CREIGHTON ELEMENTARY SCHOOL DISTRICT NO. 14

Board Policy Manual / 322 Documents
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BUS3.2 - Local Revenue Sources: Indebtedness

Section B - Business
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Special Levies and Debt Management

 

Special Levies:

The Governing Board holds responsibility for decisions related to special taxation necessary for budgetary items exempt from Legislative-established budget limits for school districts. These levies are separate from the general school budget and may affect the Primary Tax Rate and Secondary Tax Rate.

  1. Primary Tax Rate Adjustments:

    • The Governing Board may annually approve budgets for Adjacent Ways and Excess Utilities that impact the primary tax rate.
    • The Superintendent is tasked with preparing a communications plan for Board approval to ensure that decisions impacting the Primary Tax Rate are sufficiently communicated to the public.

  2. Secondary Tax Rate Adjustments:

    • Voter-approved initiatives such as M&O Overrides, Desegregation, Capital Overrides, and School Improvement Bonds directly influence the Secondary Tax Rate.
    • Based on recommendations from the Superintendent and administration, the Board may decide to call for override or bond elections following statutory requirements.

  3. Public Transparency:

    • All Board decisions that affect tax rates or district debt will be presented separately for public review and a Board vote, either during the adoption of the annual budget or as separate agenda items.

Debt Management:

The Governing Board is committed to the responsible management of the District's debt on behalf of taxpayers, ensuring decisions align with fiscal responsibility and legal guidelines.

  1. Debt Limit Monitoring:

    • The District will not exceed the debt limits specified in A.R.S. 15-1021 and will continuously assess the financial impact on the District’s taxpayers.
    • The Superintendent shall recommend debt issuance timing based on market conditions and ensure the efficient use of obtained funds.

  2. Debt Issuance Considerations:

    • Recommendations for issuing debt must explore alternative financing options, such as grants or partnerships, before any debt issuance is proposed to the Board.
    • With the support of financial advisors, debt schedules will be structured to complement the District’s existing obligations, and efforts will be made to secure the best credit rating.

  3. Debt Refinancing:

    • When financially advantageous, the Board may consider refunding or restructuring existing debt to reduce costs.
    • Outside financial advisors will guide the Board in all debt-related transactions, ensuring transparency and fairness in pricing.

Financing Guidelines:

All proposals involving the sale of securities, loans, or lease agreements must be initially reviewed by the Director of Business Services to determine their financial feasibility. Legal counsel will then review all relevant documents before the Superintendent forwards recommendations to the Board.

Financial Disclosure:

The Superintendent will ensure compliance with all relevant disclosure requirements, including those under Securities and Exchange Commission Rule 15c2-12 and applicable state and federal laws. Required disclosures will be made available to bondholders, rating agencies, taxpayers, and any other entities entitled to financial transparency.

The Superintendent is responsible for implementing regulations to enforce this policy.

Adopted: September 14, 2017

Legal References:

  • A.R.S. 15-481 – M&O Overrides
  • A.R.S. 15-482 – Special budget override elections
  • A.R.S. 15-491 – Bonded indebtedness
  • A.R.S. 15-910 – Adjacent ways
  • A.R.S. 15-947 – Excess utilities
  • A.R.S. 15-962 – Desegregation
  • A.R.S. 15-995 – Primary tax rate adjustments
  • A.R.S. 15-1021 – District debt limits
  • A.R.S. 41-1276 – Arizona Auditor General regulations




 

Special Levies and Debt Management (Continued)

Policy Number: CD-106

Special Levies in Arizona

Property tax levies are calculated based on assessed property valuations. These levies are categorized into primary and secondary:

  • Primary tax rates apply to the assessed value for regular operations.
  • Secondary tax rates apply to overrides and debt service, calculated on secondary assessed valuations for voter-approved initiatives like M&O overrides, desegregation, and school improvement bonds.

Superintendent Responsibilities

  1. Monitoring Tax Levies:
    • The Superintendent will periodically monitor, analyze, and report to the Governing Board the impact of all tax levies on District taxpayers. This analysis will include:
      • General obligation bond and override levies.
      • Primary tax levies.
      • Tax rates imposed by overlapping jurisdictions.
    • The Superintendent will also compare actual tax levies and assessed valuations with the estimates made during bond or override authorizations, reporting periodically to the Board on the discrepancies.

Adjacent Ways Funding:

  • The Superintendent will compile a three-year projection of qualifying projects eligible for Adjacent Ways funding.
  • This projection will be revised annually to account for changes in construction projects and submitted to the Governing Board for approval through a separate roll call vote.
  • Additionally, the Superintendent will provide the Governing Board with periodic budget analyses comparing proposed vs. actual expenditures for the Adjacent Ways fund.

Desegregation Funding:

  • The Superintendent will annually evaluate the District’s Desegregation spending plan and recommend any increase or decrease in Desegregation funding, including proposed levies.
  • This recommendation will be presented for review and approval by the Governing Board through a roll call vote at least 60 days before the proposed budget adoption.
  • A communications plan detailing the impact of any changes in Desegregation funding will be implemented to inform stakeholders no later than 30 days before the Truth-In-Taxation hearing.

Excess Utilities:

  • Periodic energy audits will be conducted to explore more cost-effective methods of providing utilities to District facilities.

Overrides:

  • Overrides are authorized for a five-year period with reductions occurring in years six and seven.
  • The Superintendent will provide information to assist the Governing Board in deciding whether to call for an override or its reauthorization. This information will also be made available to the public.
  • Upon voter approval of an override, the Superintendent will establish an Oversight Committee to monitor the fiscal and administrative implementation of the override and report periodically to the Governing Board.

School Improvement Bonds:

  • The Superintendent and Governing Board will maintain a five-year Capital Plan for the replacement and improvement of District assets, updating it annually.
  • Debt financing costs (including interest, fees, and issuance costs) will be evaluated against potential cost increases due to delays in repairs or replacements.
  • The Superintendent will maximize the use of state and local capital funds before recommending increases in bond capacity.

General Guidelines for Special Levy and Debt Management:

The Director of Business Services will coordinate all Special Levy and Debt Management activities, including:

  1. Preparing an annual budget timeline to allow timely consideration of tax and debt management decisions.
  2. Identifying and utilizing federal, state, and local funding sources, grants, and partnerships before recommending tax increases.
  3. Regularly updating the Superintendent and Governing Board on assessed valuation and tax rates.
  4. Presenting recommendations for additional levies and budget adjustments to the Superintendent and Governing Board for approval before finalizing the budget.
  5. With assistance from financial advisors, making recommendations on debt issuance, including timing, sale structure, and associated costs.
  6. Reporting on the status of current and future capital projects.

Special Situations:

  • Unforeseen circumstances, such as changes in capital markets or District programs, may require action outside of existing policy guidelines. In such cases, Governing Board authorization must be obtained before any administrative action is taken.

Adopted: September 14, 2017

Legal References:

  • A.R.S. 15-481 – M&O Overrides
  • A.R.S. 15-482 – Special budget override elections
  • A.R.S. 15-491 – Bonded indebtedness
  • A.R.S. 15-910 – Adjacent ways
  • A.R.S. 15-947 – Excess utilities
  • A.R.S. 15-995 – Primary tax rate adjustments
  • A.R.S. 15-1021 – District debt limits
  • A.R.S. 41-1276 – Arizona Auditor General regulations

 

 

 

Special Levies and Debt Management

 

Definitions and Structure of K-12 Education Funding in Arizona

Primary and Secondary Taxes:

  • In Arizona, property tax levies are calculated based on primary and secondary assessed valuations, expressed per $100 of assessed value.
  • Primary taxes support basic operational expenses set by the Arizona Legislature, while secondary taxes are associated with voter-approved initiatives like overrides and bonds.

Primary Taxes

Set by Arizona Statute:

The Arizona Legislature sets limits on school district budgets, consisting of three primary components:

  1. Revenue Control Limit (RCL): The core operational funding formula for school districts.
  2. Capital Outlay Revenue Limit (CORL): Funding dedicated to capital expenditures.
  3. Soft Capital Allocation: Funds for minor equipment and furniture purchases.

Using an equal tax rate called the Qualifying Tax Rate (QTR), school districts collect a portion of their budgets through primary property taxes levied on residential and business property owners. The remainder of the budget is funded through the State General Fund as described in A.R.S. 15-971.

Board-Authorized Primary Tax Increases

  1. Desegregation Funds (A.R.S. 15-910(G)):

    • The Governing Board may budget for expenses related to court-ordered desegregation efforts or agreements with the U.S. Department of Education Office for Civil Rights. These funds are exempt from revenue control limits, providing flexibility in addressing desegregation issues.

  2. Adjacent Ways (A.R.S. 15-995(A)):

    • The Governing Board can levy a special assessment to fund improvements to public ways adjacent to school property. This includes sidewalks, sewers, roadways, and utility lines.

  3. Excess Utilities (A.R.S. 15-910(A)):

    • The Governing Board may budget for excess utility costs beyond the Revenue Control Limit, covering operational expenses like heating, cooling, and sanitation.

Secondary Taxes

Secondary tax rates apply to voter-approved initiatives that help districts exceed their budget limits to fund specific programs or projects.

  1. Overrides:
    • Maintenance and Operation (M&O) Override (A.R.S. 15-481):
      • Voter-approved increases to the budget by up to 10% of the RCL. These funds support operational expenses such as teacher salaries and instructional materials.
    • K-3 Override (A.R.S. 15-482):
      • A special voter-approved initiative that increases the budget by up to 5% of the RCL, specifically aimed at improving K-3 educational programs.
    • Capital Override (A.R.S. 15-481):
      • A voter-approved initiative that permits the district to increase its capital budget by up to 5% of the RCL for purchases of items like furniture, fixtures, and equipment.

Override Funding Period:
Overrides are authorized for five years, with phased reductions in years six and seven. Before the override period ends, the Superintendent will provide the Governing Board with information for evaluating reauthorization.

  1. School Improvement Bonds:
    • School Improvement Bonds (A.R.S. 15-491):
      • Voter-approved bonds fund capital improvements like purchasing land, constructing or renovating buildings, and acquiring pupil transportation vehicles.

Summary of School District Budget Formulas

The following formulas outline how a district’s Equalization Base is determined:

  • Revenue Control Limit (RCL):

    • Weighted Student Count
    • multiplied by Base Support Level
    • multiplied by Teacher Experience Index
    • multiplied by Career Ladder/Performance Program (if applicable)
    • plus Transportation Revenue Control Limit (TRCL)

  • Capital Outlay Revenue Limit (CORL):

    • Weighted Student Count
    • multiplied by Legislatively set per-pupil amount

  • Soft Capital Allocation:

    • Un-weighted Student Count
    • multiplied by Legislatively set per-pupil amount

The Equalization Base is the sum of the RCL, CORL, and Soft Capital Allocation.

Funding Sources for the Equalization Base

  1. Qualifying Tax Rate (QTR): Set by the state to fund a portion of the Equalization Base.
  2. County Education Levy: A state-mandated levy applied to property taxes.
  3. State General Fund: Fills the gap between the district's tax revenue and its Equalization Base.

Legal References:

  • A.R.S. 15-481 – Maintenance and Operation Overrides
  • A.R.S. 15-482 – K-3 Overrides
  • A.R.S. 15-491 – School Improvement Bonds
  • A.R.S. 15-910 – Excess Utilities, Desegregation
  • A.R.S. 15-947 – Revenue Control Limit
  • A.R.S. 15-995 – Adjacent Ways
  • A.R.S. 41-1276 – Qualifying Tax Rate