FAQ on the Tax Levy
Litchfield CUSD12
What is a property tax levy?
A property tax levy is the amount of property tax dollars a school district requests to operate the district for the upcoming school year. This is separate from an extension, which is what a district receives.
Why is a property tax levy important for a school district?
Property taxes are the primary funding source for many school districts, including ours. Approximately 40% of our funding for this year is from property taxes. Each year, the district requests a tax levy extension, or levies, to match expenditure increases for cost-of-living, service, and material increases, as well as other expenditures. The amount of the tax levy rate increase is determined by a formula established by Illinois School Law.
Here is a link to our Budget Presentation from the September BOE Meeting.
How is a property tax rate calculated?
Illinois Law establishes the tax levy formula. The tax levy rate is based on the equalized assessed value (EAV) of the properties within the district’s boundaries (including any new properties and the increase or decrease in property values of existing properties) and the school district’s request for local revenues for its ongoing operations. The school district does not control all of these factors.
Is the property tax levy the Litchfield CUSD #12 Board of Education approves a final figure?
The tax levy the board of education approves is not the final figure. It is a request based on estimations of the items in the tax levy calculation above and the district’s request to support the district's ongoing operations. Since the final figures for equalized assessed value of properties and new growth are not known until the spring following the board-approved tax levy, a school district must estimate what it believes the final figures will be.
What is Truth in Taxation?
This is required if a local governing body proposes an aggregated levy that is more than 105% of the total amount of taxes extended in the previous year (excluding necessary payments for bonded debt). The district is required to publish a legal notice in the locally circulated newspaper and hold a public hearing within a specified timeframe. At a public hearing, the taxing body must explain the levy increase and allow the public to provide testimony. After the hearing and approval process, the taxing district adopts the tax levy. If the levy is less than 105% of the total amount of taxes extended in the previous year, public notice and a Truth in Taxation hearing are not required.
If a school district uses estimates higher than the actual final figures for EAV and new growth, will they receive more money than they should?
A school district can only receive a tax levy based on the final figures released by the county or counties (Montgomery and Macoupin) for Litchfield CUSD #12. If the school district requests a levy that is higher than the final figures allow (based upon the final EAV calculation of the counties), the district will only receive what is allowable by law, which is the final calculation based on the actual numbers as established by the counties. For example, if a district requests a tax levy increase of 10%, but the numbers released the following spring equate to an EAV increase of only 4%, for most levies, the district will only receive a 4% increase in its extension (additional new funding over the previous year).
Why would a district request a rate higher than what they believe the final figures might calculate for the actual levy?
The district makes an educated guess about the final EAV for the properties within its boundaries. However, it is only an educated guess. If a district requests a levy lower than the final figures released by the counties, the district has no way to adjust the levy to receive the additional dollars available to it. Once a levy is filed, it cannot be increased. For example, if a district filed a levy request for a 5% increase, but the counties released figures the following spring that could have allowed a 9% increase, the district cannot change the levy to access the additional 4%. The revenue lost from the lower request would be lost, and the district would go without the needed and available funding for the school year.
As stated above, a district cannot receive more than what the law allows by the property tax levy calculation, so even if the requested levy is higher than the results of the final EAV allows, the district will only receive what is established by the final EAV.
The district has consistently gone to Truth in Taxation since 2022.
2022 = 7.95%
2023 = 10.23%
2024 = 12.24%
This year= 8.59%
Most of this, not all, is due to taking an educated guess about the final EAV to ensure the district has the funds necessary for ongoing operations. This year, the LCUSD12 does not have an EAV estimate from the county, so it is estimating an EAV increase of 9% (just over the final EAV increase last year). It would not be financially responsible for us to do otherwise. Again, we will only receive what is determined by the final EAV set by the counties and nothing more.
The district will also make other changes, outside of the levy, to help continue lowering our expenditures and aligning them more with our current revenues. We do not want to rely entirely on the levy and recognize that other changes are needed.
How does my property value impact the taxes I pay each year? Why did my taxes increase?
There are several reasons why property taxes may increase year over year. An increase in property taxes within your particular taxing district may occur due to the following:
An increase in taxes levied by the local government and school district
An increase in the assessed value of your property (your property is now being valued as more than it has historically been). The assessor's office provides the assessed value of your property, and the district has no input on this number.
Public voting for bond issues, such as new construction.
An increase in the payments of previously approved bonds.
It is important to note that over the past three years, Litchfield CUSD 12 has seen an average EAV increase of 8.11%, with the tax rate decreasing from 4.42 to 4.39. However, many taxpayers' property tax bills increased due to the EAV increase. When property is valued more than the previous year(s), your taxes may increase even though the tax rate has decreased. Again, the school district controls its request of tax dollars to fund the ongoing operations of the school district. The school district does not assess the value of your property.
How do our new and updated buildings impact our tax rate?
School districts often have levied and non-levied debt. The levied debt is built into the Tax Levy and is a set amount based on what you owe each year to pay off your debt. The non-levied debt has to be paid from another source of revenue within the current operating budget. The district currently has 3 bonds levied and 2 not.
Existing Levied Debt:
1 was ~$8.2 million for Colt Renovation
2 is ~$435,000 for operating purposes of the district (we did track/roof work with this)
3 is ~4.955 million for Colt Renovation
Our payment for this Tax Levy request is $1,123,023, which is a 3.85% increase from the previous year.
Existing Non-Levied Debt:
1 was originally ~14.8 million. Paid back from 1% County Facilities Sales Tax
2 was 1.2 million in Debt Certificates, which must be paid back from our operating budget and/or the 1% sales tax, if any remains after paying back #1.
What is our current tax rate, and where does it fall within the two counties where our school district resides (Macoupin and Montgomery)?
LCUSD12 is currently number 10 of 23 districts, which is 2 above being in the middle. Two districts saw their tax rate go down, due in part, to a large EAV increase. Below, you will see a history of our tax rate as well as the EAV% increase (both estimated and actual).
What is our historical tax rate, and how does it align with EAV?
This shows a history of the tax rate and EAV since Tax Year 2000. The average tax rate over those years is 4.61. The district has seen 6 years of a decreased tax rate, until last year, when the tax rate increased by 2 cents. Also, the EAV average increase since 2021 has been 7.91%, of which a portion is directly attributable to rising property values, meaning taxpayers have seen higher tax payments even though the tax rate has declined over the majority of the past seven years. You can also see that the final EAV increase has been higher than the estimated EAV increase. This year, the district did not receive an estimated EAV, so we can only use the average of what we have historically received as we prepare our levy. The district has been conducting Truth in Taxation since 2022, as we continue to be transparent about funding. This is common and prudent financial practice across the state.
How much could the current levy request cost me as a homeowner?
The image only shows the funds we can request a maximum amount. As shared, while we are requesting more than the final EAV may provide, most funds have maximum rates and are capped by the final EAV. We will not receive more than what they set. The tax rate in these scenarios is less than the 6-year average tax rate of 4.52.
Summary
I was told that understanding property taxes and the levy is like learning a new language. I am not sure whether this document helped you, but I hope a small part did. As a district, we are committed to transparency and will continue to communicate with our community. If you struggled with some of the ideas/concepts in this article, you are not alone. Please know that the Litchfield CUSD12 School Board takes its responsibility as the steward of public funds very seriously. As a result, they are always looking for ways to maximize the use of funds while minimizing the impact on taxpayers. The School Board works diligently to balance the district's ongoing operational needs with the yearly requests it makes of its local property taxpayers. Without this valuable source of revenue, the district could not function effectively. The board and staff appreciate the commitment that local taxpayers have to supporting the school district and the children we serve. We will continue to use those funds conservatively while providing the best possible education experience for our students.
Please contact Dr. McClain (kmcclain@litchfieldpanthers.org) with additional questions or clarification.