Answers From DLGF

My call to the Department of Local Government Finance was returned today and a number of answers provided. My thanks to Amanda Stanley for her help.

The tax cap situation is different this year than it will be in 2009, 2010 and going forward -- assuming the legislature doesn't monkey with things.

This year the homestead property tax cap sits at 2% of assessed value. So, if line 2 of Table 1 of your property tax bill shows a 'total gross assessed value of property' as $100,000, your total 'property tax liability' on line 5, should be no greater than $2,000. Table 2 shows the tax cap calculated maximums. If you are like me, the maximum tax cap was less than my actual total tax bill for the year.

According to the DLGF, this is because the school general fund costs are still split between the state and the property taxpayers. In my case, Decatur schools' general fund tax rate is 0.58%, so our cap is really more like 2.58%.

Next year, the state will take over the entire cost of the school general fund. So, we should see a full implementation of the 1.5% homestead tax cap, regardless of the amount of debt our school district carries. And, likewise, in 2010 and after, we should see a 1% homestead tax cap, regardless of debt. The schools will have to use operating funds for debt payments if the tax caps limit their tax revenue too much.

The schools have three ways to get around next year's and after property tax caps -- ways we should all be aware of.

First -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 2%, they can apply to the state for a 'levy replacement grant'. The state will have a fixed amount of money in that fund and will distribute it proportionately to districts that fall in this category. The fund likely will not make up the entire shortfall, but it will make up some of it.

Second -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 5%, they can apply to the 'distressed unit appeals board' for relief. This would entail public notice to the taxpayers of the district and public hearings before the DUAB. The DUAB would evaluate the testimony and would decide if the school district should be allowed to avoid the property tax caps.

Third -- the school board can call for a referendum, where the public would vote on whether or not the district should be allowed to avoid the property tax caps.

All three approaches deal with current debt, and not new projects. After this year, if the district pays for property or projects over certain amounts, depending upon the exact project, they will be required to hold a public referendum on that project and how much over the tax caps they can go. The voters would decide yes or no. If the district pays for property or projects that cost UNDER those certain amounts where they are not required to hold a public referendum, then they must abide by the property tax caps.