High Finance with Hentze
As the Chair of the District Budget and Finance Committee, I have set up a monthly meeting with Brian Mentzer to increase communication with our members about the current state of the district's finances. This report will be shared with the Executive Council at the monthly meetings and with the membership.
Three upcoming issues this next month:
New TIF District
1. Brian will be meeting with the TIF (Tax Increment Financing) committee to decide on approval of a new TIF district in Fairview Heights around the old Sports Authority shopping plaza (across from St. Clair 10 Cinema) and 72 acres of recently cleared woodlands behind it.
Tax Increment Financing (TIF) is a way for local governments to lure economic development into areas that would normally be considered unusable or "bloghted". Since these blighted areas generate little or no tax revenue, a TIF will allow the municipality to offer developers the chance to reprise the land. The benefit for the developer is that the property will be taxed at the original blighted value originally and then incrementally increased over a period (such as 25 years) until it reaches full value. For taxing entities such as school districts, this means that they do not see the full value of property taxes from the moment the property is developed. On the other hand, without the TIF imcentives, many developers will not begin new projects in communities that can increase the overall value of all property over time. If a city government offers a TIF, it must be approved by the taxing entities that will be impacted (such as District 201). As part of the negotiation process, these entities can ask for a percentage of the city's TIF revenue in exchange for their support.
The District is opposed to the TIF in its current form on two fronts: 1. The district does not consider that area to be blighted 2. The clearing of 72 acres of woodlands indicates that they city is making way for some new development. Fairview has proposed giving the district a 10% share of the TIF revenue from the land, but the District is asking for 30% in order to grant approval. To compare, Belleville gives the District 50% of the TIF revenue for lands such as the new retail and hotel development out by the Shrine. The district did not block that TIF because the land is currently owned by the Oblates and thus not generating any revenue as it is tax exempt. Within four years, this TIF will be generating new revenue for the District.
New Financing Bill
2. There is a new school financing bill in the Senate (SB1) that will restructure formulas for General State Aid (GSA). The new formula will primarily help districts that receive a majority of their funding from GSA (such as East St Louis 189) and not those that are mainly driven by local taxes determined by the Equalized Assessed Valuation (EAV) such as the suburban Chicago schools. Since District 201 is in a unique position of being funded by larger EAV but some GSA, we will receive some funding but not as much as other districts. Brian estimates that we will possibly receive around $400,000 more in GSA the first year and maybe as much as $600,000 the second year under the current form of the bill. While this increase will be helpful, it is far short of the amount needed from the state (approximately $4 million). For comparison , our MONTHLY payroll is between $2.3 and $2.4 million, so the new funding will not do much to alleviate expenditures. Of course, this is pending the passage of the bill by both chambers and approval by the governor (as well as full payment of state obligations).
New Line of Credit
3. The board was asked, and approved, a $6 million line of credit at the last meeting. This will be held in reserve to cover operating costs until GSA and local tax revenue payments are disbursed. It will only be used if existing funds are exceeded before the payments are deposited. The primary is of the line if credit will be used to cover payroll expenses, if needed.
If you have any questions about these issues, please do not hesitate to contact me.
In addition, I would like questions from the membership to ask Brian at the monthly meetings. I will certainly be glad to discuss payroll budgets, but I would also like to explore other finance issues beyond just payroll, since ultimately these issues impact payroll as well. Please email me at firstname.lastname@example.org with any questions you would like answered.
3/23/2015 12:59:31 am
Thanks for taking the time and initiative to keep us informed, Brandon. You keep writing these and I'll keep posting them. :)
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Proud alumnus, union member, and educator in District #201 since 2006.
Dr. Hentze is the author of High Finance with Hentze, a monthly blog that provides news about District 201's current financial state.