High School District 211 Levy Excess Explained

In order to understand the situation we are now in with the District 211 levy and the district’s enormous fund balance cash pile we need to understand the history in District 211. We also need to understand the two levy limitations that are in effect, namely the “rate limitation” and the PTEL “tax cap”. We will discuss this latter topic first.

Most people today believe there is just the one “tax cap” in effect, also known as the PTEL (Property Tax Extension Limitation) law which is intended to keep the property tax levies at or below the rate of inflation. However, prior to PTEL we only had the “maximum rate” limitations on the various components to a levy, the primary one being the Education Fund. The “maximum rate” limitations are still in effect and are in addition to the PTEL (tax cap) law. For District 211, the past levies were limited sometimes due to PTEL and sometimes due to the old “maximum rate” limitation. Take a look at my analysis D211_Analysis.xls, specifically the line “Limiting Factor (PTEL or Max Rate)?” in my Google Drive:

https://drive.google.com/folderview?id=0B-NGxr9I3-DDbzQ3bUdTbjVtb0E&usp=sharing

Note too another difference between the “maximum rate” limitations and the PTEL limitations. The “maximum rate” limitations are based on the EAV (Equalized Assessed Valuation), which is the total assessed value of property in District 211’s boundaries. When property values decline, such as what had happened following the last recession, then rates rise and can hit their “maximum rate” limitation. PTEL on the other hand is just concerned with the total levy dollar amount increase, not on the computed rate, to limit the total levy dollar amount to not increase by more than the rate of inflation.

Now that we understand the two laws that can limit property taxes for the district, let’s examine the history for District 211. Note that prior to Levy Year 2004 that the Education Fund levy requests were at or near their maximum rate of 1.59. Some years the levy for that fund was capped by the rate limitation and some years it was capped by PTEL. District 211 was not happy with sometimes being limited by the Education Fund maximum rate limitation of 1.59. This was the basis for the referendum, which asked voters to raise this rate by .40 to 1.99. This referendum passed in the Spring 2005 election.

Not intending to complicate matters, the Illinois legislature passed Public Act 94-976 Effective June 30, 2006 that for all intents and purposes did away with the “Maximum Rate” limitation. On their own, Cook County increased the Education Fund maximum rate to the statutory maximum 3.5% for all school districts. So, while District 211 had to have a referendum in 2005 to raise its Education Fund rate from 1.59% to 1.99%, Cook County the next year without any referendum raised it to 3.5%. The only difference was that the Cook County action did not levy any additional dollars for any of the school districts.

Immediately after the successful referendum election District 211 then significantly increased its levy requests over the next two years. In tax year 2004 (tax years are always a year before the calendar year) District 211 requested an operational fund levy that was 16% over the prior year’s levy, or in dollar terms was about $21 million more compared to a normal $5 million average increase. The following year the levy increased an additional 9.8% over the already significantly increased 2004 levy, or in dollar terms about a $15 million increase also compared to a normal $5 million average increase.

Now, here’s the real “kicker”, which is the basis for the whole issue. By increasing its operational fund levy in tax year 2004 per the referendum to get an influx of about $16 million over its normal average levy increase, it also “raised the bar” for the levy for which future PTEL limitations would look at. Again, the next year the “bar was raised” significantly when the tax year 2005 not only included the additional $16 million levy increase from the 2004 levy year but then an additional $10 over the normal $5 million average increase. Putting this into perspective, before the referendum the operational fund tax levy was about $132 million. Two years later the operational fund levy was up to about $168 million. Only then, going forward with this inflated levy level would PTEL (the “tax cap”) begin limiting increases to no more than the rate of inflation.

Due to the 2005 referendum which significantly “raised the bar” on the operational fund levy, and the district’s policy of always levying the maximum permissible amount under the PTEL tax cap, District 211 has been raking in so much money that after expenses it has on average over $10 million extra to add to its growing fund balance. Since 2005, on average it has increased the operational fund levy by $5.2 million each year and then had $10.6 million each year over and above what it needed that just accumulates in its fund balance to where it is now more than $75 million over its own policy target level.

Apart from the operational fund levy, which is now over $200 million, the district also has a levy for paying the principal and interest on its bonds. The average levy amount on its bonds has recently been a little over $5 million per year. Recently, the district has taken a portion of its huge operational fund balance to make “token” abatements of its bond levy, such as the $2 million planned for this year. The term “abatement” is simply asking Cook County to not levy some amount for which the district will replace with its own funds. In light of the situation, the district can do much more, such as abating the entire annual bond levy of about $5 million while still retaining its questionable policy of always levying the maximum amount on its operational fund levy.