are: $68,825,330.00 ((page 21 of the annual meeting booklet

...and 10% of that figure is $6,882,533

...then that means that they could use about $1,200,000 of fund balance to lower the tax levy (and mill rate) while still be meeting their "goal". And isn't a "goal" something one strives for (rather than MUST achieve)? And fund balance IS a "rainy day" fund, and folks, the economy suggests things do not get much rainier.

What does DPI say about how large fund balance should be?
How Large A Fund Balance?
Determination of an appropriate fund balance is a critical factor in district financial planning and budgeting processes, but it is strictly a local matter. The Department of Public Instruction makes no recommendation regarding the amount a district should have as its General Fund balance, except that the department encourages districts to seek legal counsel should they contemplate budgeting for and/or operating with a negative general fund balance.
As part of the budget process, the board must determine fund balance amounts to be:

• retained for working cash needs, recognizing that the working cash fund also serves as district's contingency or "rainy day" fund.


• used to fund expenditures of the next fiscal period, recognizing that if used for recurring expenditures, future budget decisions will revolve around finding resources to continue funding these expenditures.

The most commonly asked question regarding fund balance is how large should it be? Perhaps the best answer would be: "an amount sufficient that short term borrowing for cash flow could be avoided and would also allow the district to set aside sufficient assets to realize its longer range goals." However, this may not always be practical or politically possible. The school board must make a policy decision as to the extent they will borrow for cash flow rather maintaining a working cash balance.
- Wisconsin DPI on Fund Balance

Hold on to your wallets!!!!

Deputy District Administrator Phil Frei was asked recently what the current projections are for NEXT year's millrate, considering that the increase for THIS year is expected to be at least $1.28 (per $1,000 of assessed value).

Frei's estimate for the 2010-11 year is: $1.32 (per $1,000 of assessed value).

That's a total of $2.60 additional, or an additional $520 for a $200,000 home (as compared to 2009 property taxes).

Adding $1.32 on top of the $1.28 (at least) for this year (2009-10) will increase the total school district mill rate to $13.13, the highest it has been in over 10 years. All that building? Time to pay the piper, folks.

Please note, however, that mill rates can never be calculated with a high degree of confidence until final aid and equalized value (of district property) numbers are obtained in mid-October of any given year.

Reducing the Mill Rate - Mission Possible?

So we know that the school board is proposing (and will approve it unless enough people get vocal and convince them otherwise) a $1.28 minimum increase to the millrate, which will add $256/year to the property taxes on a $200,000 home.


Tax Levy (proposed)=$46,089,546. The Mill Rate(proposed) =$11.81 (per $1,000 assessed value). Do the math, and you see that basically every $1,000,000 of tax levied results in a $0.25 increase to the mill rate. Yep...one George Washington quarter. So....to reduce the mill rate to last year's level (net zero), with a mill rate increase of $1.28 (which amounts to 5 quarters) means we'd have to shave about $5,000,000 off the budget. OK...that sounds pretty unlikely...but....

What they haven't told us is how we got there or what we could do to lower such a huge increase during very tight times. What we can tell you is what some of the new additions have cost us relative to the mill rate:

• Teachers Contracts, $1,457,075 = $0.37 on the mill rate
• Debt Levy increase, $876,000 = $0.22 on the mill rate
• New "SP4K" Program, $640,000= $0.16 on the mill rate
• Administrator Pay Increases, $113,895= $0.03 on the mill rate
• Administrative Support Pay Increases, $80,000= $0.02 on the mill rate

How to Reduce the Mill Rate

Basically there are 3 ways to reduce the mill rate:

1. Increase the value of property in the district. The budget was based, as directed by the Finance Committee, on the assumption of a net zero increase in the value of property (otherwise known as "Equalized Value") within the school district. This one is a little beyond our control. We know that assessed value of our homes actually went down, so the first inclination is that maybe the projection is actually too high already. But you also have to consider the value of NEW homes built since last year, and new businesses in the district...such as the new Target. A 1% increase in Equalized Value (with no reduction to the Tax Levy) would result in a $0.12 decrease to the mill rate.

2. Decrease the Tax Levy (Budget Cuts). This is the tough part...cutting things from a budget. Some things are fixed, such as the debt levy; we borrowed the money for construction of the new high school and now we have to start paying it back. This is also where the district and school board are right (technically) that a 7-day newspaper subscription, flowers, KitKat bars,sea bass dinners, and lots of pizza don't really affect the mill rate. Individually, they have minuscule impact on a mill rate. Add 'em all up, however, and we do start to see "real" money. More importantly, this kind of "want vs. need" budgeting only costs the taxpayers money.

It's funny that at the public hearing on the budget, school board member Caren Diedrich specifically spoke to teachers who may feel the lack the tools to do their jobs effectively.

" We meet the teachers' needs...we don't always rise to their wants. "
- School Board member Caren Diedrich

Hmmm...who's policing district administration and school board "wants"???

To really see a dent in the mill rate, we need to focus on the big ticket expenditures. The only new big ticket item, this year, was the 4K program. The bottom line, no matter how they spin it, is that the net effect THIS year was a COST to the budget of about $640,000. Assuming the Equalized Value projection is accurate, we would need to shave the budget by $1,000,000 for every $0.25 reduction in the mill rate.

3. Reduce the Tax Levy (Dip into the Savings Account). What many people do NOT know, is that the district maintains a "savings account" of sorts. It's called "Fund Balance", but it basically exists as a "rainy day" fund to cover unexpected high dollar costs that were not budgeted. Say, for example, the boilers completely die in a couple of schools. That would cost a lot of money, and once a budget is set, it's hard to cover these expenses. Just as you (hopefully) maintain savings accounts for these "rainy" days, so to the district has its "Fund Balance, which it can tap into for emergencies. Already, in this budget, the district is using $200,000 from Fund Balance to pay off property tax chargebacks. With the proposed budget, the general Fund Balance sits at $7,800,000. Using $1.500,000 from fund balance would reduce the mill rate increase by $0.38, saving the owner of a $200,000 home $77 on their property taxes.

The Case Against Using Fund Balance to lower the Tax Levy
Why shouldn't we dip into the savings account? The single biggest reason is that the strength of our "savings account" affects our bond rating (much like an individual's credit score). If the bond rating goes down too much, than when we need to borrow money, we are not eligible for the lowest rates generally available. The problem is that the district/board will never speak in specifics. There's just that somber tone of "our bond rating will drop. Our interest rates will rise".

Certainly, that is true, but the last time this issue arose, the difference in interest rate was less than 0.05%....like 4.75% vs. 4.79%. Also, bond ratings are obtained based on MORE than just the heft of one's Fund Balance (savings account). They look at the viability of the school district. If the district's projections for increasing enrollment ring true, then more kids means more money...and who WOULDN'T invest in that?

The Case FOR applying Fund Balance to Lower the Tax Levy
They call Fund Balance a district's "rainy day" fund. With local people out of work, or suffering from wage cuts or furloughs...with people struggling to keep their homes out of foreclosure...people, could it really get much rainier??

And...if the district's answer to that question is, "Yes, it could get much rainier", then don't you think they should be telling us?