Township and road district finance 101
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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 l.jpg

Township and Road District Finance 101

Satellite Community Issues Workshop

Illinois Department of Commerce & Economic Opportunity


What is a budget l.jpg
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


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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


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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


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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


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What Should Be in Budget?

  • 2 years of financial history

    • Actual revenues

    • Actual spending

  • Upcoming budget year



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Format Important

  • Prevents overstatement of revenues

  • Prevents understatement of expenditures

  • Compares revenues to expenditure

  • Compares "Beginning Cash" to "Ending Cash"


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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


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Developing Expenditure Figures for the Budget

  • Start with amount actually spent

    • Adjust for program changes

    • Adjust for payroll changes

    • Adjust for changes in economy


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Best Tools to Compile Budget

  • Personal computer

  • Spreadsheet software

    • Enables instant revisions

    • Enables easy printing

  • DCEO has budget formaton disk



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Step 1 - Tentative Budget

  • Board of Trustees prepare a proposed budget

    • Starting point for discussion

    • Can be changed


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Step 2 - Inspection

  • Clerk makes tentative budget available for inspection

  • At least 30 days before adoption

  • Convenient time & location to public


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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


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Step 4 - Hearing

  • Hearing conducted by board of trustees

  • Answer questions from public


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Step 5 - Adopt

  • Board of trustees adopts budget

    • May adjust items in budget


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Step 6 - File

  • Clerk files adopted budget with county clerk

  • Within 30 days of adoption


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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?


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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


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Monthly Budget Report(Financial Speedometer)


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Necessary Financial Reports

  • Monthly Investment Report

    • Financial Fuel Gauge

      • How much money is left

      • Is it necessary to adjust rate of spending?


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Monthly Investment Report(Financial Fuel Gauge)


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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


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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


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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



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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


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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


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Property Tax Levy Deadline

  • Last Tuesday in December

  • But don’t wait until the last day


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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


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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%


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How Much Tax Money Can Be Received?

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


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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


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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


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Truth in Taxation

  • Estimate (determine) total levy 20 days before adoption

  • Don’t include

    • Permanent Road Tax

    • Bonds


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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


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Property Tax Extension Limitation Law (PTELL)

  • Does not really “Cap” taxes

  • Allows for inflationary increase

  • Allows for new construction


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What is the Limitation?

  • Lesser of 5% - or the increase in Consumer Price Index (CPI)

  • For the 2002 levy

    • it is 1.6%


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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%


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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