A timely note for my Edina peeps
Next Tuesday, May 5, 2015 is the referendum vote on the Edina School District’s $125 million capital improvement plan. It comes with a tax increase, and that’s why, of course, it goes to the voters. You can read more about it here, and even figure out how much your property taxes will go up if it passes.
I had the occasion to talk to a group of Edina residents, a group called Common Sense for Edina, earlier this week about about TIFs in Edina, which also relate, of course, to property taxes. The subject of the effect of TIFs on the school district’s projections of tax increases from a successful referendum vote came up. I discussed it a little, and I followed up with an email to the group.
I thought it might be interesting to others, too. So here it is:
I appreciated the chance to visit with members of Common Sense for Edina on Sunday evening about TIFs in Edina. There was also some discussion about the upcoming bond referendum by the school district that came up, and I’d like to amplify my remarks about that, for the group, especially group members who were not there.
Tuesday, May 5th is the day for the referendum vote, and of course, people have been voting absentee for several weeks now. I personally hope it passes, and I think that it will; based on the history of school board referenda in Edina, it should.
During the referendum discussion, concern was expressed about a couple of matters that I think are potentially confusing, and which really don’t bear directly on the merits of the referendum. People, including me, are genuinely upset about future tax revenue that will be diverted from the tax levies of the county, school district, and the city itself, on Pentagon Park, because of the creation of the TIF district there in 2014.
Some $62 million of tax revenue will be paid to the Edina HRA over the next score of years or so, $54 million as a development subsidy, and $8 million to the city for infrastructure improvements to support the project. In the TIF documents, the city and the HRA estimate that about $36 million of that will come from taxes that would have gone to the school district, but for the TIF.
One of the questions raised was, Doesn’t this blow a $36 million hole in the in the school district’s projections and tentative tax assessments to property owners? It’s a good question, but the answer is, NO. Here’s why:
If you follow the link above, you will see that the district’s taxpayer impact chart is dated February 15, 2015, and it shows projected incremental assessments for property taxes to be paid in 2016. There is always a lag of a year between assessments, made as of January 1st of any given year, and payment. There are just practical and mechanical reasons why this is so. Time to permit property owners to protest the assessments, and government units that rely on the property tax to do their budgets, are a couple of reasons for this.
But once the assessment data is in, the tax base is known with some precision by the taxing jurisdictions. They know there will be some assessment protests, and that some taxes will be delinquent when they are due the following year, but it’s a number, adjusted for those things, that local government units use set their budgets and determine what we used to call mill rates will be.
If you know how much money you need to raise in a given year, and you know what the aggregate tax base is, you can calculate the tax rate you’ll need to raise that money. It’s simple – very – long division. Once the rate is determined, you can apply it to individual properties, either in a tax statement, or as here, an informational prognostication.
That’s all the district’s impact chart is. The revenue from school levies to Pentagon Park won’t be a “hole,” because it was never assumed to exist and was never part of the calculation. The estimated market value of Pentagon Park was reduced in 2013 due to a settlement of an assessment dispute, but that lower EMV is already reflected in the 2015 assessment figures used by the district in the chart. There won’t be a magic increase in the homeowner assessments because of Pentagon Park.
The district knows how much money it will have to raise every year to pay interest on and retire the bonds, pretty closely, anyway. What will change in the future is the tax base. Historically, it goes up, but it can go down, too, in the short run, as we’ve seen. That’s why, as some have suggested that it do, the district cannot predict assessments for the duration of the levy.
There is also some consternation about increases in assessments, or estimated market value, that residents are seeing in the last couple of years. The school district doesn’t have anything to do with determining the EMVs of properties; that’s the city assessor in Edina’s job.
There was some sentiment expressed as the CSE meeting that the referendum should be defeated to send a message to the city about TIFs and excessive assessments. I think that would be unfair and misguided; the school district is a bystander here, and it’s a bystander full of kids.
Moreover, the city’s public schools are not one of, but the major attractor to Edina. Nobody moves to Edina to be closer to Pentagon Park; everybody moves to Edina to be in the school system. Homeowners ignore that fact at their peril, in my opinion. Property values in the city held up better than anywhere else that I can think of in the last recession.
Anyway, get out there and vote.
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