A County School Facility Sales Tax Success Story

Steve Ptacek, Superintendent, Jacksonville CUSD 117

Noel Beard, Board of Education President, Jacksonville CUSD 117

Michael Oldenettel, Sales Tax Referendum Campaign Committee Member

Kyle Harding, Bond Counsel, Chapman & Cutler LLP

Tammie Beckwith Schallmo, Financial Advisor, PMA Securities, Inc.

November 21, 2015

IASB – IASA – IASBO Joint Annual Conference

For a copy of this PowerPoint and much more visit:

Vision117.com

County School Facility Sales Tax Overview County School Facility Sales Tax Law enacted by General Assembly

on October 17, 2007, and amended on August 23, 2011, July 13, 2012 and August 27, 2013.

Law based on similar legislation in Iowa. Allows school districts to submit a ballot question to county voters to

implement a county sales tax for school facility purposes.– In 0.25% increments– Up to 1%

Of the 102 counties in Illinois, 62 have voted on the sales tax. Tax implemented in 33 counties. Tax imposed on the same general merchandise base as state sales

tax, excluding titled or registered tangible personal property (such as vehicles, watercraft, aircraft, trailers, and mobile homes) and qualifying food, drugs and medical supplies.

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County SchoolFacility Sales Tax Map

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“School Facility Purposes”

Acquisition, development, construction, reconstruction, rehabilitation, improvement, financing, architectural planning and installation of capital facilities consisting of buildings, structures and durable equipment

Acquisition and improvement of real property required, or expected to be required, in connection with capital facilities

Payment of bonds or other obligations issued for school facility purposes (such as alternate bonds) or issued to refund such bonds or other obligations, provided that the taxes levied to pay such bonds are abated by the sales tax proceeds used to pay such bonds

Fire prevention, safety, energy conservation, disabled accessibility, school security, and specified repair purposes set forth under Section 17-2.11 of the School Code

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Ballot Question

How to put the question on the ballot: The regional superintendent of schools (ROE) for the county must,

upon receipt of resolutions of school boards representing more than 50% of the student enrollment in the county, certify the question to the proper election authority.

Enrollment means the head count of students residing in the county on the last school day of September of each year, as reported on the Fall Housing Report.

Ballot question (form prescribed in law): "Shall a retailers’ occupation tax and a service occupation tax

(commonly referred to as a “sales tax”) be imposed in The County of __________, Illinois, at a rate of 1% to be used exclusively for school facility purposes?”

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Election Results

A majority of the votes cast needed to pass If referendum is successful, the sales tax is imposed at

the rate set forth in the question The election results must be certified by the county clerk

and filed with the Illinois Department of Revenue (IDOR) If pass in March 2016, file with IDOR on or before May 1,

2016, tax begins on July 1, 2016 If pass in November 2016, file with IDOR on or before

May 1, 2017, tax begins on July 1, 2017

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Flow of Funds

Tax is collected by IDOR and held by State Treasurer; State retains 2% of collections for administration costs.

By 25th of each month, IDOR certifies to State Comptroller the amount to be disbursed to the ROE for the counties where the tax has been imposed and collected during the second preceding calendar month.

Within 10 days after receipt of certification from IDOR, Comptroller causes orders to be drawn for amounts contained in the certification.

Within 30 days after receipt, ROE disburses sales tax proceeds to school districts.

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Distribution of Funds

ROE distributes sales tax proceeds to school districts on a monthly basis– Distributed on enrollment basis– Only students residing in the county are eligible for funding– Need to determine distribution process with ROE

School districts must deposit the sales tax proceeds in a separate School Facility Occupation Tax Fund

Monies on deposit in the School Facility Occupation Tax Fund may only be used for “school facility purposes”

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Duration of Sales Tax

No limit in sales tax law nor does law authorize inclusion of sunset in ballot proposition

Referenda required to reduce or discontinue the sales tax at any time– County Board must certify question to reduce or discontinue the

sales tax– If referendum is successful, sales tax will be reduced or

discontinued (as set forth in the ballot question), provided that such reduction or discontinuance does not adversely affect a district’s ability to pay debt service on bonds that are secured by sales tax receipts or necessitate the extension of additional property taxes to pay debt service on bonds (e.g., sales tax alternate bonds).

Timeline

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Election Date March 15, 2016 November 8, 2016

Individual school boards representing more than 50% of total county

enrollment adopt resolution in support of CSFST referendum

Prior to December 28, 2015 Prior to August 22, 2016

ROE certifies ballot proposition to the County Clerk

Prior to January 7, 2016 Prior to August 31, 2016

County Clerk publishes election notice

Between February 14 and March 5, 2016

Between October 8 and October 28, 2016

County Clerk posts election notice Not later than March 5, 2016 Not later than October 28, 2016

Election day March 15, 2016 November 8, 2016

County Clerk canvasses election April 5, 2016 November 29, 2016

Sales tax effective date July 1, 2016 (provided canvass is filed with IDOR by May 1, 2016)

July 1, 2017 (provided canvass is filed with IDOR by May 1, 2017)

Sales tax revenues received monthly from ROE

Beginning no later than October, 2016

Beginning no later than October, 2017

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Four Phases of CSFST Success

1. Preliminary Research and Planning

2. Pre-Referendum Community Engagement and Visioning

3. Referendum: Community Campaign

4. Post CSFST Referendum: Bond Sale

Phase I:

Preliminary Research and Planning

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Jacksonville School District 117 General Overview

3300+ students grades K-12 76% of the students in Morgan County 62% Low Income 10 District Buildings

– One High School– One Junior High School– Six Elementary Schools– Central office/Kindergarten Center– “The Bowl” gymnasium

(Pre-K Centers in Morgan County Housing Spaces)

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Political Overview

Very conservative county “Tea Party” influence Last successful referendum: 1978 2012 CSFST failed with only 36% yes vote Multiple failed referendums in past 35 years

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Financial Limitations

Morgan County passed PTELL in 1996

JSD117 Debt Service (DSEB) is ZERO

(We can’t sell HLS bonds!)

Each year we use Ed. Fund money for HLS needs

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State of District Facilities

Most recent building: JHS 1982 2 buildings 40+ years 1 building 50+ years 4 buildings 60+ years 1 building 80+ years 1 building almost 100 years old (1917)

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Starting Questions

Why are we asking voters for money?

What are we planning on doing with the voters’ money?

How do we get community support?

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Where to Start?

Board and Superintendent early focus - Establish Unity – Develop a central team – Community Facilitation Team

(Team includes: Board members, administrators, teachers, and diverse community representatives.)

Invest in consultants (JSD117 utilized the professional services of BLDD Architects and Unicom ARC)

Empower and direct Facilitation Team with an official “Charge from the Board” (Approved November 2013)

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IMPORTANT POINT 1

Do not attempt to pass the Sales Tax unless you can show the voters that the money is needed!

JSD117 was in dire need of this revenue source, but we needed to demonstrate our need.

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IMPORTANT POINT 2

Focus on developing unified, community support of the facility improvement plan – NOT on the money!

Show the voters what you will do with their money!

Previous JSD117 efforts had disagreement amongst supporters on how to spend the money.

Many people voted no because they couldn’t support the plan, not because they didn’t want to invest in schools.

Phase II:

Pre-Referendum

Community Engagement and Visioning

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Facilitation Team

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10 diverse community members, 2 teachers, 2 board members, 3 district administrators

3 Community chair leaders Utilized professional consultants 10 total meetings: November 2013 – June 2014 Subject to Open Meetings Act First Tasks:

– Formalize the structure of the process– Create a Brand– Develop a list of possible improvement scenarios – Prepare for large community engagement events

Community Engagement Process

Four large community engagement events– Jan, Feb, March, April 2014– Average attendance over 200 community members– Structured: Community chair, architect, and Superintendent

presentations– Work activities for community members with small group reports– Data from each event analyzed by Facilitation Team – No “open mic” events

Professional political phone survey Vision117.com and Vision117 Facebook

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Branding

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Very important to create a brand for the process First Facilitation Team meeting included lengthy

brainstorming session Team chose:

“Vision117: Honoring Our Past – Looking to Our Future” Focused on Jacksonville’s proud educational history

“Athens of the West”

Brand

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Improvement Scenarios

Facilitation Team originally developed 21 possible improvement scenarios.

Scenarios underwent a thorough analysis including:– Physical needs assessment– Educational adequacy of each building using national standards– Cost/Benefit ratio for each scenario

Following analysis, 21 scenarios reduced to 11

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Improvement Scenarios

Larger community engagement examined 11 scenarios– Received input from political phone polling and community

engagement sessions – Included possible funding limitations (Money was not discussed until the 3rd community engagement

session)

Scenarios reduced to final 5 that fit within budget that could be supported by community

Further community input helped develop final Facilitation Team recommendation presented to the Board of Education in June, 2014

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District Role

District developed the Vision117.com webpage to regularly update and communicate with the community:– Pictures of the condition of the buildings– Explanation of the impact of having zero DSEB– Timeline of Jacksonville’s proud educational history– Explanation of the sales tax law– FAQ– Clarified misrepresentations – Much more

(The original pages have been moved to the “Archive” heading.)

Superintendent took active community role prior to issue being placed on ballot.

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IMPORTANT POINT 3a

Commit to an extensive, structured community engagement process!

Show the voters what you will do with their money.

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IMPORTANT POINT 3b

Utilize professional consultants for both:1. a structured process, and

2. physical needs and educational adequacy assessments.

The Vision117 process worked because it was very structured, focused, and included objective data.

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IMPORTANT POINT 4

Develop a brand!

Vision117 has become its own “entity” defining the partnership between the district and community focused on school and community improvement.

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IMPORTANT POINT 5

Have a smart final plan!

The final plan of Vision117 was the only plan that had a positive impact on everyone, fixed a building with extreme need, and fit within the budget.

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IMPORTANT POINT 6

Don’t be frightened of social media, use it to your advantage!

The intense communication through Facebook and Vision117.com were instrumental in the success of this process.

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IMPORTANT POINT 7

On a personal level, be willing to compromise!

The final plan was not what most of the Facilitation Team wanted when the process began, but everyone was in agreement in the end.

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IMPORTANT POINT 8

Overall, develop trust between community and district!

Communication and transparency helped develop trust between the district and the community.

Phase III:

Referendum:

Community Campaign

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Separate Entities

Once the issue is on the ballot: Things Change! The community efforts, including fund raising must be

driven by community members. (No district involvement) Public Funds are NOT allowed to be used to support a

proposition on a ballot. – Superintendents are considered “on duty” 24 hours a day. – Board members can be involved with referendum as community

members only!

(See 9-25.1 of Election Code: Election Interference)

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Community Committee

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Community Committee

Structure– Leadership– Meetings

Fundraising– Personal donations– Corporate donations

Game Plan– Radio– Signs– Facebook– Community Blitz

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District Role

Maintained Vision117.com website– Factual information including answering misrepresentations

Superintendent gave weekly tours of junior high to show physical state of building

Maintained community presence – Factual information only

Kept in regular contact with attorney to ensure that communication never “crossed the line” into election interference

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IMPORTANT POINT 9

Don’t be frightened of communicating during the election period, but only give factual information! (Talk to your attorney on a regular basis)

The district continued to present data and clarify misrepresentations after the sales tax was on the ballot.

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Result

In November, 2014 Morgan County voters passed the CSFST with

60% yes votes!

Phase IV:

Post CSFST Referendum:

Bond Sale

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Bond Sale Considerations

The District’s number one financing goal was to achieve the lowest cost of capital– A secondary goal was to make bonds available to Jacksonville

residents, who supported the CSFST referendum

The District’s financial advisor, PMA Securities sent a Request for Proposal to several underwriters

After thorough review of the proposals, PMA recommended that the District select a team of three underwriters to sell its bonds to investors

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Underwriting Team

The three underwriters had various strengths:– Firm one:

Sold bonds to retail (individual) investors– Primary focus on Jacksonville residents

Had four brokerage offices in Jacksonville– Firm two:

Sold bonds to retail investors– Firm three:

Sold bonds to larger institutional investors (banks, insurance companies, etc.)

Jacksonville residents were given first priority for retail orders, followed by other Illinois residents and then out-of-state individuals

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Conduit Issuer

The District also decided to sell its bonds through a conduit issuer– Western Illinois Economic Development Authority (WIEDA)

By purchasing bonds through WIEDA, investors enjoy both state and federal tax exemption on its interest earnings– Results in a lower interest cost for the District than if it sold bonds

on its own (federal tax exemption only)

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Financing Goals Achieved

The District positioned itself to secure the lowest possible financing cost– Assembled a strong underwriting team who focused on various

types of investors– Sold its bonds through WEIDA

Jacksonville residents had an opportunity to purchase the District’s bonds – “Full circle” community support for the District’s projects

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District Update

The Facilitation Team (Vision117 Committee) was reconvened to discuss how to use the excess proceeds from the bond sale

This spring we will renovate our first elementary school The community is getting more than the initial plan they

supported We are working on Phase II

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IMPORTANT POINT 10

Hire an outstanding Municipal Advisor and Law Firm to help with your bond sale!

PMA and Chapman & Cutler have been amazing assets in helping to secure our maximum funding.

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IMPORTANT POINT 11

Keep communicating after the election!

Trust between the community and the district will be critical for future phases of Vision117.

Lessons Learned

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Q&A

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This document has been prepared by Chapman and Cutler LLP attorneys for informational purposes

only. It is general in nature and based on authorities that are subject to change. It is not intended as

legal advice. Accordingly, readers should consult with, and seek the advice of, their own counsel with

respect to any individual situation that involves the material contained in this document, the

application of such material to their specific circumstances, or any questions relating to their own

affairs that may be raised by such material.

© 2015 Chapman and Cutler LLP

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