Tax Impact Calculator
Watch the following segment from the 2017 referendum video to further understand the tax impact associated with the proposed referendum.
Q: What is the tax increase over the current 2016-17 tax level for each of the referendum questions?
Q: What is the overall estimated tax increase over the current 2016-17 tax level?
Q: When will the tax increase take effect?
A: If approved, District residents would first note the impact of:
Questions 1 and 2 on the December 2017-18 tax bill. This is a phased borrowing over a 3-year period (2017-2019) with each borrowing paid back over a 20-year period
Question 3 on the December 2020-21 tax bill and thereafter on a recurring (ongoing) basis
Q: Are the estimated tax impacts additive (does it increase year over year)?
A: No. The estimated tax impacts for Questions 1 and 2 are consistent from one year to the next as stated in the chart below and based on individual property value. This borrowing will be phased in over a 3-year period, with each borrowing paid back over a 20-year period.
The estimated tax impact for Question 3 would also remain consistent from one year to the next, but is called “recurring,” meaning it becomes a permanent increase to the school tax rate beginning in 2020-21.
Q: Would the school tax rate go down if the referendum did NOT pass?
A: Yes. The current (2016-17) school tax rate is $11.98 per $1,000 of fair market property value. If the referendum questions are not approved by the community, the estimated school tax rate for 2017-18 would be $9.44 per $1,000 of fair market property value.
Q: Why is the tax impact related to a much larger project (Q#1 for $162.8M) only slightly more than the tax impact related to a less costly project (Q#2 for $18.5M)?
A: The City of Verona created a Tax Increment District (TID) to provide infrastructure improvements for the EPIC campus. Once the City recouped the funds associated with those improvements, the TID closed and the property value associated with that development is returned to the tax rolls. That closure occurred in 2016, resulting in a sizable increase total property valuation for Verona Area School District.
The increase in property valuation creates an opportunity for the District to complete approximately $140,000,000 of building projects and have no impact over our current (2016-17) tax rate. The tax impact for Q#1 takes this into consideration, so the impact over the current tax rate is really associated only with the amount of the project in excess of $140M (or $22.8M).
The District would not build the swimming pool or competition athletic fields and related facilities without constructing the new high school, so none of the 'credit' of the $140M is applied to the pool/competition athletic fields as it's all applied to Question #1 (new High School, School Renovations, and District-wide Maintenance)..
Q: What is the estimated school tax rate after 2020-2021 if all three referendum questions are approved by the community?
A: It is challenging to look out further than five years as there are many variables that can affect future tax rates, such as changes in state law, new state budget cycles, economic changes and actual student enrollment. It’s important to note that the impact of approval of the facilities questions #1 & #2 are each 20-year borrowings (phased in over 3 years) that extends the debt service tax rate impact into 2038-2039. The approval of recurring funding for the operational expenses are a permanent increase over the revenue limit cap.
Q: What happens if the projected “growth” slows down?
A: The estimated tax impacts for the referendum questions are based on projected annual equalized property growth of 2.75% in 2017, 3% for 2018-2024, and 0% thereafter. If the equalized property growth is lower than predicted, the tax rate impact would be higher than projected; if equalized property growth is higher than predicted, the tax rate impact would be lower than projected.
Q: What is the difference between “fair market property value” and “assessed property value”?
A: Fair market property value (FMV) is the agreed upon valuation, or price, between a property buyer and seller and is calculated by licensed property appraisers. Fair market value is based on a number of factors, including size, features and condition of the property, supply and demand in the local housing market and recent market history.
An assessed property value is the valuation placed on a property by a public tax assessor to determine a homeowner's annual property tax. Assessed value is always a percentage of the property's fair market value (which varies from state to state) typically calculated as 80 percent to 90 percent of fair market value, and then impose a 1 percent to 2 percent annual property tax on the assessed value.
The assessed property value and fair market property value both serve a different function and purpose of importance to a homeowner: one is used by local government and the other is used by consumers and mortgage lenders.
Q: How much debt is the District currently carrying?
A: The District’s current referendum-approved debt is approximately $4.8 million. The Board of Education’s strategy is to minimize fluctuations in the school tax rate and maintain a level rate rate year over year, if possible. By doing so, the District has been able to prepay existing debt; the District has reduced interest cost by nearly $4.3 million through either prepayments or refinancings done over the last 5 years.
Q: What assumptions are used to determine the estimated tax impacts for the facilities and operational referendum questions?
A: Key assumptions include:
Interest rates ranging from 4.00% to 5.00%.
Annual Equalized Property Growth: 2.75% in 2017; 3.00% in 2018-2024;0.00% thereafter.
State Aid based on projected tertiary reimbursement of -25%.
Phased borrowing approach over a 3 year period (2017-2019) with each borrowing paid back over a 20-year period.
The illustrations are intended to estimate the increase in the referendum portion of the tax bill only. Does not include property taxes paid to other governments (e.g. City, County, Technical College District, etc.). Actual tax rates and payments may vary based on equalized valuation growth, individual homeowner reassessment, State Law changes, property tax rate initiatives, and other factors, as well as changes in the assumptions.
This Information was prepared by PMA Securities, Inc. (“PMA”), as Financial Advisor, at the request of, and is being provided to, the listed school district (the District) for its Institutional Investor Use to provide factual information to its taxpayers and the general public as part of a referendum being placed on a bond ballot election. This information is being provided for informational and/or educational purposes only without regard to any particular viewer’s financial situation or means. The content of this information is not to be construed as a recommendation by PMA that the viewer take an action or refrain from taking an action, or as a solicitation or offer to buy or sell any security, financial product or instrument. Nor does it constitute any legal, tax, accounting or investment advice of services regarding the suitability or profitability of any security or investment. Viewers should consult with their own tax and/or legal advisors before making any decisions.
Although the information contained in this Information has been obtained from third-party sources believed to be reliable as of the date hereof, PMA cannot guarantee the accuracy or completeness of such information. It is understood that PMA is not responsible for any errors or omissions in the content in this document and the information is being provided to you on an “as is” basis without warranties or representations of any kind. Moreover, use of this information after the date hereof is subject to change.
Q: How did the 2015 Land Referendum impact taxes?
A: In April 2015, the community approved spending $8.35 million to purchase three parcels of land. The Vanta/Erbach properties (also referred to as “West-End”) is the proposed site for the new Verona Area High School and the Herfel property will be retained for future school needs. The tax impact at the time of the referendum was $15 per $100,000 of property value.
In spring 2017, the District will prepay all remaining debt related to this approved land purchase, saving District taxpayers over $300,000 in interest costs.