Provided below is a response to questions regarding your local tax bills and why the increase is larger than expected. This letter will give the facts and provide you with where you can go to get more information if you would like it. The first and most important point to make is that only the 50 cent increase in the Education Fund is permanent. The rest of the increase is temporary and we will do our best to explain how and when we will see relief from the remainder of the increase.
The increase from the school district portion of the local tax bill is 72.75 cents. The first question is where did this increase come from. Let’s start with the specific funds that were levied at higher amounts this year and then go into details of each specific increase.
The 72.75 cent increase in the tax rate is due to the following:
The 50 cent increase in the Education Fund was expected. What will follow is an explanation of 2, 3, and 4.
2.99 cent increase in the Retirement Fund
One strategy for overall cost saving employed by the Board of Education prior to the Education Referendum passing was to pass a resolution for a one year window for an Early Retirement Incentive for non-certified employees. This resolution did not apply to teachers or administrators and allowed employees with 20 or more years of service to retire if they were willing to purchase a portion of the retirement costs. The district would cover the other portion of the cost. Overall, this incentive is estimated to save the district over 30% in the salary cost of these employees, but it leaves a short term debt that must be paid to IMRF. This 2.99 cent increase is temporary. The district could choose to pay this remaining debt off within the next couple years or spread it out over many in order to provide more immediate tax relief.
8.38 cent increase in the Tort Fund
The Tort Fund is a fund used by all districts in the state to protect them from liability and to help keep the students and public safe on school grounds. The details of the Tort Fund are contained in the district’s Risk Management Plan. Within the last year, an example of an expense that has been added to this fund is the addition of a school resource officer at Triad Middle School. In an effort to keep the tax rate as low as possible for the previous few years, the Board has chosen to “under-levy” the Tort Fund. At the November and December 2015 Board meetings, information was presented showing the balance of the Tort fund at the end of the 2014 fiscal year at $734,934, at the end of 2015 fiscal year at $557,061, and a projected balance of $261,700 at the end of 2016. With the threat from the state of Illinois of tax caps looming, the district could not allow the Tort Fund to go negative and had to levy enough to meet the projected budgeted expenses. Because of this, after the public hearing at the December 2015 board meeting, the Board levied for an additional $400,000 to ensure that next year’s budget would not end with the Tort Fund in the red. The district will make every effort to lower the amount needed in the Tort Fund to ensure a lower amount for the December 2016 levy (http://bit.ly/DecLevyPrez).
11.38 cents in Long Term Debt
As discussed many times throughout the referendum process and at Board of Education meetings, while the individual Education Fund rate was and still is one of the lowest in Madison County, the Bond and Interest Fund rate is high. The amount that the district owes in long term debt is over 81 million dollars in principal and interest. Almost all of this is due to paying off Triad High School--built in 1999--and the three elementary schools built in 2007. You can see the current long term debt and when it will be paid off here (http://bit.ly/TriadDebtSchedule) A small portion included in this long term debt is the $2.5 million dollars in Working Cash that the Board authorized selling at its November 2015 meeting. The $2.5 million dollars of working cash was discussed at the August Board meeting and the September public hearing and was in the local paper on a number of occasions leading up to its sale in December. The Working Cash was necessary as a 1 year solution to account for the $2.38 million dollar deficit in this year’s budget (http://bit.ly/FY16BudgetHearing). Without it, the district would have been unable finish this year with positive balances in the operating funds. There are no plans to sell the remaining 2 million dollars that the Board of Education has authority to sell. Remember also that the none of this would have been necessary if the State of Illinois would have continued to pay revenue in the form of General State Aid that the district was promised. In the past four years, the district has been “shorted” over $4 million dollars that it is owed and will never receive.
In addition to the $2.5 million in Working Cash, at the November 2015 meeting, the Board refinanced over $17 million in existing debt from the elementary buildings in order to get a better interest rate. The hope was that this refinancing would allow the district to see significant savings and immediate tax relief, however, the savings were not as significant as we had hoped in the short term. Overall, the refinancing will save the taxpayers over $1.8 million in interest costs, however, in the short term, this has not provided the immediate tax relief that we had hoped.
The area of Long Term Debt offers us the most options in terms of lowering the tax rate in the future depending on when the district wants to pay off this debt. If you viewed the chart above, you saw that virtually all of Triad’s long term debt is paid off by 2026 and completely paid off by 2028. In 2026, without any changes or refinancing, the amount of tax money required to pay off the debt would go from $1.89 to $0.235--a change of over $1.65. This means that once the district has paid off its debt, there would be a drop over double what the increase was this year ($.7275 cent increase). Because of the larger than expected increase this year, however, administration has already begun working with our bond counsel to develop a long term plan to present options to the Board that could provide relief in the tax rate in the coming years and spread our debt out further than 2028. Spreading this debt can provide some short term relief, however, the total amount actually paid will be larger because of the interest incurred. While the ultimate cost to taxpayers will be higher if the debt is spread out, it could help to lower the tax rate in years to come over what it could be.
Much of what we will be able to do with our tax rate will depend on the State of Illinois. If the district were to be funded by the State at 100% as it was until 2011, we would certainly be able to see more local tax relief in a shorter period of time. Of course we haven’t seen any such progress. Once again for 2015 the State failed to meet their funding obligations and only funded at a 90% rate. Worse yet we continued to be negatively impacted by more unfunded mandates, such as SB 100, which increase costs without any associated revenue. Also keep in mind that without a state budget or any state revenue beginning in July, our local taxes will only provide enough revenue to allow Triad to stay in operation for six months or through December 2016. Some Illinois districts will not even be able to open their doors come August without a state budget or some sort of educational funding from the state.
Finally, it is important remember also that because of the successful referendum the district has been able to address many of the issues that were important to everyone: lowering class size at many grade levels, increasing the technology that we can get into the hands of our students, and keeping and expanding our curricular and extracurricular programs. We have also seen an increase in interest in families moving into the Triad District. For the first time in 3 years, our communities had an EAV that went up instead of down. We continue to talk to families who are moving into the Triad Districts to be a part of a community that has great schools. As families move in and the EAV goes up, the tax burden on each individual taxpayer goes down.
Strong and successful schools are a primary reason for a community to thrive. Think for a moment about surrounding areas where the district and schools do not have the reputation of Triad. What do some of those communities look like? Are they places that are able to attract new families? Please be patient as we strive to maintain a balanced budget and continue to improve our school district. We will work to address the tax rate and will work to provide property tax relief while keeping our schools at the level that the communities have come to expect.