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Township and Road District Finance 101 Satellite Community Issues Workshop Illinois Department of Commerce & Economic Opportunity What is a Budget? Financial plan Identifies revenues Identifies spending Legal tool to control spending

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township and road district finance 101

Township and Road District Finance 101

Satellite Community Issues Workshop

Illinois Department of Commerce & Economic Opportunity

what is a budget
What is a Budget?
  • Financial plan
    • Identifies revenues
    • Identifies spending
  • Legal tool to control spending
  • Prevents financial problems by forcing comparison of spending to revenue
why is a budget so important
Why Is a Budget So Important?
  • All operations revolve around money
  • Budget determines “Who gets what?”
    • More help for the Assessor?
    • Computer for general operations?
  • Spending cannot exceed budget amount
perpetual budget struggle
Perpetual Budget Struggle
  • Conflict is inevitable
  • Officials want best operation possible
    • More employees & higher wages
    • Newer equipment
  • Government mentality of “Spend it or lose it”
  • Taxpayer pressure to hold down costs
budget appropriation requirements
Budget / Appropriation Requirements
  • 50 ILCS 330/3
  • 60 ILCS 1/80-60
  • 605 ILCS 5/6-501
  • Adopt before or during 1st quarter of fiscal year
what should be in budget
What Should Be in Budget?
  • 2 years of financial history
    • Actual revenues
    • Actual spending
  • Upcoming budget year
format important
Format Important
  • Prevents overstatement of revenues
  • Prevents understatement of expenditures
  • Compares revenues to expenditure
  • Compares "Beginning Cash" to "Ending Cash"
budget terms
Budget Terms
  • "Operating Deficit"
    • Revenues less than Expenditures
    • Results in "Ending Balance" to be less than "Beginning Balance"
    • Serious financial warning signal if occurs 2 years
developing expenditure figures for the budget
Developing Expenditure Figures for the Budget
  • Start with amount actually spent
    • Adjust for program changes
    • Adjust for payroll changes
    • Adjust for changes in economy
best tools to compile budget
Best Tools to Compile Budget
  • Personal computer
  • Spreadsheet software
    • Enables instant revisions
    • Enables easy printing
  • DCEO has budget formaton disk
step 1 tentative budget
Step 1 - Tentative Budget
  • Board of Trustees prepare a proposed budget
    • Starting point for discussion
    • Can be changed
step 2 inspection
Step 2 - Inspection
  • Clerk makes tentative budget available for inspection
  • At least 30 days before adoption
  • Convenient time & location to public
step 3 notice in newspaper
Step 3 - Notice in Newspaper
  • Announce inspection of tentative budget and hearing 30 days before hearing
    • Dates & time
    • Location
  • Published in Township
    • If none, then post in 5 of most public places
step 4 hearing
Step 4 - Hearing
  • Hearing conducted by board of trustees
  • Answer questions from public
step 5 adopt
Step 5 - Adopt
  • Board of trustees adopts budget
    • May adjust items in budget
step 6 file
Step 6 - File
  • Clerk files adopted budget with county clerk
  • Within 30 days of adoption
sound budget is important but
Sound Budget is Important - But ...

It is not enough

  • Must watch over budget
    • Are revenues coming in as expected?
    • Are expenditures in accordance with budget?
important financial reports
Important Financial Reports
  • Monthly Budget Report
    • Financial Speedometer
    • How fast revenue is coming in
    • How fast is spending going out
  • Keeps you out of trouble
necessary financial reports
Necessary Financial Reports
  • Monthly Investment Report
    • Financial Fuel Gauge
      • How much money is left
      • Is it necessary to adjust rate of spending?
what if budgeted amount is not enough
What If Budgeted Amount Is Not Enough?
  • Board may transfer spending authority from one item to another item of same fund
    • Total adjustments limited to 10% of that fund
    • Transfers do not increase total spending
what if budgeted amount is not enough cont
What If Budgeted Amount Is Not Enough? (Cont)
  • Have “Contingency” of 5% for each fund for emergencies
    • Transfer to needed line-item
    • Also limited by 10% transfer rule
what if transfers are still not enough
What If Transfers Are Still Not Enough?
  • May amend the budget to appropriate more money
  • Requires same procedures to adopt budget
    • 30 day inspection
    • Newspaper notice
    • Hearing
what is the purpose of the tax levy ordinance
What Is the Purpose of the Tax Levy Ordinance?
  • Formal request for property tax money
  • For the Road District - determined by the highway commissioner
  • Passed by the board of trustees
what is the purpose of the tax levy ordinance29
What is the Purpose of the Tax Levy Ordinance?
  • Provides property taxes in the following fiscal year
    • 2002 tax levy produced taxes in 2003
    • 2003 tax levy will produce taxes in 2004
property tax levy deadline
Property Tax Levy Deadline
  • Last Tuesday in December
  • But don’t wait until the last day
common terms used with property taxes
Common Terms Used With Property Taxes
  • Levy - Amount of property taxes requested
  • Extension - Total amount of property taxes billed for the township
  • Tax Rate - Amount of taxes due stated as a percentage of tax base
how much tax money can be received
How Much Tax Money Can Be Received?
  • Multiply equalized assessed valuation by tax rate

Assumptions:

Equalized Assessed Valuation =

25,000,000

Road & Bridge tax rate = .165%

how much tax money can be received33
How Much Tax Money Can Be Received?

25,000,000 x .165% = $41,250

if using a calculator
If Using a Calculator:

Enter 25,000,000

Press the multiplication key

Enter .165

Press the percent key

The most that can be

received is $41,250

truth in taxation
Truth in Taxation
  • Is estimate of proposed total levy more than 5% greater than previous extension?
  • If yes, then:
    • Publish notice in newspaper
    • Conduct hearing
truth in taxation36
Truth in Taxation
  • Estimate (determine) total levy 20 days before adoption
  • Don’t include
    • Permanent Road Tax
    • Bonds
hearing notice requirements
Hearing Notice Requirements
  • Not more than 14 days or less than 7 days before hearing
  • 1/8 page in size
  • 1/4 inch black border
  • Type size - 12 point
  • Not in classified or legal section
  • No additional information allowed
property tax extension limitation law ptell
Property Tax Extension Limitation Law (PTELL)
  • Does not really “Cap” taxes
  • Allows for inflationary increase
  • Allows for new construction
what is the limitation
What is the Limitation?
  • Lesser of 5% - or the increase in Consumer Price Index (CPI)
  • For the 2002 levy
    • it is 1.6%
how to estimate maximum tax
How To Estimate Maximum Tax

Estimated Tax = Prior year total

extension x (1 + %CPI Limit)

x (1 + %New Property)

Assumptions:

Prior Year Extension = $100,000

CPI = 1.6%

New Property = 4%

how to estimate maximum tax41
How To Estimate Maximum Tax

$100,000 x (1 + .016) x (1 + .04) = Tax

$100,000 x 1.016 x 1.04 = $105,664

Note: Subject to Truth in Taxation hearing