Quincy Reporter

Community Consolidated School District 181 Board of Education Finance and Facilities Committee met Nov. 7.

Here are the minutes provided by the committee:

Call of Meeting

The Board of Education Finance Committee meeting of Community Consolidated School District 181, DuPage and Cook Counties, Illinois, was called to order by Board Member and Finance Committee Co-Chair Asim Aleem at 5:00 p.m. on Tuesday, November 7, 2023.

Roll Call

Finance Committee members present were Sinead Duffy (remote), Asim Aleem, Hector Garcia, Mindy Bradford, Mike Duggan, Jerry Mejdrich, Lois Mejdrich, and Catie Norton.

Also present, Meg Cooper, Margaret Kleber, and Ellen Dunlap.

Guests: Robert Lewis, Senior Vice President, Managing Director, PMA Securities, LLC

Pledge of Allegiance

Mindy Bradford led the Pledge of Allegiance.

Public Comment

No public comments.

Approval of Minutes

Asim Aleem made a motion to approve the minutes from the October 24, 2023, Finance and Facilities Committee meeting. Meg Cooper seconded the motion. The motion carried.

Celebrations

Ms. Bradford noted the following celebrations:

● Benefits Annual Open Enrollment Process Successfully Automated (November 1-15)

Informational Items

Fund Balance Strategy: Phase One

Ms. Bradford shared that the District is dedicated to maintaining a reasonable fund balance to mitigate current and future financial risks and to ensure stable tax rates. Policy 4:20: Fund Balance establishes goals and provides guidance concerning the desired level of year-end fund balance to be maintained by the District. The policy indicates that the Board should target an audited operating fund balance of no less than 30% and no more than 50% of total expenditures. At the October 17, 2022, Board of Education meeting, the Board approved the recommendation for the Fund Balance Strategy. The strategy includes any amount over 50% of the operating fund balance that should be restricted for district approval and/or an adjustment on the Levy/Abatement amount. It was decided on February 7, 2023, at the Finance and Facilities Committee to authorize an abatement of the 2022 Bond and Interest Levy of $5.9 MM. Ms. Bradford said the current FY24 Budget includes a projected abatement amount of $2MM.

Ms. Bradford noted that it is essential for the District to preserve revenue resources and to look for opportunities to reduce expenses while continuing to provide the highest academic return on investment. An adequate fund balance is vital to providing cash flow for not only continual needs but for unforeseen circumstances as well.

Things to review/consider on an annual basis:

● Possible Revenue Reductions/Cost Shifts

○ Property Tax Freeze compounded annually ≅ $3MM

○ Evidence-Based Funding ≅ $2.26MM ○ Categorical Payments ≅ $.7MM annually

○ Potential Tier I Pension Cost Shift annually at 10.6% ≅ $4.1MM

○ Potential Tier II Pension Cost Shift - TBD

● District Initiatives

○ Restricted medical self-insurance reserve as of June 2023 ≅ $783,95

○ Restricted activity accounts as of June 2023 ≅ $244,880

○ Full Day Kindergarten debt certificate payments ≅ $2.5MM

○ Administrative Building ≅ FY2024 $4.1MM FY2025 + $3.3MM TOTAL $7.4MM

Ms. Bradford recommended that the District include restricted medical self-insured reserves, restricted activity accounts, full-day kindergarten expenses, and Administrative Building expenses. The District will continue to monitor the risks associated with the possible revenue reductions and/or cost shifts.

Committee members engaged in a discussion related to possible revenue risks/cost shifts (Tier II Pension).

Committee members discussed the pros and cons of abating when the District is planning for full-day kindergarten.

Financing Update: Full-Day Kindergarten

Ms. Bradford shared a history of the plan to implement full-day kindergarten. An estimated $26MM facility investment was included in the FY24 budget (resulting in an approximate $2.5MM annual bond & interest payment and was prioritized and included in both the FY24 Budget and the related long-term projections).

The District has continued refining those estimates based on the demographer report (received after the FY24 Budget was approved) and preliminary cost estimates (based on the number of additional classrooms required based on the demographer report).

Based on the latest cost estimate of $26.438MM, the current annual bond & interest payment for this issuance (depending upon market conditions at the time of sale), is estimated to be $2,425,000. This is based on an estimated 4.25% interest rate and a term of 15-years). The final payment would be made on June 1, 2039.

Mr. Lewis shared that the District issued Debt Certificates in 2009 for general improvements and renovations. Those certificates were refinanced in 2019 for a present value savings amount of $310,600. Those debt certificates have an annual bond and interest payment of approximately $460K and will mature in 2028. Debt certificates do not require a referendum and, instead, only have a legal requirement for the Board of Education to adopt a debt certificate resolution. This is because the annual debt service payments will be made from the District’s Operating Funds and do not require a separate bond levy payment from taxpayers.

The maximum length of maturity for these certificates is 20 years. Typical terms are 10, 15, or 20 years. Due to the current high-interest rate environment, Mr. Lewis reviewed the arbitrage rules as an essential consideration before issuing any debt certificates. The District would issue these debt certificates as a tax exempt obligation. Typically, the IRS does not allow an organization to issue tax-exempt certificates and then invest the proceeds in securities and investment vehicles that would yield a higher return than the borrowing rate on the tax-exempt bonds. The difference in spread between those two rates would result in “profit” to the issuing organization, which is not the intention of these vehicles.

Mr. Lewis explained that there are two exceptions to the arbitrage rule that educational institutions can take advantage of:

● Small Issuer Exception for Schools - Available if a school issues less than $15MM of tax-exempt bonds in a calendar year

● Spend-Down Exceptions (used to minimize the amount of time that the proceeds could be invested in a higher-yield investment vehicle)

○ 6-Month Exception ■ Spend all proceeds within 6 months

○ 18-Month Exception (applicable to land acquisition and construction costs)

■ Spend all proceeds according to the following schedule:

● 15% of proceeds within six months ● 60% of proceeds within 12 months

● 100% of proceeds within 18 months

○ 24-Month Construction Exception (applicable to construction ONLY costs)

● 10% of proceeds within six months

● 45% of proceeds within 12 months

● 75% of proceeds within 18 months

● 100% of proceeds within 24 months

● Since the construction timeline spans two summers and the projects involve only construction/renovation costs, the District can take advantage of the 24-month construction exception. Taking advantage of this exception will allow the district to retain any investment yield resulting from the proceeds' investment. It will be very important for the District to maintain strong records to support the timing of the spending, as each spending threshold level must be met by the given deadlines (as there is no “catch-up provision” if initial spending lags the required timeline).

● Tentative Timeline for Sale:

○ Board approves Parameter Resolution Authorizing the Sale: May 13, 2024

○ Administration delivers credit rating presentation on May 20, 2024

○ The district receives a credit rating on May 28, 2024

○ Debt Certificates sold; delegates approve final results June 4, 2024

○ Debt Certificates close and proceeds received July 2, 2024*

Mr. Lewis said he prefers the 15-year term as it provides protection if a payment becomes unaffordable, but it is favorable if you can pay off the debt.

Ms. Braford said they will return this topic to the committee in May 2024.

HCHTA Contract Discussion

Ms. Bradford shared that the District agreed on a contract with HCHTA for July 1, 2023, to June 30, 2027, and the Board of Education approved the contract on Monday, October 30th, 2023.

Projections on the financial impact of the contract were made. The new contract allows the district to continue to provide an outstanding learning environment, ensure long-term fiscal sustainability, and acknowledge current market and labor conditions.

Salaries: The salary year-over-year increase, including retirees, is as follows:

● FY24: 4% Increase

● FY25: 3.75% Increase

● FY26: TBD - Based on CPI-U

● FY27: TBD - Based on CPI-U Benefits: Increase the employee share of insurance benefits. Increased employee share of PPO Plan:

● Single Coverage: From 18% to 20%

● All Other Coverage Levels: From 25% to 27.5% Increased staff share of HMO/HDHP Plan as follows:

● Single Coverage: No change

● All Other Coverage Levels: From 25% to 27.5%

All new staff can only choose from the HMO or HDHP plans. Further financial implications of the new contract were considered. The district’s financial priorities did not change. The district is still planning on Full Day Kindergarten for approximately a $26MM investment (≅$2.5MM annual payment). Abatement expectations have not been altered, and the yearly projection of a $2MM abatement remains. The four-year projected fund balance percentages are within the 30-50% level required by our fund balance policy.

Items for Recommendation

Monthly Financials

Ms. Bradford shared the following information related to the October 2023 Monthly Financial Reports:

● Operating funds Year to Date:

○ $54.1 MM: trending favorably

■ Includes relief to the taxpayers

○ Revenue $31.6 MM: trending favorably

■ Due to the timing of tax payments, revenue will be less than budgeted

○ Expenses: $18.4 MM: trending favorably

The committee agreed to bring the Monthly Financials to the Board meeting for approval.

Tentative Tax Levy Presentation

Ms. Bradford shared that the district annually requests the Tax Levy in November for property taxes to fund approximately 90% of the district’s operating funds. The State of Illinois Property Tax Extension Limitation Law (PTELL) [34 ILCS 200/18] is designed to limit the increases in property tax extension (total taxes billed) for non-home rule taxing districts. She explained that although the law is commonly referred to as the "tax cap," this phrase can be misleading. The PTELL does not "cap" individual property tax bills or individual property assessments. Instead, the PTELL allows a taxing district to receive a limited inflationary increase in tax extensions on existing property plus an additional amount for new construction, newly annexed areas, and recovered TIF valuations. The limit slows the growth of revenues to taxing districts when property values and assessments are increasing faster than the inflation rate. As a whole, property owners have some protection from tax bills that increase only because the market value of their property is rising rapidly. The county clerk calculates the " limiting rate " for each taxing district to implement PTELL. The sum of a district’s rates extended for those funds subject to the PTELL cannot exceed this limiting rate. After calculating preliminary rates for the funds, the county clerk will compare the sum of these rates to the limiting rate. If this sum exceeds the limiting rate, the county clerk will reduce each rate proportionally unless instructed by a taxing district to reduce them differently.

As of October 31, 2023, the District received Preliminary Estimated Equalized Assessed Values (EAV) from Downers Grove Township, which makes up 87% of the district’s EAV. At this time, York Township and Cook County values are not available. Therefore, estimates will be used based on regional and past trends. Based on estimated numbers received from Downers Grove Township and past trends for Cook County and DuPage County, the projected Equalized Assessed Value is calculated to be $3,074,060,962 or a 4.9% increase from last year’s EAV of $2,929,710,303. Cook County and DuPage County have combined projected new construction to be $24,860,151 or a decrease of -15.2%.

Ms. Bradford said that the district can project the limiting rate and the extension limit based on the following factors:

● 2022 extension w/out Debt Service = $72,186,266

● District will receive a 5.0% (CPI) increase over the 2022 extension

● EAV is projected to increase by 4.93%

● Estimated EAV = $3,074,060,962

● Estimated New Construction = $24,860,151

● Estimated Limiting Rate = 2.47%

● Estimated Total Tax Rate = 2.57%

● Projected Extension Limit (without debt service) = $76,408,544

The numbers are based on Preliminary Estimated Equalized Assessed Values (EAV). The county does not have all exemptions and appeals determined when taxing bodies’ levies are filed on the last Tuesday in December (December 26th). She noted that the district would also have time to decrease Levy adjustments or Abatement amounts in February after projected numbers are given before the extension is signed off in March.

Ms. Bradford said the District recommends that the total requested 2023 Levy for Operating Funds be $76,723,704.

Levy Calendar:

● 11/07/2023 – Levy Presentation to the Finance Committee

● 11/13/2023 – Levy Presentation and Tentative Levy Resolution Adoption (meets the 20-day requirement)

● 11/17/2023 – Release Public Notice to Hinsdalean for 12/07/2023 publication

● 12/07/2023 – Publish Public Notice (cannot be more than 14 days before hearing)

● 12/18/2023 – Public Hearing & Levy Adoption

● 12/19/2023 – File Certificate of Tax Levy with the offices of Cook and DuPage County Clerks

● 12/19/2023 – Post 2023 Levy presentation on District website

● 12/26/2023 – Last Tuesday in December filing deadline

● 02/06/2024 – Finance Committee Meeting - Projections, Levy/Abatement Amount

● March 2024 – Business and Operations Signs off on final Tax Calculations from the counties

The committee agreed to bring the Tentative Tax Levy proposal to the Board meeting for approval.

Resolution - Estimated Amounts Levied

WHEREAS, the aggregate amount of property taxes extended, excluding the Bond and Interest Fund, for the year 2022 was:

● Education Purposes $58,887,421

● Operation and Maintenance Purposes $ 9,801,623

● Transportation Purposes $ 1,516,890

● Illinois Municipal Retirement Purposes $ 990,166

● Social Security Purposes $ 990,166

● TOTAL $72,186,266

WHEREAS, it is hereby determined that the estimated amount of the aggregate levy to be levied, excluding the Bond and Interest Fund, for the year 2023 is as follows:

● Education Purposes $63,346,990

● Operation and Maintenance Purposes $10,324,934

● Transportation Purposes $ 1,655,616

● Illinois Municipal Retirement Purposes $ 698,082

● Social Security Purposes $ 698,082 TOTAL $76,723,704

Future Agenda Items

● Investment Update

● District Office Building Update

● Full-Day Kindergarten Bid Update

● Summer Project Bid Update (If Applicable_

● Annual Comprehensive Financial Report (ACFR)

● Annual Financial Report (AFR)

● Annual Statement of Affairs

● Monthly Financials

● Tax Levy Adoption

● Resolution to Levy for Certain Purposes

Adjournment

Asim Aleem motioned to adjourn at 6:30 p.m. Meg Cooper seconded the motion. The motion carried.

 https://go.boarddocs.com/il/hccsdil/Board.nsf/files/CYBTV771D229/$file/2023_11_07_Fin.%20Com.%20Mtg.%20Min..pdf