001Okay. Want to welcome everybody to the We're a minute early, but that's okay. My watch says sit. Okay. Well done, Dad. Welcome everybody to the um Jennings County School Corporation work session this evening. Um we do have a guest speaker tonight who just walked in, so hopefully he had a chance to take a breath and settle in. Barry Gardner with policy analytics. Is there anything you want to introduce him? >> Uh, welcome Barry to speak with us. We've been working with policy analytics for almost a full year now. Been a lot of resource of help. Barry, how many school corporations around the state do you work with now? >> We're up to approximately eight districts. >> So, a lot of districts around the state. So, some very important insight for us. Last board meeting we
002talked about um all of the financial impacts that we have going on with not only ADM but property taxes, local income tax, and also federal grants. Um so Barry's going to give us some really specific insight to that property tax piece evening. >> We will remind Barry, you and everybody in the room, we are live streaming the work se session this evening. So um it will be recorded and uploaded to the website. So welcome. Thank you. Appreciate it. Good evening everyone. Appreciate the opportunity to be here with all of you again. Very good policy analytics. Tonight, as we said, we're going to take a deep dive into some of the impacts that we are seeing as a result of Senate World Act One. We kind of take a step back to this spring. Uh Senate
003World Act One was signed into law by Governor Braun on April 15th and was really um driven by this goal to uh create property tax relief uh specifically for homeowners and at the end of the day really wrote rewrote uh property taxes and how they interact and operate uh not just with schools but with governmental units really across the state. And so tonight we're going to talk through that a little bit, some of the mechanics, what we're seeing a little bit from a statewide perspective, and then also drill down to what we are seeing specific for Jennings County Schools and some things for the district to be aware of, uh, as we see how the legislation is beginning to play out. Uh, and so, uh, feel free if there's any questions along the way, uh,
004feel free to ask. We can also there at the end is really fine with me. There we go. Uh so we at Policy Analytics is alluded to uh we actually work not only with school districts but our firm works with governmental units across the board. So we work cities, towns, counties uh and I hope the schools division working with about 80 districts across the state and really there's three main pillars of impact that we are talking with school districts about. Uh that is that we're going to see some impact on Senate Build Act One in terms of tax rates. We're going to talk about what Senate Real Act One is potentially going to do to tax rates really for school districts also has impact on the levies or the revenues that districts receive at the
005end of the day. We're going to kind of outline those and then we're also going to take a look at what does this mean in terms of the taxpayer. We start to play out this legislation and we've created a little illustration here at the end of what do what would a taxpayer potentially see uh in terms of their own property tax bill at the end of the day. What does that mean uh for all of us? And with all three of these, there's some pretty significant changes uh as a result of Senate Bill Act one uh across the state. When we try to as best we can simplify uh school finance, which is not often easy sometimes to do, uh property tax revenue, and that's really what we're speaking primarily about tonight. The education fund
006is funded really on that per student basis and the state funding formula. We're talking about property tax revenue which funds your operations fund. And at the end of the day, we really look at net assessed value which is the value of each individual piece of we call parcel or piece of property across uh the school district. So homes, farmland, businesses and when we add up what they are assessed at that we call that net assessed value. after any deductions they receive, we're going to take that net assessed value times a tax rate and going to generate revenue. And we've been really in this the last gosh close to 10 years been living in a situation where each year assessed value and specifically net assessed value has increased. Our assessment system is market based and so
007as home prices have gone up so has the assessed value and as assessed value goes up it allows us typically to do a few things. Uh one we can keep a steady tax rate and generate additional revenues uh that maybe help with inflationary pressures. We can also allow the tax rate to decline and still maybe generate the necessary revenues as assessed value grows. student rule act one we're really beginning to look at that bottom row which is new in that we're facing the result of declining net assessed value and as net assessed value goes down the tax rate must go up in order to generate the similar amount of revenues and that's one of the new mechanics of Senate enrollment act one across the state as declining net assessed values happen it's going to have
008impact on tax rates and it's going to on revenue at the end of the day. Why and and what what's driving this? Uh so the legislative changes were were minimum uh really across the board. They some ways pulled multiple levers all at once and the first is in the deductions that a homeowner receives. So, previously, if you've ever looked at your property tax bill, there's a gross assessed value. Again, that's tends to be market value uh or associated with market value you can sell your home for. And then you have deductions. You had a standard deduction of 48,000 and typically a supplemental deduction of 35%. The new legislation phases out that $48,000 deduction over the next six years down to zero. But at the same time, it's increasing the supplemental increasing that percentage really up
009to a 2/3 deduction. Why? Uh the legislative body thought and mathematically would play out a standard deduction of 48,000 becomes worth less and less each year as my home value go grows because it's a stagnant figure. It doesn't grow with the home. So the value of that deduction becomes worth less where a percentage deduction the deduction grows as as a proportion as my home value grows. And so that was the desire uh was to increase the deduction uh for homeowners. And at the end of the day a 2/3 deduction is going to be greater than our original 48,000 and 35%. And the theme really tonight if we start trying to take away some nuggets, right? Or some simple thoughts with this is anytime I'm increasing deductions, I'm going to drive down net assessed value. And
010then when we drive down net assessed value, that's going to have impact on the rates and revenues. And so this is the first place we begin to see deductions increase um in this case specifically for homeowners. The other component that they have provided for homeowners to try I think to create uh relief a little faster because again the last slide it was a six-year phase in of that deduction is a new homestead credit and it is 10% of your tax liability or what you pay in property taxes up to $300 and it's after the property tax caps. So, if I had a home that was worth $150,000 and the most I could pay is 1,500 in property taxes due to that 1% cap, I'm going to get an extra $150 off my tax bill in
0112026, which that $150 is then revenue now that is not coming to the schools and to the other local government units, right? And so, revenue that's going to be kept by the homeowner at the end of the day. And so this starts in 2026 and we see it have some impact as we'll show later a little bit on the district's revenue uh as we move forward. They also increased uh some additional deductions that you're familiar 65 and over. There's been a disability deduction. There's been a veterans deduction. They've increased those and also increase the income levels uh that allow a person to qualify for those. So again, some additional deductions that play out in legislation as well. The other area, and this is new, is that they introduced uh deductions now for the 2% property
012tax class. And the 2% property tax class uh it contains um apartments, non uh rentals, long-term care, and agriculture. And it phases in again over the next six years up to a one-third deduction. And they also changed the base rate calculation farmland. Uh so I numbers I'll put pulling here again. I think originally the base rate per acre was supposed to be around 2390. I think it's coming in now around 2120 2140 on a per acre basis. I may be a little bit off on that, but it's a couple hundred dollar difference. And so again, that has impact then on the revenues and and the rates of the district as well as they've created these additional deductions in the 2% class. The last probably the most complex uh is the changes they made to business
013personal property. And business personal property is the equipment associated um with a business. All right? So a data center, you might think servers, the computers inside of a farm, you might think a combine, right? The equipment that's used to run that business. And two changes were made. The first is there has always been what has been known as a dimminimous amount. Uh that's recently been up to $80,000 that a business did not have to report equipment for state taxable purposes. So if I had a $75,000 piece of equipment, I didn't have to report taxable purposes. Starting in 2027, that threshold now goes to 2 million. So now if I have a million half dollar piece of equipment, I beginning in 2027 will not have to report that for taxable purposes. And really what that does
014is it pulls assessed value out of the system. Giving that really exemption to uh businesses and their their equipment and that's going to pull assessed value out of the system and again that drives down at the end of the day AV overall and specifically that assessed value and we're going to see that a little bit in your specific data in a moment and it has some But you're still going to be left with a decent size amount of your assessed value that's business personal property. I think it's around 13% still after that uh deduction comes out. And the concern there I think from the school's perspective um is the second part of the business personal property. Currently a business can depreciate a piece of equipment uh down to a 30% floor. So, if I have
015a $10 million piece of equipment, a large piece of equipment, I could depreciate it down to $3 million and I pay taxes on that remaining $3 million. Any new piece of equipment from January 1 of this year moving forward, I can depreciate that down to zero for taxable purposes. So, it creates a way to lessen my tax liability. And what we don't know is what kind of economic incentive that might create. If I'm a business and I have a lot of large equipment, uh maybe do I replace it a little sooner knowing that I can eventually over a depreciation cycle get that down to a lower taxable um purpose. Do I create a new entity, new LLC in which I shift my business personal property over to the new LLC and depreciate that down? And
016the challenge is that's still going to take time because even if I purchase that new piece of equipment, it's going to have its own individual depreciation schedule and that varies depending on the piece of equipment, but typically it's at least four to five years and sometimes longer. So, we won't know that full impact of the second portion of did it create this incentive or what's that impact really for multiple years down the road, but it's so it's something to keep an eye on really at the end of the day when you think about it. um 20 years down the road, if we really play this out, it's a good chance it's eliminating most of the business personal property as a taxable entity at the end of the day with new pieces of equipment come on
017and with that depreciation schedule change. Uh the last uh this has been a little bit new um I'll just touch on this briefly. the two years ago, um, the state legislators put in, uh, caps or thresholds, excuse me, on the debt service fund. And basically, they said at the time, if your debt service rate was above 80 cents, you had to take a project, you were forced to take a project to a capital referendum. Uh, it didn't matter if it was $2 million or $200 million. It was, you had, you're above 80 cents, you had to take it. They've now lowered that to 70 cents. The The area though is probably a little closer I think from the James County perspective is we have this 40 cent threshold and that really I'd say is the
018lesser of the two impacts. Uh the 40 cent threshold says that if now it treats every project like a control project meaning that you have to do two public hearings have to wait 30 days see if there's any taxpayers enough taxpayers up to roughly 500 that file a petition against that. If they do, um, then you're forced then to maybe go down some different legal steps. If they don't bring the petition forward, you're allowed to move forward with the project, right? That's kind of the the process that and that's been in place for many years. A lot of districts go through that. The reason we bring this up is one, um, this is in our slide deck because they've changed it to 7040. But secondly, they've created mechanics, but they're going to drive up tax
019rates. And so tax rates are going to be pushed up against this threshold. And so it's an that more districts are having to keep an eye on. So if you hear that that's some of the the changes and we'll talk a little bit about that. Okay, let's talk a little bit about some statewide pieces here. Um we recently uh at policy analytics held a seminar. We brought in about 60 school districts to talk about Senate World Act One and what we are seeing in the data. And in our analysis as we in our model and again we have a software model that takes this down to the parcel level across the state. And as we looked at the schools changes over the next six years. Right now the average school tax rate in the state
020of Indiana is right around a dollar two. Call it a dollar three if you round up. And over the next six years, you would potentially see that rate rise to a$137. And that's what the district's keeping the same amount of levy or revenue in their debt service fund as they currently have. So it's not increasing any levy in their debt service fund. And it's just allowing the operations fund to operate like it has in previous years where it grows by the growth potion in the state of Indiana. So really kind of status quo is the best way to say it, right? Uh and so overall we're seeing that rate rise. And so this is a mindset shift, right? Because we've been in a situation in a lot of districts across the state that have been
021able to manage to a steady tax rate, right? A lot of districts often ask, "What is the state tax rate?" They try to be around that 95 cents, maybe to a dollar, and they say, "Okay, we're going to stay at that 95 cents." And it's going to allow at least some revenue generation in both the operations fund and the debt service as assessed value grows. Well, now assessed value is not going to grow. It's going to decline. And as it declines, it's going to drive up the rate in order to generate those same amount of revenues. And so that's the mechanics that we're seeing as a result of Senate Bill Act One. And so the idea of saying we have a flat or steady tax rate is a really a situation that's going to be
022very difficult for schools to maintain, really almost impossible for districts to maintain to be perfectly honest because of the mechanics of the bill that we're going to model some of this out locally here with Jud County. But this is what we're seeing really across the state and it's not just school districts. When we look at the county rates across the state, 92 counties here in Indiana on average the county rates go from about 42 cents to roughly 60 cents. And so we're seeing this happen with the other government units as well. So this isn't just a school situation. This is uh both cities, towns, counties, everyone within that piece. And this is not a surprise if you've heard chairman Thompson uh chairman Jeff Thompson represent Thompson uh is the chairman of House Ways and Means.
023He is the author of really I know it's a Senate enrolled act one but it was really driven out of the house and he's really the author behind this and his goal in his mind and his calculations is the property tax system will even itself out as all tax basically payers. the tax rate moves to an overall $3 rate between schools, cities, towns, kind of collective, right? So, we're not surprised to see the mechanics of the bill drive up tax rates because that's what they stated intended it to happen. It's a part of the mechanics of the bill. Um, and so again, that's why we're seeing these happen, not just with schools, but with the other government units really as well. Uh, we look at cities and towns. Uh again, this is a little more
024difficult because again, uh uh there's just different size cities and towns and you look across the state. But as we tried to pair this back, again, the mechanics really are the same. This goes from about a$116 to $162. Uh and so if you were to go back and add up those previous three slides, right? So $160, add on another 60 cents, add on another I think it was $130ish in the first slide, we're above the $3, right? It's the mechanics of what Thompson intended with the bill. Uh so again, not surprised to see mechanics, but this is hard, right? Because if I go back to it, we're really not changing the amount of revenue, but the rates are rising. And oftent time we associate rising tax rates with additional revenues. And that's just not the
025connection anymore. Okay? the way rates have been connected to revenues in the past have changed as a result of Senate Rule Act One. And that's a really difficult concept, right? It's it doesn't make sense, I would say, in some ways, right? But that is really the mechanics of the bill is that the rates don't reflect the revenues situations that we've seen. So again, this is going to be a challenge, I think, for all schools across the state. It's going to be a challenge for cities and counties because of this u you know when taxpayers see rates rising they're going to think that we're increasing you know we're we're increasing the rate when really it's often times the mechanics of the bill at the end of the day. Um the other piece again that we're seeing
026really statewide um is this is looking really at the impact of the operations fund net levy. Okay. At the end of the day, the dollars coming into school districts um and the impacts, we'll talk a little bit more later about some local income tax uh revenue that schools receive and and James County Schools is one of those. And really the purple line is the the teal line, excuse me if I explain this well, is the Senate enrolled act one. So what we would have expected in revenues and the uh post senate enrolled act one is the purple. And really what you can see is there's a 2 to 2.7% annual decline in per student um revenue um across the state of districts that receive these local certified shares like James County. Right. So what we
027know in the data is that revenues are going to be muted to declining over the next three years. Then they kind of settle in in 2028 and start to have a uh you know upward trend again. But overall we see the gap that grows with the revenues we would have expected which the revenues that now we project to come in on a statewide average. And again part of this was the intention of the bill. Again, if I go back to Chairman Thompson, not to quote him too much tonight, but the one of the comments that were made were districts were going to receive um not less revenue. They kept calling this firm less of more, right? So, instead of getting 4% revenue increases, you might get 2% revenue increases. Now, the data is showing it
028may be a little more impactful than that, but the intent of the legislation was to constrain revenues because I think at the end of the day, there was some thinking that schools had enough in their operations fund um and could survive the next few years with more muted revenue streams. And again, so none of this is really surprising, I'd say, from a statewide piece. This is what we expected to happen as the really stated in the intended legislation uh within that. Okay, so let's talk a little bit here now. We'll localize this. Um I'll pause. Any questions on any of the statewide data? Maybe it's a good place to pause for any questions. I know I'm throwing a lot tonight. Okay, let's talk a little bit about Jayce County uh schools information. And so the
029first piece that we often look at is the breakdown of the net assessed value. So if we go back again, think of that equation, net assessed value times tax rate gives me revenue. We're going to have a look at what your net assessed value is made of because this is going to impact that, right? in terms of revenues at the end of the day because we typically really like a pie like we have on the left that we have somewhat a diverse pie uh within that. The challenge in this legislation for the district is really two of the major areas of your pie receive new additional deductions. Right? And so when we look from 2025 and I'll just fast forward to 2031. It's showing when all the deductions are fully in place. We see that
030business personal property which is in the yellow drop by you know approximately not quite 4%. That's because in 2027 any business personal property under $2 million is getting pulled out of the system. And then we see the agriculture piece of pie get a little bit smaller. Again we're giving those additional deductions to the 2%. And this is not a great representation because if we truly did this the right way 2031 that pi would actually be a smaller pie. Right? Right? So we've almost gone think of pizza pizza, right? We've gone from a large to a medium, right? In terms of net assessed value through the day. So we've changed the composition and we've shrunk the pie. And these pings as we look at it are going to start to have some impact within the district.
031Um, as we often do at policy analytics, we try to look at debt service for a lot of our districts because depending sometimes on how you move your debt service needle, it could have impact on your operations funds. So as we look at the scenarios, we ran really two scenarios for the district. One is we kept the 25 debt service levy constant and then the other we kept the 2025 debt service rate constant. And that's probably seen a little bit more easily here. So if I refer in these future slides to the levy scenario, it's really saying you keep your 2025 debt service levy at that $4 billion uh figure. In the 2025, we're keeping the 475 debt service rate constant which in the previous situation with growing abs would have generated additional revenue or
032higher levies each year the mechanics of it right and these are just guard rails for now uh you know as our work with the district an assessed value is released here in another hopefully another month or two for 2026 that's when we'll dial in with the district and your work with Baker Tilly in terms of the exact structuring of your debt um this was our way to try to get some guard rails and see what the impact looked like for the 80 districts that we're looking at really in the last couple months. But so it's going to give us I think a somewhat accurate look at what's happening. Uh we'll definitely tailor that that in. And here is the chart that really is going to drive a lot of our conversation. And this is net
033assessed value uh projections for the district. The green line represents gross assessed value. So that's before deductions. and call out a couple of things. One, really easy one is you see that uh call out which says BPP impact, right? That is the business personal property impact. And if you look in that year, the green line actually goes down when every other year really around it, it's increasing. And why is it going down from 26 to 27? because we're pulling out those parcels under the $2 billion threshold that now the legislation are exempt. Uh and so that does have impact on your assessed value. If you think back to that previous pie chart, that's why that piece of that yellow got smaller. The reason the green line though continues to grow is because we do have
034some tren trending assessed value as we call it growth. Right? Right now economic data would tell us that u assessed value would continue to grow. They did not change the assessment system. that's still market based. So the home worth 150,000 could be 160 next year, 170 next year, right? The businesses will continue to grow. So that's why we have that green line still trending upward is because we have some positive growth in there. The blue line represents net assessed value prior to Senate World Act One and it somewhat mirrors the green line, right? Uh and then the orange represents net assessed value after Senate and World Act One. And that is where we see over the next six years really a declining net assessed value as those deductions ramp up and become larger and larger
035each year. And it goes back to that as we increase deductions. We drive down that assessed value. And that's what we're seeing in the data. In 2031, you see it start to move back in a positive direction. That's because at that point, all the deductions are fully in place, right? we kind of set a new floor or establish a new baseline and then it grows with gross assessed value though at a more muted level because we have larger deductions at that point. Um and so we're in this really interesting time to be perfectly honest and that we have the next six years that we're probably going to be facing declining net assessed value which is different from what we've been dealing with the last several years and how that's looked in terms of our rates
036and our revenues. And then in 2031, we might flip back to a situation where we have growing excess value. And so it's going to require flexibility really from schools across the state uh in terms of how you think about your your finances around property tax revenue at the end of the day. So what does that impact look like specific for um Jennings County Community Schools? Um again, this is an illustration. Uh I want to pause. Let me come back to this. I'll come back to that tax rate because I want to set this up. We have again it's a roughly call it about 3% call it trending AV growth right and with any of our projections again we're making that we tend to try to be a little bit conservative u because we don't want
037to overestimate your assessed value growth but it is a projection right based on the best information we have today. So if assessed value comes in better than what we're projecting the numbers that we'll see would look better. If it comes in lower, maybe we hit a plateau in terms of housing, right? Um or have a pullback in the economy, then it could assess value doesn't grow as fast as what we have projected, then we could see uh some more impact to the figures. So, I think that's important to understand. These are illustrations based on really our assess value projections as we best know it today and the impact of what we do know in Senate rule act one. And that's what's really driving uh here uh the increase in the rates. And so theoretically um
038the solid lines are the preenate enrolled act excuse me solid lines are post Senate enrolled act one. The dotted lines are preenrolled act one. Uh the teal is the debt service rate scenario and the red is the debt service levy scenario. We're going to expect the teal to be higher because we have larger revenues in the debt service fund in that. And so again, you can see that potentially we would see anywhere from a 50 to 60 cent potential um debt overall property tax rate uh for the school district increase over the next six years. And even in the levy scenario that's holding that debt service levy, you know, constant. I will tell you, we'll show this some of this is driven by debt service. A lot of it's driven just simply by the operations
039fund and the mechanics of the operations fund at the end of the day. uh that with its relations to the growth potion. Uh if you notice, you see a pretty decent jump from 26 to 27. And I don't think I've got a pointer. I should put a little call out here, but this little larger than normal jump. That is because again in 2027, we're pulling out additional assessed value with that business personal property. So you have a little larger impact than that additional deduction. So that's what's driving that piece there. And then again, you see it start to level out and you know, we move past because then all the deductions are fully in place with the debt service fund. Um, and this is again where I say a lot of your tax rate impact
040is not necessarily in your debt as it is in your operations fund because we looked at about a 50 cent increase on the levy scenario and yet only about eight of it is actually coming in your debt service fund. So the majority of it is actually coming in the operations fund and the mechanics there. Um as assessed value relates to the growth portion. Um this is also where again the district you've been below that 40 cent threshold. You could potentially move up over that 40 cent threshold. Um again that would require just some additional legal steps in order to do a project um within that. Again, sometimes you have to do those legal steps if your your project is above a certain dollar figure anyways, right? So, it's not anything it can do. Um, and
041that doesn't mean that the district's going to move there, right? It's going to be based on some of the decisions you make at the end of the day, but it is something that just your bank team, you're going to have to navigate and think about as you move forward within that that you may just have to have some additional hearings or some additional steps if you're looking to do a project at the end of the day. Okay. So, let's talk now revenue and this is again I think where we can really show that the rate changes and the revenue changes don't match right and um so this is your operations fund uh net levy at the end of the day and so in 2025 it's at that 9.2 2 million. The dotted line is showing
042um again preenetate enrolled act one. It's got a 4% MLGQ, the maximum growth quotient, which is what we've had the last couple of years. That's what's built into that line, just continuing again how we've been operating in the past. The solid line is what we see in terms of impact uh with your revenues as a result of Senate Rol Act One. And really the first couple of years they're pretty well flat in terms of revenue. Not a whole lot of revenue growth. And the reason that revenue growth is being muted or constrained and the first year it's that new 10% credit. Okay, that homestead credit, that 10% liability, I go back to that $150,000 homeowner not paying the $150 the credit they're getting. That's that revenue that's not coming in. And that's why we see
043that change. And then it's flat early in 2027 because of the change in the business personal property, right? And then we start to see a little bit of growth um as we move forward in those next several years. But really what we're looking at for the next few years is really flatline revenue in our operations fund. And the challenge, right, I think that we could all kind of think through that is oftentimes expenses aren't flat, right? Utility costs go up, property casualty insurance costs go up. You know, potentially what are we doing in terms of salaries or benefits for employees that are paid inside the operations, fuel costs going up, right? We we've seen, you know, seven, eight% inflation. Um, now it's starting to cool, right? Inflation is starting to come back a little bit,
044but we still have inflation and yet the revenue is staying the same. And so that's going to be the constraint that a lot of districts are facing is revenue is not growing and expenses potentially could at the end of the day. Um, and really does the interesting piece the revenues don't change a whole lot depending on what you do with your debt service fund. Uh, it's one of the things we sometimes look at for some districts. If you really increase your debt service fund rate, you can have fewer dollars in the operations fund. We don't see a whole lot of that here and that plays into a little bit of strategy. But overall, regardless, we're really looking at a situation to start. You're going to find out tonight, too. I'm I'm full of lots of
045great news. Um I've been told lately I'll probably be a real hit at birthday parties around here lately. Uh because here's where we're starting. And unfortunately, the news doesn't get better because of this. So, this is just the baseline piece. And we're going to move into some things that have some addition impact that are going to create some additional challenges and this is one of them. This is the the uh post circuit breaker that 10% credit and how it is laid out uh in terms of dollar figures and roughly in total uh you know it's about $480,000 but you can see it's broken out between the operations fund and the debt service fund. And the blue that's in the operations fund we already have modeled into the slide before. The challenge and the worry that
046we have for districts is the orange basically says when you go to do your 2026 levy in your debt service fund, you're not going to receive $137 in revenue in your debt service fund. And they really only let you levy for what you need to make payments in your debt service fund. you can't build up cash in your debt service. And so the worry across the state is as districts don't receive revenue in their debt service fund or their full amount of their levy is how do you make up for that? Well, you use the cash balance you have in the debt service fund. Well, you can't build that up. So once that's gone, you have to use your rainy day fund or your operations fund to make your debt service payments. And if you
047go down far enough, there's, you know, that you could say a school could default on their debt payments. And we don't think the state legislative body is going to want to have a situation where legislation they put in place would cause districts to have impact on their debt service money, right? Or not be able to make payments. They had this when they originally put in circuit breaker back in 2009. And then they did what they call protect the debt service fund, meaning all the impact goes to the operations fund and none of the impact goes to the debt service. So if they were to do that in 2026, which there's a lot of belief that they're going to come back and do this because some places this is a very big impact. What would happen
048is that orange that is debt service would flip to blue and would now impact the operations fund and be additional revenue you would not receive in the debt service fund which is what this slide is attempting to model out. And so now we've added in that at least on the left side that maroon line that shows really slightly again about $140 to $180,000 less and operations fund revenue than we previously showed you. Um if in 2026 they came in and protected the debt service fund. I'll be surprised. I maybe it doesn't happen in 26, maybe it's 27. I just don't know if they're going to allow that to play out. um across the state. I think it's a it's a real concern and we're hearing that they are they're aware of it and talking through
049it. So again, unfortunately what that means is more impact on the operations, right? And fewer dollars in the operations really adding to that. So now we're actually seeing revenue start to decline. Then because we're not done, uh because we've got to have some more things in the bill, um we have local income tax impact. So local income taxes in the past has been collected at the county level. Uh I said tax on your income and used for a variety of situations. one, it's often uh used as a what they call certified share where it's actually cash that is then or revenue that's distributed to the local units of government across the county. So, they're using income and helping to support local units. Um, James County is one of those and the school district is one
050of those. The other is when they use the local income tax as what we call a property tax replacement credit. And this is called PTRC for short. So if I say that or you see that, that's what PTRC is. And basically idea is we're taking local income tax and we're using it to lower the property tax bill, right? So you pay less in property taxes. And all of these are set to go away in 2027. legislation. So any current local income tax agreements will expire. Now there is potential and it's written in legislation that new local income tax agreements could be established at the county level and now they've also given other units of government the ability to establish local income tax. Municipalities, cities and towns of a certain size, not school districts. And so
051school districts don't have an opportunity to local income tax moving forward and what we have at least currently what's been interpreted though I think this could be an area for change is that moving forward the schools would not be a part of any potential sharing of any new local income tax pieces nor a property tax replacement credit able to be established. Now you're going to start to see some data that you're going to I think see why I think this could be continued to talk about over the next two sessions. But this is playing you know really here in the district. I think we've got a slide here that shows currently uh this is from the DLGF um that in Jennings County and this is there's more than here but uh the school district receives
052approximately $630,000 in certified shares. So that $630,000 is revenue that will go away starting in 2028 for the for the school district. And then in the bottom lefthand corner, I know it's a little bit small. Really, it says there's property tax relief of 1.6 million as it means they're taking $1.6 million of local income tax and using it to lower property tax bills. Okay, that is scheduled to go away as well. So, what does that mean as we look at impact? Well, now as we look at this chart, kind of again coming back to uh What we're seeing now as we add in the local income tax revenue, we see that much more significant drop in 2028 because that $630,000 of local income tax revenue as of today is set to go away. Now again,
053there is a legislative session in 26. There's a legislative session in 27. Could that change? Right? But as of right now, this is how the legislation reads. Um, and so again, this would impact on the school district's operations fund. Uh I think technically I think Philip and I are talking this may actually go into the education fund. We've just modeled it here kind of staying in the theme of of our current slides. Right. Really at the end of the day it's $600,000 of revenue the district receiving that goes away. So whether you have it the education fund or the operations fund is going to have impact on those those two um in those pieces. And so then again, as we pull in that postcircuit breaker credit, this maroon line on the left is really what
054we've been telling districts to at least start planning around because right now, the way the legislation reads, your revenue would be relatively flat in 26 and 27. We see a decline due to that local incomes tax in 28. And we think they're going to do something with that post circuit breaker credit, right? And so we now see as we play that out roughly about a $2 million variance from what we would have expected in revenue to what we start receiving in revenue really from 2028 and beyond. That's relatively our gap at the end of the day is about $2 million of revenue that is potentially going to go away from the school district. Um I wouldn't call it good news. Um but you're not alone, right? Uh in this piece, right? You're not alone. Um
055we're doing this chart for a lot of people. This is going to be a challenge. I think the piece every school district is facing the tax rate situation. Every district is facing revenue situations. You are on one of those districts. There are 74 school districts across the state that will actually receive fewer dollars in 2026 than the receive in 25 and 85 districts that will receive fewer dollars in 2028 than the receiving in 2025. and you would fall into that category, right? And so, uh, there's roughly about 290 school districts in the state. Um, so again, this is impactful. This is impacting a lot of schools across the state and really creating a lot of new and challenging conversations, right? Uh because we have revenue constraints at the end of the day that are really
056impacting the district. One of the things that um the team asked to look at was uh because and I completely understand this. Uh districts across the state, uh school boards across the state, I call communities have all been used to a certain tax rate for many years, right? And become very accustomed to that. I there are so many districts that we work with at policy analytics um that have a steady tax rate, right? They've had the same tax rate for the last five or six years. And so this is not uncommon. And so what we were asked to do was to say what if the district wanted to keep that$118 tax rate, right? What would it mean? What would it look like in terms of revenue for the school district? And really what we see
057and this is going to actually combine the debt service. The previous slides were just specifically the operations fund. This is combining both the debt service and the operations fund. So that's why the starting figures are a little higher. Um but really you're looking at foregoing um you know roughly you know two million starting in 2028 to approximately 4 million in 2031 in revenue from the impact of Senate ruled act one. Not even from preenate enrolled act one from post Senate enrolled act one. Right? And we already know that we were giving up roughly a couple of million dollars due to Senate and World Act One. We'd potentially be giving up now another two4 million at the end of the day. And this does not uh account for the LT impact that $630,000 right and that
058was kind of shown in both slides. So, I mean, I think the challenge is, and this is why I think there are many districts that are going to look at trying to keep their tax rate where it's at because of sustainability. I think the question is for a district is if they were to keep a steady tax rate, where does where does the $2 million you're already losing $2 million, right? So the first piece is you have to as a district um start to adjust for that $2 million impact and that's not going to be easy. I mean be perfectly honest and then uh sat in this seat, you know, school CFO for eight years. Um that's not easy, right? Um you're not talking close to you know 20% of your budget. And so how
059do you adjust for that first and foremost and then to say we're going to up another $2 million. I think the challenge would be in being able to provide services at the end of the day uh to maintain buildings uh provide transportation to get salary increases. While a noble goal, I think it would be an extreme challenge to give up really at the end of the day, you know, close to anywhere from four to$6 million of revenue and be able to sustain uh the district as is. And so, you know, For that reason, I don't know a district that um that we have talked to at this point that uh has talked about trying to maintain the current rate because again they're already facing the impact of Senator Ro which is challenging in itself. Uh
060and so and I think the other piece is depending on where your taxpayers are at, right? They may or may not a difference in their tax bill. And the example I would give you is if I'm a taxpayer who's already at the property tax cap and my tax bill would say I am supposed to pay $1,400 in property taxes, but I want my 1% says I can only pay a,000. You keep your tax rates where it's at and it gives them a $300 relief off of the original bill. So let's say they're supposed to pay $1,100 instead of 14, but remember they're only paying $1,000 to begin with. So you've lowered your rate, you've created a theoretical savings, but the taxpayer has not seen a difference in their bill. And I think that would be
061some analysis I would be really looking at as well if it's truly a consideration because you may not be impacting taxpayers in the way you think you might, right? That's the challenge sometimes the property tax system, the property tax caps is we think um by lowering rates we may be having impact on taxpayers and in some cases you might and in other cases you may not. And Again, I probably the bigger piece here I think I would just see and again part of the work we do is with the district is on future cash flow modeling, right? Revenue and expenditure modeling and I know we've been working through that already and and working to adjust and now the goalpost has been moved with Senate Bill Act one that's going to create even further conversations. This
062would be even more difficult to to to pull off that. So, I just think u appreciate the look. I think it's an interesting piece. Um the other just want to take a look at here real quickly uh is what does this look like in terms of taxpayers. Uh and we just took I think a couple of uh situations here. They're a little bit illustrative. Uh so this is North Burn City Taxing District. Uh this is again what they would pay in property taxes. In this case, all of the homesteads are at the cap. They're paying their max 1%. You see the bill go down from 25 to 26. Uh that is the result of that 10% credit. U my worry, and this is probably just Barry Gardner, but a lot of people hear $300 and
063think I'm getting a $300 deduction on my tax bill, and it's not $300, it's 10%. So in this case, it's roughly start as $130. Um but I think what people are also going to find their assessed value goes up in the home. It's not going to be the full $130, right? It's going to eat into that. Um, but potentially they would see, you know, some impact there, but then it obviously returns back to, I think, kind of status quo of what we've seen in terms of property tax, uh, bills with gross assessed value. I think the bigger concern is this one. Uh, so this is Geneva Township taxing district. Um you can see from 25 to 26 there is a slight decline in the tax bill for that 937 to just under 894. But then
064as the mechanics of the bill start to happen because they're not at the cap they have sensitivity in their tax bill. And so when the business personal property goes away it shifts the tax burden as we call it away from the business personal property to the other units including homeowners. So this would cause their bill to go up, you know, approximately $160 in that next year. And then the following year, there's the opportunity for another $140 increase because the property tax replacement credit that has been lowering the property tax bill goes away in the legislation. And so again, these are mechanics of the legislation, not mechanics of a school district operating any differently than you have. And so I think this is again going to be a challenge. You're not the only school district that's
065facing. This is a conversation again we're having a lot. But when tax bills start to increase, you know, how do you begin to tell this story, right? I mean, this is complicated. Um, you know, we're spending an hour and we're highfly 30,000 foot viewing this. Um, and so, you know, as tax bills go up, you know, what does that start to to look like? and also what's that mean across the state? You know, will they come back and continue to tweak this legislation? I think that's one of the things we've had some conversations around because again, this was framed as historic property tax relief. Um, we're not sure that this bill has at this point created historic property tax relief outside of some decrease in 26. Um, so then what's that mean again in terms
066of tweaks in the 26th session with this legislation or the 27th session? Um, I think going to continue to be some questions that are out there. So, a lot of moving parts both from the school district and for the taxpayer. Um, the last piece here, and again, I think this is just an interesting kind of look. This is we sometimes ask the question, did the legislation do what it intended? This is showing really the tax burden, who's paying the taxes of the taxes that have to be paid, where they're coming from. And you can see on the left there in 2025 about 47% of it come from the residential. And in 2031 when all the deductions are fully in place, we've given all these deductions right to homeowners and they're still carrying 49% of the
067tax burden. So it hasn't really shifted and it's partly because we're giving deductions to the other areas as well. And when you give deductions to the it's like this push pull, right? As I give deductions to homeowners, their piece of the pie gets smaller. When I give deductions to the other areas, their piece of the pie gets bigger. And this push and pull of who's paying. And so again, at the end of the day, there's not a whole lot of movement in terms of that ultimate tax. And so just part of our data that makes us start to think what may still be coming in terms of legislation. So I think that's it. I know that's a lot important. Happy to to answer any questions, but I cannot put you to sleep property tax discussions
068tonight. questions. >> You have any good news? >> I get that question a lot lately, you know, and I I I would tell you this is u it's not fun to be on your end. It's not been a whole lot of fun to be on this end either just because again, it's going around delivering news like this across the state. You know, it's there's going to be a lot of challenging conversations. Uh you're going to have a lot of think thinking differently. Um I know in a lot of places the word referendum is a very bad word. They never talk about it and they've started talking about it. Right? I'm not suggesting it's anything for the district here to discuss and I'm just using as an illustration of districts that they never would talk about
069a referendum. We present this information and they'll start talking. Maybe we got to start thinking about that's how I guess how bad I think this really is in some places. force districts to think about things that they never would have thought about before. So there's your good news, right? You're not alone. So you can see why we asked Barry to come and present and share this. Um Barry is known to be one of the top thinkers in this area in the state and he's so good at explaining it in an understandable way. Philip and I have had the opportunity to meet multiple times and talk through this and we really thought it would be something that we would like to share with you. Um, and then also our community members because we all have a
070voice in this and knowing moving forward that understanding these impacts could impact what legislation looks like, it's good that we're well informed and understand what's what those lever pulls are going to do. Um, so we wanted to bring it to share and if you don't have any questions now but you have them later, you can definitely send those to me and I can get them to Barry um and get back with you on that. >> Do any board members have any questions now? I I would suggest that the good news, Travis, is that we're looking at it now, right? We're we're trying to be forward thinking. Um and it's not just today. Um Nikki, her team, Phillip, um we've been talking about this and looking at finances. Um we're school corporation. Um we have to
071understand our bills, our expenses. Just like your home, everybody has a budget. have a budget, you have to understand that budget. Um they're difficult conversations. Um it's difficult to make those types of decisions. But what I would suggest to you all in the room and anyone who's listening online is that um our leadership team is really taking this extremely serious and um we're looking at it now versus waiting until um we have to be reactive versus really being proactive and I appreciate that. So thank you. I know that's those are not conversations. They're not um you know I know that that's all difficult. So we we appreciate I appreciate that as a the chair of the board and I know that the other board members do as well. So I appreciate that and we want
072to thank you for coming and again we know it's not fun information but it's necessary. We have to understand the facts. We have to understand what we're dealing with in order for us to to respond appropriately. So, we appreciate you bringing um this information to us tonight. >> So, we'll end the work session now and at 7 o'clock we'll um start the regular scheduled um