ISD 728

Truth In Taxation

December 12, 2022

6:00 p.m.

TRUTH IN TAXATION LAW

• Minnesota’s Truth in Taxation Law requires that cities, counties and school districts follow certain steps before adopting a tax levy for the following year

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• The law requires a mailed notice to each property owner in the county, which describes the tax levies proposed by the city, county and school district, along with the percentage increase (decrease) such a levy would mean in dollars

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TRUTH IN TAXATION PUBLIC HEARING

• The law also requires a “Truth in Taxation” public hearing for each taxing jurisdiction, which includes a specific type of public notice

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• You are here tonight as part of the school district’s public hearing process

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REQUIREMENTS OF THE TRUTH IN TAXATION HEARING

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• Tax levy must be for taxes payable 2023

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• Current budget must be discussed

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• Budget publication must be included

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• The proposed percent increase (decrease) and the reasons for the increase (decrease) must be discussed

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• Any changes to the amount of the final compared to the board approved proposed levy must be addressed

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• Public must be given time to comment

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-Minnesota Statute 275.065

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SCHOOL DISTRICT LEVY

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• 2022-2023 SCHOOL YEAR
• 2022 PAYABLE 2023
• FISCAL YEAR 2024

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SCHOOL DISTRICT BUDGET

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CURRENT SCHOOL

YEAR

2022-2023

SCHOOL DISTRICT FUNDS

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GENERAL FUND LEVY

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• Based on student enrollment
• Transportation - to and from school
• Transportation - Special Education
• Provides funding for facility maintenance and instructional equipment
• Provides funds for Health & Safety code compliance, fire safety, other safety requirements and Long-Term Facility Maintenance (LTFM)
• Provides for Integration Funds
• Unemployment Benefits

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SCHOOL DISTRICT FUNDS

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COMMUNITY EDUCATION FUND LEVY

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• Based on the population in the District
• Early Childhood Levy is based on the number of children under 5 years of age
• School Age Care Levy for Special Education Students

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SCHOOL DISTRICT FUNDS

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DEBT SERVICE FUND LEVY

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• Based on annual debt retirement schedules
• Annual levy is what is needed to pay principal and interest payments of bonded debt plus 5%
• A calculation is done annually by the State Department of Education to determine an appropriate level of fund balance. A levy reduction is made when necessary

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SCHOOL DISTRICT FUNDS

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OTHER POST EMPLOYMENT BENEFITS FUND (OPEB)

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• Activity to record levy proceeds and the repayment of OPEB bonds

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2022-2023 Budget Overview

Revenue

2022-2023 Budget Overview

2022-2023 Budget Overview

Expenditures

2022-2023 Budget Overview

Budget Publication

• Published in the Star News
• Link on website
• Link to District Report Card – www.isd728.org

How Will Your 2023 School Taxes be Spent?

General Fund

Provides funding for district instructional programs, as well as regular and special education programming, transportation, instructional equipment, building maintenance and Health and Safety Projects

Percent

67.46%

1.77%

30.39%

.38%

100.00%

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Community Education Fund

Levy for Community Education and Early Learning Programs

Debt Service Fund

Levy for repayment of principal and interest on district debt

OPEB Debt Service Fund

Levy for repayment of principal and interest on district OPEB debt

Total Levy Before Credits and Exclusions:

General Fund Changes in Basic Per Pupil Allowance

15 year history of per pupil funding shows years of no increase and years of moderate growth that has contributed to the District’s budget shortfalls and reliance on local operating referendums to provide stable and reliable funding

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**Included a change made at the state level to recalculate pupil unit weightings. Now that all students are valued at 1.0 ADM instead of the traditional weighting system that had been used in school finance an adjustment needed to be made – however funding did not increase by this amount

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State Aid Compared to Local Levy

Authority For School Levies

A School District Tax Levy must be either:

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Set by State Formula/Legislative Authority

Or

Voter Approved

$800,000 added to LTFM for Health and Safety Expenses. This was an MDE correction.

Causes For Increase In Pay 2023

• Long Term Facility Maintenance (LTFM) – Based on the District Building Maintenance Plan
• Legislative Changes
• Student Adjustments
• Changes due to updated pupil numbers for the current and past years – Student population projection changes and Legislative changes for Aid vs. Levy

The School District Levy is Increasing By:

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$6,959,769.18

11.15%

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Final Levy vs. Proposed Levy

• There was an increase between the proposed levy approved in September and the amount of the final proposed levy. This was because $800,000 in health & safety expenses was left off the levy and has now been corrected by MDE. These expenses are typically part of the levy annually.

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• The proposed levy was approved by the Board of Education at its September 26, 2022 meeting

Changes in Market Value

• The market values are final and are not a subject for budget hearings. They were discussed at the local board of review and county board of equalization hearings held earlier in the year.

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• If this property is a qualifying homestead, the final taxable market values may exclude improvements which were made to this property.

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Changes to Market Value continued…

• The estimated property tax amounts assume no change in the estimated market value.
• As stated in the assumptions under the chart, the preliminary values (used by Sherburne County to prepare proposed tax statements that were provided to taxpayers recently) reflect an increase in Referendum Market Value of 22.8% and an increase in Net Tax Capacity value of 24.2%. While some of that increase is due to new properties, much of the growth is due to increases in the assessed estimated market values for residential homes.
• With the substantial growth in the district’s tax base, even though the District’s proposed levy for taxes payable in 2023 reflects an increase of 11.15% over taxes payable in 2022, the school district’s tax rates are decreasing and that results in a 15% decrease in school taxes (assuming no change in estimated market value for an individual parcel).

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Changes to Market Value continued…

• For taxes payable in 2023, the change in values vary quite a bit depending on the property type. For most counties the values for commercial properties have stayed pretty stable.

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• Finally, the information provided on the chart provides some ballpark estimates of changes in taxes, including some assumed growth in estimated market value. For example, the owner of a home with an estimated market value of $250,000 for taxes payable in 2022 is paying school taxes of $1,444. Assuming the estimated market value increased by 20%, their estimated market value for taxes payable in 2023 would be $300,000 and their estimated school taxes would be $1,486, which is an increase of $42 or 2.9% as compared to their current taxes payable in 2022.

What Are The Main Variables That Cause Property Tax Increases And Decreases?

• Changes in market values
• Changes in class rates/history
• Homestead Market Value Exclusion
• Agricultural Land Market Value Credit
• New programs and levies authorized or mandated by the Legislature
• Voter Approved Referendums or Bonds

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Minnesota School District Property Taxes�Key Steps in the Process

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Step 1.

The county assessor determines the

estimated market value for each parcel of

property in the county

Step 2.

The Legislature sets the formulas for tax

capacity. These formulas determine how

much of the tax burden will fall on different

types of property

Step 3.

The County Auditor calculates the tax capacity

for each parcel of property in the county, as

well as the total tax capacity for each

school district

Step 4.

The Legislature sets the formulas which

determine school district levy limits. These

are the maximum amounts of taxes that

school districts can levy in every category

Step 5.

The Department of Education calculates

detailed levy limits for each school district,

based on the formulas approved by the Legislature

in Step 4. These limits tell school districts the

exact amounts that can be levied in every category

Step 6.

The School Board adopts a proposed levy

in September, based on the limits set in step 5.

After a public hearing, the board adopts a final

levy in December. Final levy cannot be more

than the preliminary levy, except for amounts

approved by voters, Dept. of Education

or debt redemption

Step 7.

The County Auditor divides the final levy (determined by the school

board in Step 6) by the district’s total tax capacity (determined in step 3)

to determine the tax rate needed to raise the proper levy amount.

The auditor then multiplies this tax rate times each property tax

capacity, to determine the school tax for that property

Sample Tax Statement

Homestead Exclusion

This category is determined by voter approved referendums and building bonds.

The other local levies category is determined by legislative action and State of Minnesota driven formulas. by the legislature

Property Tax Example Residential Sherburne County

Taxable Market Value increased by $77,826 (last year $19,402) on this property.

Total School Levy

Note: Operating and Building Bond referendum vote passed on November 5, 2019.

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The school tax increased by $73 on this property

Adoption of Payable 2023 Tax Levy

Final Tax Levy will be acted on at this meeting December 12, 2022 as required by State Statute.

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For more information:

www.isd728.org

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Email: andrew.almos@isd728.org joseph.primus@isd728.org

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Phone: 763-241-3400

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Questions and Time for Public Comment on Taxation Hearing Matters