MSD Wayne Township School Board Presentation · - In-depth demographic analysis that results in a...

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MSD Wayne Township

School Board Presentation

January 28, 2013

Policy Analytics, LLC

Introduction - Project Overview

MSD Wayne Township is operating in a different fiscal

environment than in the past

- The State has assumed the responsibility for funding local

school operations.

- Property tax rate caps (Circuit Breaker Credits have

significantly reduced property tax revenues).

- Changing economic and demographic trends impact school

tuition support and required services.

Policy Analytics is assisting MSD Wayne Administrators with

the following long-term planning projects

- In-depth demographic analysis that results in a long-term

enrollment forecast.

- Property tax revenue forecast backed by detailed, parcel level

tax base projections.

- Elements of strategic long term financial planning.

ff

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Today’s Presentation

• Overview of MSD Wayne Township tax

base.

• How do TIF districts work?

• Analysis of TIF impacts on MSD Wayne

tax base.

• Tax base analysis and long term AV

analysis.

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-

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012

Mill

ion

s

Circuit Breaker Credit

CB Replacement Grants

Non-Operating Funds

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MSD Wayne Township Property Tax

Revenue History

In 2009, the State CB replacement grant covered 93% of CB

credit.

By 2012, Circuit Breaker credit reduces prop. tax revenues by

22%

80%

85%

90%

95%

100%

105%

2007 2008 2009 2010 2011 2012 2013

Tax Years (Payable)

MSD Decatur

Speedway Sch.

MSD Pike

IPS

MSD Wayne

Marion County

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Gross Real Estate AV Trends Compared to Other Schools

GAV decreased by 7%

between 2012 and

2013

60%

65%

70%

75%

80%

85%

90%

95%

100%

105%

2007 2008 2009 2010 2011 2012 2013

Decatur Twp. Sch.

Speedway City SCH. Corp

Pike Twp. Sch.

IPS

Marion County

Wayne Twp. Sch.

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Change in Net Real AV over Time Cumulative Change from 2007 to 2013

Net AV is Gross AV less: • Homestead deduction (up to $45K) • Supplemental standard deduction (35% of AV, after Hmstd. Ded.) • Other property tax deductions (mortgage, veterans, disabled) • Property tax abatements and TIF increment AV

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MSD Wayne GAV Change by Class

-40%

-30%

-20%

-10%

0%

10%

20%

30%

2007 2008 2009 2010 2011 2012 2013

Industrial

Commercial

Residential

Personal

Total

Decreases in Commercial and Industrial due to the General

Reassessment and Property Tax Appeals

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0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013

GA

V in

Mill

ion

s

Top 7 Real Property Taxpayers

Top 7 Personal Property Taxpayers

Top Real Property Taxpayers Include:

• Crossroads Indiana

• Target Corporation

• Rolls Royce

• Westlake Properties

• AERC Waterstone

• HCRI Indiana

• Spinnaker Court

Top Personal Property Taxpayers Include:

• Rolls Royce

• Carrier Corporation

• Cellco Partnership

• Indianapolis Power and Light

• Rexnord Industries

• Covance Laboratory Services

• Vertellus Ag % Nutritional Specialties

MSD Wayne Top Taxpayers - GAV

Tax Increment Financing

How do TIF’s Work?

How do TIF’s affect MSD Wayne?

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10

Airport

Allocation Area

TIF Boundary

Wayne

Township

Decatur

Township

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TIF Increment Revenue

$99.2 million (11% of total)

City-County

38%

Muni Corps14%

Townships

5%

Cities and

Towns2%

Schools40%

Other Units

1%

Marion County 2012 Property Taxes $933.5 million (net of CB credit)

Property Tax Revenue to Units

$834.3M (89% of total)

Consolidated Allocation

Area64%

Airport EDA15%

HOTIFs4%

Other Indy TIFs9%

Lawrence TIFs4%

Beech Grove TIFs1%Speedway

TIFs3%

Marion County Property Tax Revenue

Distribution

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• Taxing unit property tax revenue

determined by rate controls.

• Levy controlled funds act more like

rate controlled funds. Homesteads

limited at 1%, other residential at

2%, all other property at 3%.

• Once all parcels reach circuit

breaker, revenue growth only

occurs through growth in the tax

base.

• TIF activity can have negative

revenue implications through

higher circuit breaker losses.

• Taxing unit property tax revenue

determined by levy controls.

• Maximum levy growth determined

by change in Indiana personal

income.

• Revenue growth is virtually

guaranteed – tax rates adjust to

generate revenue necessary to fund

levies.

• TIF activity does not largely impact

property tax revenue for other

taxing units.

Pre-Circuit Breaker Credit Post-Circuit Breaker Credit

Impact of Circuit Breaker Credit on the relationship between TIF districts and taxing units

TIF Neutralization Process

• Required annually by DLGF in accordance with 50 IAC 8-2-

12. Procedure is mandated by DLGF.

• Legally required process which neutralizes the effect of

external factors on the base and the increment, to protect

the ability of the TIF district to pay debt service on

outstanding bonds.

• TIF neutralization outcomes:

– Adjust the base assessed value for market value trends

(either upward or downward, depending on market

conditions).

– Maintain at least as much incremental revenue in the

ensuing year as in the preceding year.

– Basis for initial debt service coverage projections.

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-

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013

AV

In M

illio

ns

Original Increment Assessed ValueBase moved to increment in neutralizationBase Assessed Value

$269M

$243M In increment AV

TIF Neutralization protects

bonds by moving base AV to the

increment when AV declines

$98M

Impact of Declining Assessed Value on

Airport TIF Base AV

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15

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

Increment AV

Base AV

Change to Market Value Assessment

General Assessment

resulted in a spikein AV

Appeals and other

adjustments led to an immediate

adjustment

AV growth stagnated in the 2008 recession

AV (including base) declined sharply due

to the 2012 reassessment and

property tax appeals

History of Airport TIF AV Changes

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-

5

10

15

20

25

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mill

ion

s

Debt Service Obligations

TIF Increment Revenues

Airport Debt Service and TIF Revenue

Debt Service

from the United

Maintenance

Project expires

in 2017 – leaving

opportunities for

pass-through of

incremental AV.

Airport Debt Service is

approximately $15M

annually until 2016

Property tax revenues

supplement TIF

revenue to cover any

debt service shortfall

Tax Base Forecast

What is the Outlook for AV Growth

in Wayne Township?

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Forecast Issues

• Demographic changes affecting tax

base.

• Trends in sales prices and property tax

appeals.

• Residential homestead value compared

to other townships.

• Economic and income related trends.

• Existing long-term economic forecasts.

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Tax Base Forecast

Methodology • Review long term assessed value trends to determine

the relationship between MSD Wayne tax base and

Marion County tax base.

• Relate economic variables to changes in tax base,

using an external, professionally accepted economic

forecast (Woods & Poole).

• Customize forecast using factors specific to Wayne

Township, and the characteristics of the properties

within Wayne Township.

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0%

50%

100%

150%

200%

250%

300%

350%

Marion County

MSD Wayne

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Long Term Assessed Value

Trends

Since 2007, MSD

Wayne GAV has

declined at a greater

rate, than Marion

County as a whole

-49%

-22%

-13% -12%

2% 4%

17%

30%

54%

-60%

-40%

-20%

0%

20%

40%

60%

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Township Median Homestead AV as a

Percent of County Homestead AV (2012)

4,6524,484 4,480 4,385 4,287 4,241

4,0423,929 3,963 4,010 4,058 4,106 4,151

-

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ass

ess

ed

Val

ue

(M

illio

ns)

Tax Year (Payable)

Actual MSD Wayne Gross AV [Real and Personal]

Forecasted MSD Wayne GAV

MSD Wayne Gross AV Forecast

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3,3143,135

2,694 2,6562,547 2,489

2,271 2,197 2,217 2,245 2,273 2,301 2,328

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ass

ess

ed

Val

ue

(M

illio

ns)

Tax Year (Payable)

Actual MSD Wayne Net AV [Real and Personal]

Forecasted MSD Wayne NAV

MSD Wayne Net AV Forecast