Something For Nothing? - Read Comments as well

The following item is contributed by an unhappy tax payer concerned about the current direction of School District 46. They raise a number of significant issues that we feel are worth dialog. If we refuse to challenge the current system we become victim to unreasonable taxation without representation. Stand up and be heard!!

School District 46 is promoting a bond referendum to finance the construction of a new school building. They want you to think this referendum will cost you nothing. Something for nothing? Think again!

School District 46 has a history of misleading taxpayers. In 2002 District 46 put a referendum on the ballot requesting an increase in the tax rate of $0.50 per $1,000 of a home’s assessed value. They said the tax rate increase of $0.50 would take the district out of debt and would cover the district’s revenue needs for the next ten years. The District based $0.50 request upon the existing tax cap laws, the District’s expected growth in revenues, and its plan to keep expenditures increases under 5% per year. The plan made sense. Keeping increases in expenses at 5% corresponded to the revenue the district could expect under the tax laws. They told the public that if an owner of $200,000 home would pay an additional $100 per year in taxes, the district’s financial condition would be resolved.

The community approved the referendum. But when the District went to file with the county, the county clerk implemented the referendum without regard to the tax cap. This meant the district could move the tax rate beyond the $0.50 per $1,000. The district exploited the opportunity and went well beyond what the voters approved, causing the tax rate to increase $0.85 per $1,000, not the $0.50 advertised. The owner of a $200,000 home now pays an additional $170 per year, a whopping 70% more than what the voters approved! And there is one more increase to come in this year’s taxes thanks to their 2005-2006 budget and levy.


“Since 2000, taxpayers in District 46 have been gouged.”
-Northwest Herald 11/18/2005

Since the 2002 referendum, the district continues to ignore what the voters approved and continues to levy the maximum $0.85 per $1,000. Each year District 46 has a choice: to do the right thing and keep spending so they levy only enough to be at the $0.50 per $1,000 increase, or “tax to the max.” When faced with the same situation, our neighboring school board in Huntley made a different choice. Huntley chose to respect what the voters understood they approved and set their spending and tax levy to the amount the voters approved. Huntley’s school board did this “to keep their credibility with the community.”

Tax and Spend—It has to End!
District 46 also has not kept its word in fulfilling their 2002 adopted resolution of keeping increases in expenses at 5%. From 2002-2004 the cost per student has increased 30% while the number of students during that time dropped by 40 children. The school tax rate per $100 of property valuation increased 25% during that time and the school’s spending resulted in a 30% increase in per-student operating cost. District 46 collected $4,982,298 in 2000 and $9,099,896 in 2004—an 82% increase in tax dollars collected from our community. Where did the money go?

The district increased administration payroll (adding an assistant principal in the elementary school and an assistant superintendent position). I’m glad we expanded our administration so much to handle the 40 fewer children over the 2002-2004 period. (they did not to mention adding administrators when they asked us for more money during the 2002 referendum.) But most of the money went into salary increases for both administrators and teachers. From 2001-2005 salary increases are 42% for teachers and administrators. From 2004-2005 teachers and administrators had salary increases ranging from 5% to 51%. WOW! Cost of living was less than 3% during the same year! A salary chart is in another document on this site detailing the increases. (Take a look at the teacher/administrator salary database on the website www.thechampion.org to see exactly what everyone got.) And the new school building design already has an office for another assistant principal. We will have a superintendent, assistant superintendent, two principals, two assistant principals, huge salary increases for teachers and administrators…WHEN WILL IT STOP???

And if you hear the usual response “you have to pay for a good education” and “a good school increases your property value”, think about the fact since the last referendum District 46 has been placed on “Academic Watch” in 2004 by the state of Illinois and over the last three years state test scores in the school have declined. The school is a year behind other area schools in math for students moving on to high school. Sure glad they all got good raises!

Now District 46 is asking the community to believe them again. And they are misleading the community again. They tell you that this bond referendum will not cause a tax rate increase. Don’t confuse the fact that your tax rate won’t go up with the actual money you pay in taxes. Your taxes will most assuredly go up. District 46 is counting on the value of homes to go up a lot. When they tell you you’re the referendum is tax rate neutral, here is the math to use to figure out what it will cost you:

$0.24 x More A$$essed value of your home = Higher tax $$$ that we pay

Another misleading statement has to do with the land. In 2005, District 46 told the community the developer of Tall Grass “was donating” and “was giving” the land to the school (see the Shareholders Report for 2005). This development was a great deal for the school. Now when you look at the referendum language, the school is, in fact, buying the land at market value. They are buying the land from the developer, not by expending any cash but by crediting some of the developer’s impact fees. That is a far cry from “giving.”

The bond referendum only covers the construction of a school building, not the staffing and operation. They publish information on the tax neutral bond rate but don’t publish any detailed numbers on the increased operating costs. Probably because when you calculate 10-13% annual increases in costs-per-student coupled with the additional students, you run out of money real fast. When asked about money to cover the staffing and operation, they talk about transition fees (one time fees) and claim they cannot forecast past the next five years, avoiding the question. Funny…they can forecast the number of children over 10-15 years but not the expenses of operating the school. What this means is that we can expect a substantial increase in taxes in the near future because once the new school is built, they will need more money to run it. In a District that is taxing and spending like District 46, it won’t take long.

What should we do
It is true that our school will be overcapacity at some point in the future so we have to do something. Our community now pays the second highest school tax rate in McHenry County. If we are not careful, we’ll make it to the highest level. The solution has to be a fair to the school and we taxpayers who don’t have kids. First, we should not adopt a referendum this year. There is no pressing need. From 2002-2005 the number of students increased from 1048 to 1054. The expectations of overcapacity by 2008 are exaggerated. We should realize we have time to look at some options:

Wait a year or two to see District 46 will live up to its last referendum and set their tax levies such that they only tax the community the $0.50 increase that was approved. LET THEM LOWER OUR TAXES TO THE $0.50 INCREASE WE APPROVED BEFORE WE APPROVE ANYTHING ELSE!

Wait a year or two to see if District 46 can live up to its 2002 Adopted Resolution/Promise to keep spending increases at no more than 5% per year. If the District continues increasing spending per student at over 10% per year like the last three years, we will face another costly education referendum in a few years.

Wait a year or two until the District’s bonding power is in better shape and we have less reliance on premium bonds (a more expensive form of financing). Heavily mortgaging our future is a BAD idea.

Wait a year or two to see if the new impact fees and transition fees survive legal challenges. If the new village ordinances on impact fees and transition fees fall to a legal challenge, the taxpayers will be left holding the bag. There is still a legal challenge outstanding from Berian Builders over the existing impact fees so it is very possible there may be challenges to these new fees (and these fees are the key to the District’s financing). If we take on the debt and don’t have these levels of fees, the money to pay the debt comes from the taxpayers.

Wait a year or two to explore consolidation with Crystal Lake. Consolidation could help spread costs across residential, commercial, and industrial tax bases and it has worked well with the area high schools. As developers move in along Route 31, there will be an increase in children for both Crystal Lake and Prairie Grove schools. Merging with Crystal Lake makes sense for both districts. The State of Illinois has legislation that provides grants to facilitate school district mergers as they have recognized the heavy tax burden small school districts place on a community. But taking on a lot of debt now will make merging with our school less attractive to another district.

District 46 wants you to believe this referendum will cost you nothing because it is tax rate neutral. Tax Rate neutral is not tax neutral. Something for nothing? Think again!

Taxpayers must defend against broken bonds

www.dailyherald.com news story

Suburban Illinois taxpayers might have thought tax cap laws that allow school districts to take more money than voters thought they had authorized was the worst financial news along these lines. Turns out it was but the tip of a very expensive iceberg in many districts.

A Daily Herald investigative team showed last year that tax caps created to protect property owners from ever-escalating bills did not prevent taxpayers in 25 school districts from paying $263 million more than they thought they had approved.

A new investigation directed by Assistant City Editor Tim Sheil and reported by Jeff Gaunt and Emily Krone shows many are paying excessive loan costs, too. This is despite the fact that such tax-exempt bonds are backed by captive taxpayers who represent the ultimate collateral, giving districts access to low-cost financing options about which home buyers can only dream.

Since 2000, voters in 81 suburban school districts authorized taxpayers to take on $3.2 billion in debt. Sixty-five of them used "innovative" financing techniques that are illegal in many other states. As a result, taxpayers will pay back almost $6 billion, at least a billion dollars more than they should have expected to pay.

Because of the cheap loan options accorded governments, taxpayers should expect to pay back about $1.50 per $1 borrowed. That number is based on a Daily Herald analysis of typical government bonds, financed using methods recommended by national financial experts.

More than half the bond repayments we studied exceeded that amount. Using that $1.50 per $1 figure, taxpayers who approved that $3.2 billion in debt should have expected the cost of paying it back to be about $4.8 billion. In Illinois, they paid almost $6 billion.

Some districts did well, executing deals that committed taxpayers to repay only $1.30 per $1 borrowed. Others committed taxpayers to far worse, some repaying as high as $3 per $1.

How? That’s easy. Taxpayers get to authorize the amount of the loan. But public officials, financial consultants and bond houses get to arrange the financing. Our study assures us that many put maximizing available dollars well ahead of minimizing taxpayers’ costs.

Taxpayers should study closely today’s story and those that will follow. Understanding is worth the effort. The series will even provide a list of questions to ask. Look for a few specific terms that should raise red flags.

• Premiums are supposed "gifts" of money to a school district in exchange for it agreeing to pay higher interest rates. Premiums allow a district to exceed its statutory debt limit and the amount taxpayers authorized. When it’s time to pay the bill, that premium will no longer look like a gift, but rather another cost for taxpayers to pay — in the form of higher interest.

• Capital appreciation bonds allow districts to defer interest payments and keep tax rates stable today. But the interest is compounded, meaning interest is paid on interest. That increases costs and makes the loan more akin to credit card debt when it should be cheaper than a mortgage.

• Back-loading, paying less now and more later, can make sense if the intent is to defer costs until new residents in growth areas can share the burden. But it commits taxpayers to huge future debts, often without their knowledge.

In Illinois, school districts and other taxing bodies are enabled by the General Assembly, which created these opaque laws, often with the help of those who benefit most from them financially. Worse, it has failed to fix them when the real cost to taxpayers was made plain, as in the case of tax cap law.

Thus, taxpayers must defend themselves by insisting on detailed repayment plans before approving local bond debt and then making sure school officials follow through.

Taxpayers must arm themselves with knowledge and commit themselves to ending this financial abuse at the hands of those who are supposed to be representing their interests, but often don’t.

Is this how you’d borrow money?

The following article outlines what it takes to borrow money and what it can costs a community if the wrong type of funds are chosen. Let's not let this happen to us without ample debate of the options.

By Jeffrey Gaunt and Emily Krone
Daily Herald Staff Writers
A typical home loan will cost you twice what you borrowed when it’s paid off with interest.
Governments can get better deals.

Federal tax breaks keep interest rates on government loans lower than those available to homeowners — up to 30æpercent lower, according to the Congressional Budget Office.

Yet not all governments avail themselves of lower cost loans — at greater cost to taxpayers.
A Daily Herald analysis of 206 suburban school district loans reveals many taxpayers repay those loans at rates higher than they would on their homes.

Since 2000, 81 districts in our coverage area have borrowed $3.34 billion. The districts agreed taxpayers would pay back $6.03 billion.

That’s nearly the same repayment rate — $2 per dollar borrowed — as a home loan, despite the federal measures that keep government rates low.

In the most costly example, taxpayers will repay $3.09 per dollar — or three times the amount borrowed.

A total of 27 loans will require repayments of more than $2.00 per dollar borrowed.

The average of the 206 bond issues examined would ask taxpayers to pay back $1.55 for every dollar received.

On only 89 loans, fewer than half of those studied, will taxpayers repay less than $1.40 per dollar — or 30 percent less than homeowners, the standard cited by the Congressional Budget Office.

Why such a range?

Because in Illinois, taxpayers only get a say in how much a district can borrow — not how much will be paid back.

The loan structure — the length of time, the interest rates, the repayment schedule — is decided by district officials and their consultants.

With that freedom, 66 of the 81 school districts in the study took out loans using at least one of three practices that drive up costs to taxpayers:

•Many districts agreed to interest rates higher than available, and got cash bonuses from their lender for doing so.

•Many agreed to pay compounded interest rates — sometimes on the higher rates.

•Most pushed debt payments off a decade or more in order to spread the cost to tomorrow’s residents — and downplay the cost to today’s voters.

The practices are limited or outlawed in many states — but legal here.

The financial consultants hired by school districts call the practices creative solutions to financial challenges.

School officials use them to maximize revenue and better serve their children.

Many experts and state officials around the country condemn them.

The bottom line is that creative solutions aren’t cheap.

Capital appreciation

School districts borrow money by issuing bonds.

Each bond has a repayment schedule — or a list of how much taxpayers will pay back each year.

Under state law, interest rates on those payments can’t exceed 9 percent in any year.

So if a district borrows $100, interest cannot exceed 9 percent — or $9 — annually. Over 10 years, the district will have paid off $190, or $9 a year, by the end of the loan.

Some districts make it more complicated. More and more, districts borrow by issuing capital appreciation bonds.

Interest on these bonds compounds.

In other words, taxpayers pay interest on the interest.

Credit cards give you a choice. If you buy something for $100 and pay it off in a month, you’ve paid simple interest. If you buy something and don’t pay it off for six months, you’re paying interest on the $100 and the mounting interest each month.

Capital appreciation bonds are like credit cards for school districts. They allow a district to delay interest payments.

Other bonds typically require semiannual interest payments.

Because delaying interest payments makes it riskier for investors, capital appreciation bonds carry automatically higher interest rates.

District officials say they issue capital appreciation bonds — and delay interest payments — to spread some of the cost to future residents and keep current tax rates stable.

But in return, taxpayers will pay back more per dollar than they would on an average bond issue.

"It’s kind of like borrowing on your credit card and not paying — and then paying interest on interest," said Cynthia Weed, a partner in the public finance division of the Seattle-based law firm Preston Gates and Ellis, which ranks 10th nationally in volume of municipal bonds transactions. "It’s not the best policy."

Take, for example, the district that borrowed $100 for 10 years and paid $9 in simple interest each year.

If the district issued capital appreciation bonds instead, it would still owe $9 in interest the first year.

The similarities end there.

Interest would compound, costing $18.81 in the second year and $29.50 in the third.

Each year the interest mounts, and with it the interest on the interest on the interest and so forth.

When the district went to pay off the $100 in this case, it would pay a total of $236.72 — or $46.72 more than the simple interest version.

Now, imagine that the loan was for $100 million rather than $100 and for 20 years rather than 10.

Weed said she has never seen schools put that type of burden on taxpayers in her 27 years of public finance in five Western states.

"There should be an articulated rationale, as opposed to, ‘I want to prevent a levy spike this year because it’s bad for my re-election campaign.’"

Premiums

School districts sometimes can’t borrow as much money as they want because of state debt limits.

Under state law, elementary and high school districts cannot accrue debt totaling more than 6.9 percent of the equalized assessed value of property in the district. The law limits unit districts — K-12 districts — to 13.8 percent.

There also is a second restriction on borrowing. The law requires voter approval for most large loans, especially those used for construction.

If a school district is up against its debt limit, or wants to borrow more than voters approve, there is a way.

Dozens of districts have gone that route — taking premiums.

Basically, a premium is a cash bonus. Districts agree to repay loans at higher interest rates in exchange for more money up front.

These bonuses don’t count as debt — not against the state debt limit or against voter authorization.

Thus, if a district has $20 million left under its debt limit, it can borrow $20 million at high interest rates and legally collect an additional premium.

The wider the gap between prevailing interest rates and the interest rates districts agree to pay, the larger the bonus.

Taxpayers in essence are paying for the premium — by paying more in interest on the principal.
"Yes, taxpayers pay for the principal, interest and premium on the bonds," said Liz Hennessey of the Chicago financial firm William Blair & Co.

School districts can take premiums on either simple interest or capital appreciation bonds.
But the appeal of capital appreciation bonds is that they super-size interest payments — which super-sizes the premiums.

In Will County, Crete-Monee Community District 201-U agreed to pay $82.5 million in interest on $45 million worth of capital appreciation bonds.

That’s a total repayment of $127.78 million.

In exchange, the district got a $17.1 million premium.

Assistant Superintendent for Business Affairs Todd Covault said the state’s "somewhat arbitrary" debt limit forced the district to take the premium.

"We were trying to capitalize on getting the largest amount of bonds sold at that time period because we knew rates would climb," Covault said.

But the district would not have used premiums to take more than voters authorized, Covault said. "That would be wrong, fundamentally."

The use of capital appreciation bonds and premiums is not limited to big money loans.

In 2002, Winfield Elementary District 34 in DuPage County had $6 million left under its debt limit. The district issued $6 million in capital appreciation bonds, paying compounded interest at 8.5æpercent.

The district received a $2 million premium. Voters will pay back $14.3 million for that $6 million loan.

District 34 Superintendent Diane Cody said she wasn’t working in the district at the time the bonds were issued. But she believes districts need to make sure taxpayers know what they’re in for.

"I think the whole thing here is honesty and communication," Cody said. "When you’re still operating under the law, but it may not be best for the taxpayer, then the taxpayer needs to know that."

The practice of collecting premiums to get around debt limits drew fire from financial and legal authorities across the country.

"This to me looks like a clear evasion of the intent of any law that seeks to limit debt," said William Kittredge, director of the nonprofit Center for the Study of Capital Markets and Democracy in Arlington, Va., and former professor of finance at the University of Georgia.

"I think the spirit, and maybe the letter of the law, has been broken," said Mike Griffith, a policy analyst with the Education Commission of the States in Denver.

Idaho Deputy Attorney General Jim Jones also described large premiums as a ruse — and a violation of Idaho law.

"Assume a district held an election authorizing (school) bonds in the amount of $10 million to build school buildings," Jones wrote in a recent opinion sent to the Idaho Department of Education. "If a district could set artificially high interest rates on the bonds such that investors would pay $15 million for the bonds, the electors would be greatly deceived."

Back-loading

The faster you pay off your debts, the better.

The longer you wait to pay off your car loan, credit card or mortgage, the more interest you’ll pay. The same goes for school districts.

But most districts in our study chose to delay payments.

The Herald analysis shows 114 of the 206 bond issues were structured so taxpayers waited more than a decade to pay off at least half of the loans.

In the most extreme cases, districts borrow millions of dollars and don’t pay anything back — no principal, no interest — for the first 19 or 20 years.

In those examples, taxpayers end up paying more in interest alone than the district borrowed in the first place.

Take Geneva Unit District 304, which issued $2.79æmillion in simple interest bonds in 2004.

The Kane County district will make one balloon payment — in 2024 — for a total of $6.19 million.

That’s $2.06 for every dollar borrowed.

Why pay so much? So future residents can share in the cost, said Rebecca Allard, the district’s assistant superintendent for finance.

"It has been deliberate," Allard said. "Most of the bond sales deal with constructing facilities. It just seems prudent to share the cost with residents who are not here yet."

The costs speak for themselves — in 74 of the 114 cases, taxpayers will pay back more on the dollar than the average of all the loans studied.

School districts that push debt back say they’re spreading the cost to future taxpayers, who will share in the benefits of the new schools.

Some experts say that is a high-stakes gamble on the district’s future prosperity.

"That’s a real dangerous game," said Griffith, the policy analyst with the Education Commission of the States. "Most states don’t even let you play those games."

Massachusetts doesn’t — and the state’s director of accounts slammed the practice.
"It’s horrible fiscal management, and I can hardly imagine the ratings industry looking at that with anything but a jaundiced eye," James Johnson said.

Darkest before dawn

Used separately, premiums, capital appreciation bonds and back-loading magnify the cost of borrowing.

Together they maximize it.

Each technique compounds the costs of the others.

The people of Huntley School District 158 know what that’s like.

In 2000, voters in the McHenry County district authorized a $24 million bond issue to pay for a new elementary school and additions to the old middle school and high school.

Over the next three years, school officials issued the $24 million in bonds, tacked on $11.5 million in premiums and back-loaded more than a third of the payments.

All told, taxpayers are expected to pay back roughly $72 million — or three times the $24 million they authorized.

In 2002, voters — unaware of the hidden cost of the first authorization — approved another $80 million to build two middle schools, two elementary schools and a new central office. Much like before, school officials turned to premiums and capital appreciation bonds.

By 2005, the district had issued only $55 million of the $80 million. But it had collected $78 million with premiums. And officials were planing to spend more.

Then everything changed. News broke that the district hadn’t provided voters accurate information on a request for a tax-rate increase.

The community lashed out. The school board apologized. The superintendent and top business official stepped down. Voters elected three new board members.

And the new school board, with a new administration, pledged to restore voter trust.

Soon after, they halted plans to spend more than the $80 million voters authorized.

To do otherwise, they said, would further damage public confidence. And that’s something the district can ill afford.

"What the public believed was they were paying off $80 million in debt," said school board Vice President Glen Stewart, elected in the 2004 voter uprising. "Not to play games and jack it up to $105 or $110 million.

"The credibility of a board, of a school district, is incredibly important," Stewart said. "If you want to get any referendum passed, you have to tell the truth and live with it."

Premium path takes you above debt limit

In their rush to build a school, it appears PG 46 will be using premium bonds to get past their debt limit to finance the $18 million in bonds for the March referendum. The total cost to the district 46 taxpayers will be $49 million (including $7 million in old bonds).


Premium path takes you above debt limit
BROKEN BONDS
By Jeffrey Gaunt and Emily KroneDaily Herald Staff WritersPosted Sunday, February 05, 2006
Grayslake voters have been generous.
In 1999, they approved a $23.2 million bond issue to build two elementary schools.
In 2002, they approved a $50æmillion bond issue to build a high school.
And in 2004, they approved another $34 million to build an elementary school for the Madrona Village subdivision in the Lake County community of Round Lake.
But Grayslake Elementary District 46 and Grayslake High School District 127 couldn’t just take what voters were willing to give.
In addition to sharing voters, the districts shared a problem: the growing student population was outpacing increases in property values.
Neither district had room under its state-imposed debt cap — which limits indebtedness to 6.9 percent of the equalized assessed value of taxable property in each district — to issue all of the bonds voters approved.
That is, until the districts hit on a common solution to their shared problem: money that the state doesn’t count as debt.
Twice since 2002, District 127 took cash bonuses — called premiums — in excess of its debt limit.
Three times since 2000 District 46 did the same.
In exchange, both districts accepted above-market interest rates — as high as 9 percent compound interest, the limit set by the state.
In total, District 127 has received $37.22 million in bonds and $17.28 in premiums — for a total of $54.50 million.
That’s $4.50 million more than the $50 million voters approved.
Voters now are due to pay back $95.71 million for their $50 million OK.
And district leaders are prepared to borrow more.
The district’s 2005-06 budget includes proceeds from a planned $14æmillion bond sale. That would bring the amount collected through loans and premiums to $68 million — $18æmillion more than voters approved.
The district needed the extra cash because the original plan to house upperclassmen and underclassmen on separate campuses expanded into a plan for two, 4-year high schools, Associate Superintendent for Business Affairs Michael Zelek said.
“Now we need other things,” Zelek said. “Some conditions aren’t always known.”
Maximizing revenue was in the best interest of the district, Zelek said.
“The law allows us to do this,” he said. “We’re following all practices in the state statutes.”
But District 46 officials may change course.
After fielding questions from the Daily Herald about the premiums, District 46 officials now say they’re considering returning the money.
Like District 127, District 46 took premiums in excess of its debt limit.
On a 2001 issue, for example, the district issued $4 million in bonds and tacked on a $3.29æmillion premium.
And like their counterparts, District 46 officials paid for the premium by agreeing to 9 percent compound interest on the loan.
On those bonds, taxpayers will pay back $2.41 for every dollar borrowed — making it among the most costly loans issued by suburban school districts in the past six years.
But residents may get some of that money back.
“The district is presently researching and considering its options in light of the new information on the premiums,” a news release issued Wednesday said.
“There are two main options under consideration: to complete the projects as planned or abate the bonds.”
District officials said they couldn’t comment further because they weren’t there at the time the bonds were issued.
For the next 20 years, their decision will affect taxpayers — and the children of taxpayers — who weren’t there when the bonds were issued, either.

Schools rake in more than voters OK

PG 46 took in almost $1000 more than what was requested and advertised since the last referendum on a $300,000 home. They were asked to give the money back on at least two occasions - and they said NO. See the story below. District 46 is in bold.

Monday, April 11, 2005
By Catherine Edman and Jeffrey GauntSource: Daily Herald

Voters who authorized school tax increases have paid hundreds of dollars more each year than they were led to believe, a Daily Herald analysis shows.

A study of 25 tax-rate increases approved by suburban voters during the past five years shows homeowners routinely paid more than most school officials had projected - as high in one case as an average of $435 a year for the owner of a $300,000 home.

That extra comes on top of the hundreds of dollars homeowners already paid after agreeing to a tax increase.

The analysis, which doesn’t apply to districts where voters approved only construction projects, shows tax-rate increases generated millions of dollars more to school coffers than voters - in most cases -were led to believe.

“It has allowed for a misuse of the tax cap law,” said Wayne Wasylko, Lake County’s director of tax extension.

“Certain taxing districts reaped a harvest of additional dollars in excess of what the voters approved.”

RELATED GRAPHICS
• The true cost of a school tax vote
• Looking at some local schools
• A detailed look
• How the tax gap works

For example, one district the Daily Herald examined -Libertyville-Vernon Hills High School District 128 - boosted its operating funds by 85 percent in three years after voters approved a tax increase.

This can happen because of a nuance in the complicated state tax cap law, which was created in the early 1990s to shield homeowners from large property tax increases in Cook, DuPage, Lake, Kane, McHenry and Will counties.

The tax cap causes tax rates to drop over time. When voters approve a tax-rate increase, school officials can raise most rates back up to their legal maximums - and then tack on the voter-approved increase. And it allows them five years to do that.

But county clerks say that defeats the purpose of the tax cap. They’ve lobbied state lawmakers, and a bill sponsored by state Rep. Mike Tryon, a Crystal Lake Republican, is being considered in the Illinois House.

If the bill works as intended, tax-rate increases would more closely resemble the way districts pitch them to voters.

“If taxpayers can’t know exactly what they’re going to be paying, it complicates the referendum process,” Tryon said. “If we don’t fix this, the future of all referendums is at stake.”

The bill would apply to all taxing bodies - not just school districts.

Other governments ask for tax increases, too. But those ballot questions generally take another form, such as asking for specific amounts of money or one-year tax cap exemptions.

With schools, it is commonplace to apply tax-rate increases over time.Additionally, school taxes account for nearly two-thirds of the average tax bill.

Here are some county-by-county examples of where taxpayers were hardest hit:
•The owner of a $300,000 house in Central Unit District 301, based in Burlington, paid $1,023 more to the school district over four years than school projections suggested.

•The owner of a $300,000 house in Libertyville-Vernon Hills Area High School District 128 paid $973 more over five years than projections indicated.

•The owner of a $300,000 house in Naperville Unit District 203 paid $1,541 more over five years than the district campaign projected.However, not every district took more than it told voters.

•The owner of a $300,000 house in Wheeling Elementary District 21 has paid about what the district told voters it would over three years.

In all, the 25 districts examined by the Daily Herald collected $204 million more than most school officials would project.

“The districts should get what people vote on, not what they think they can get out of it,” DuPage County Clerk Gary King said.School officials in some cases said they were unaware how much a tax increase would net; others said they felt explaining the process to voters would be too complicated. Either way, many school officials said they are merely using everything the law allows to bring in money.

The gap between what school officials estimate the tax increase will cost homeowners and what it could really cost already has taken its toll in Huntley Unit District 158.

In January, school board members acknowledged they had not understood the intricacies of the tax cap formula - or that homeowners would have to pay more than the board had suggested.

The school board unanimously and publicly apologized for failing to publicize accurate information.

A month later, still facing a storm of public resentment, the district’s superintendent and top financial officer resigned. And school officials have yet to collect a dime from the tax-rate increase.

According to the Daily Herald’s analysis, the following districts have been collecting more already:

Glen Ellyn District 41John Marcheschi knew what he voted for in 2001: a 55-cent property tax increase. The boost in Glen Ellyn Elementary District 41 was destined for the education fund: to hire teachers, buy classroom supplies and reduce class sizes. For an extra $531 a year from the owner of a $300,000 house, the district could do it all. Or so Marcheschi, a District 41 board member, thought. But from 2000 to 2005, the owner of a $300,000 house paid a total of $1,320 more than school officials said to expect.

Over five years, that homeowner paid $18,455 in property taxes to District 41, while the district forecast a $17,135 bill.Board President John Vivoda said the cost to taxpayers was greater than what was projected, but that’s because the district’s needs increased.“The referendum, everything connected with the referendum, was estimates,” Vivoda said.The district’s actions were all legal and open to public scrutiny, he said.

“Once we got the referendum passed, we were then in the mode of levying dollars,” Vivoda said. “We don’t have huge surpluses. We have added incredible numbers of staff. … If we have maximized our revenue through the referendum, I can assure the taxpayers we are spending the money as responsibly as possible.”But Marcheschi refused to support the district’s yearly property tax levy after seeing how much the district collected since 2000 because of the tax rate increase.“A big thing with me is that we have to be open and honest with people,” Marcheschi said. “I voted no for the levy because I don’t think taking more money in than taxpayers expected was being open and honest - and ultimately risks whether we’ll be successful in future referendums.”

Libertyville-Vernon Hills High School District 128When District 128 officials asked voters for a 36-cent tax-rate increase in 2001, they said it would cost the owner of a $300,000 house $360 more a year. When the vote was approved, the homeowner paid a total of $11,043 over five years. Using the district’s math, the homeowner would have paid $10,070 - a difference of $973. “We did take the maximum we were allowed each year,” said Yasmine Dada, assistant superintendent for business. “Each year it’s a discussion with the board of education. It’s not something that is done behind closed doors.”

But district officials still could have better explained the tax increase before the election, Dada said.“To the taxpayers, yes, perhaps it should have been more specific,” she said, “so they were also aware of what the impact would be down the road. You want to be up front to your community because under the tax cap you are eventually going to have to go for another referendum. Like it or not.”Before the election, officials said the tax boost would raise an additional $2 million for the district’s education fund. And it has. Every year.It’s also allowed the district to move cash into other funds.

Between 2001 and 2004 the balance in the tort and liability fund has more than doubled, up to $1.3 million; the operations and maintenance fund balance rose from $5.5 million to $8.5 million; and in 2003 the district added a new $1.1 million lease fund.

Naperville Unit Dist. 203Voters thought they knew what it would cost to maintain programs in schools and cut District 203’s deficit when they hit the voting booth in 2002.The owner of a $300,000 house would spend $511 more annually for a 53-cent boost in the education fund rate.That translates into $21,777 in total taxes paid to the district over five years.But during that span of time, the homeowner paid $23,318 - or $1,541 more.

Throughout the campaign, officials said they planned to reduce the district’s deficit. But they never explained how an increase in the education fund could lead to higher rates in other funds - and an even bigger tax bill overall.“In the couple of years prior to the referendum, I was robbing that (education fund) to keep other funds from going into the red,” said Allen Albus, the district’s assistant superintendent for finance. “I distributed that (increase) in a way to get the other funds into the black.”Albus said trying to project future tax bills is nearly impossible, given all of the variables. And trying to explain those projections to a voting public would be tough, at best.“I remember one guy (on the referendum committee) saying this won’t make sense to anyone,” Albus said. “So we decided to focus on (telling residents about) reducing the deficit.”

Geneva Unit District 304 In 2001, Geneva Unit District 304 officials had an extremely accurate idea of how much their 30-cent tax-rate increase would cost homeowners.But nobody told voters that.At the time, school officials told residents the owner of a $300,000 house could expect $290 annual increases with the tax hike.That’s what is indicated in both the district’s newsletter and in referendum fliers.Internal district documents around that time, however, had the district receiving roughly $3æmillion to $4æmillion more per year - for the next five years.

The internal documents, produced in 2001, have proven to be extremely accurate. The district was off at most about $1æmillion on collections of $40æmillion in 2004.The cost to homeowners, however, hasn’t been close.Over the past five years, the owner of a $300,000 home has paid roughly $1,741 beyond officials’ projections - or an average of $435 more every year.Had that one-year projection held true, the owner of a $300,000 house would have paid $20,289 over five years, rather than the $22,030 the district actually received.“It’s pushing boulders uphill trying to get the general population to understand school funding,” said Tricia Stewart, an outgoing school board member. “To try and break it down into small, manageable pieces is extremely difficult.”

Central Unit District 301 In 2002, officials in Central Unit District 301 in Kane County told voters a 30-cent education fund tax increase would cost $290 a year more for the owner of a $300,000 house.If that were true, the homeowner would have paid $18,182 over four years. The homeowner wound up paying $19,205 - or $1,023 more than projected.District 301 used the flexibility a voter-approved tax increase provides under the law to also bolster other funds.Business Manager Ron Cope pointed out the district is growing rapidly, both in the number of new houses and students.“I’m sure we’re going to be trying to prop up the educational fund,” Cope said. But he added other costs are associated with running a district.“Transportation routes are going to increase dramatically. We’re going to be building new buildings,” Cope said. “That’s the reason why you don’t see the money concentrated in one (fund) rate.”

Prairie Grove District 46 When Prairie Grove Elementary District 46 in McHenry County asked for a 50-cent increase in its education fund rate, officials say, they had no idea what to expect. They didn’t know the county clerk interpreted the law in such a way that they’d actually get large increases every year.

For five years.“That’s out of our control,” Superintendent Mary Fasbender said of the clerk’s interpretations. After the first year, when that became apparent, district leaders held public meetings to alert homeowners they’d pay more than first expected, she said. “I don’t think anyone in the district at that point in time realized how it would be implemented,” said Cathy Wolfe, the district’s director of business and finance. “Had we known that … obviously we would have shared that information.”

Instead of the $11,385 the owner of a $300,000 house would have paid under the simple formula, the homeowner wound up paying $12,333 - an additional $948 - over four years. Fasbender said officials did discuss the possibility of not taking all the money they were entitled to under the law, but decided not go that route after speaking with their consultants. “It was the advice of our bond counsel not to do that,” she said. “We were not in financial black mode, if you will. We were still in the red.”

Wheeling Elementary District 21Like the other districts, Wheeling Elementary District 21 has collected all of the money the law allowed in the first three years after voters approved its tax increase.The difference is, unlike the other districts, officials in District 21 told voters up front what they were going to do.“The commitment that was made with the community was that this would be phased in over a three-year period,” said Daniel Schuler, the district’s assistant superintendent for planning. “We’ve accessed what was available to us under the cap.”Of course, the law allows districts to apply the tax increase over five years.

District leaders say they will leave money on the table in the fourth and fifth years.Thus far, the owner of a $300,000 house has paid $11,200 since 2002 - roughly what was promised.“There have been some districts who really haven’t gone the whole way in trying to communicate with their community,” Schuler said. “As long as it’s properly communicated to the community, I think you’re on solid ground.”

D-46 must give where it's gotten

http://www.studentsfirst.us/
D-46 must give where it's gotten
Friday, November 18, 2005
By Brian SlupskiSource: Northwest Herald
School District 46 officials should agree to give land for the widening of Route 176. If not, then the Prairie Grove village board should reject the Tall Grass subdivision. Tall Grass is a 653-home project that District 46 is depending on. Without Tall Grass, the school district would not get 20 acres for a new school and would lose $6.2 million in fees. District 46 has been given a lot, not only by the village board, but also by taxpayers. Since 2000, taxpayers in District 46 have been gouged. In 2000, the owner of a $300,000 home in Prairie Grove paid about $2,690 in taxes to District 46. By 2004, the same homeowner was paying $3,537 to the district. In 2002, district residents approved a tax-increase referendum. But similar to the situation currently going on in Huntley School District 158, the referendum resulted in a tax increase higher than advertised. However, unlike District 158, rather than try to keep the tax increases under control, District 46 officials have cashed in. Not surprisingly, the district's local property-tax revenue nearly doubled between 2000 and 2004, from about $4.2 million to more than $8.1 million a year. Regardless, District 46 officials still have the nerve to cry poor. So the village board approved exorbitant impact fees on new homes, about $21,800 for a four-bedroom house. Prairie Grove Village President Michael Breseman never was a fan of the Tall Grass project. But he knew that it was important to the school district. And village officials worked hard to meet deadlines imposed by the property owners who were selling the Tall Grass property, south of Route 176 between Smith and Valley View roads. "I have never seen a volunteer board put in the hours these guys have," said Gary Overbay, a traffic engineer who has worked with Prairie Grove and several McHenry County communities. Now, village officials are asking the school board to put forth the same effort for something they deem important: the future of Route 176. Any widening likely is decades away, but you have to get the land when you can. District 46 Superintendent Mary Fasbender said she was worried the road would be too close to the school, would be too loud, and would eliminate some parking. But the road would be only 20 feet closer to one corner of the school, from 80 feet away to 60 feet away. Second, the village has proposed a barrier that would make the school safer. If a car on Route 176 goes out of control, 20 feet is not going to make much difference. A concrete barrier will. The bottom line is that if the school district isn't willing to work fast to resolve the Route 176 issue, then the village board needs to reject Tall Grass.

Ballot Question on March Referendum

Shall the Board of Education of Prairie Grove School District Number 46, McHenry County, Illinois, acquire & improve a site for school purposes, build & equip a building thereon, improve the site of, build & equip additions to & alter, repair & equip the Prairie Grove Junior High School Building for conversion to an intermediate level school building, improve the site of, build & equip the Prairie Grove Elementary School Building & issue bonds of said School District to the amount of $18,000,000 for the purpose of paying the costs thereof?