Published: June 26, 2008 10:22 am      

Officials learn more about schools tax

By TESA CULLI

tesa.culli@register-news.com

MT. VERNON — An informational meeting to discuss the Illinois County School Facilities Tax to school administrators, board members, County Board members and the public included information on about how much sales tax revenue was generated in Jefferson County by those living outside the area.

Brad Lybrook of the Peckham, Buyton, Alberts & Viets, Inc. consulting company said he had been asked to do an analysis of the Jefferson County sales tax by Bryan Cross, Hamilton-Jefferson County regional superintendent of schools.

“We were asked to study the sales tax and determine the actual burden it would place on the residents,” Lybrook explained. “This is a micropolitan area, where retail sales in Jefferson County is over and above what the residents themselves are buying in retail goods.”

Lybrook said 23 percent of the retail sales in Jefferson County “are the direct result of sales by consumers outside of the county.”

Lybrook said in conducting the analysis, he used information from the Illinois Department of Revenue and applied the information to Jefferson County households and the median income.

“The amount being collected in tax is [23 percent] more than the residents could afford to spend,” Lybrook said.

The presentation was given by Jill Rendleman and Tom Crabtree of Stifel, Nicolaus and Co., a bonding and financial consulting company that deals predominantly with schools. The company is consulting with Williamson County, which was the first county in the state to pass a referendum enacting the tax following the Legislature’s passage of the act that created the facilities tax.

Under terms of the act, county schools work together to pass the sales tax at a rate determined by the schools. If voters approve the measure, the tax is collected and distributed to all schools in the county based on the school’s annual attendance percentage. The funds can only be used for school facilities purposes, such as acquisition, development, construction, reconstruction, rehabilitation, improvement, financing, architectural planning and installation of capital facilities consisting of land, buildings and durable equipment. In addition, schools can use the funds for fire prevention, safety, energy conservation, disabled accessibility, school security and specified repair purposes, according to information from Stifel Nicolaus.

Retail sales except for cars, boats and RVs, mobile homes, food, drugs and farm equipment and parts are affected by the facilities tax.

Receipts from the sales tax can be used for “pay as you go” projects such as annual school maintenance needs or used to restructure and refinance bonds that were issued for capital projects, to retire existing debt issued for capital purposes and then abate property taxes, or any combination.

The refinancing of bonds and issuance of alternate revenue bonds using the facilities tax funds as the alternate revenue source elicited several questions from members of the Jefferson County Board.

According to Crabtree, the act includes the necessity of a feasibility study to determine how much money can be backed by the sales tax before bonds can be issued and 1.25 times the amount needed in additional sales tax receipts.

“They would be what we call double barrel bonds,” Crabtree explained. “If there is not sufficient sales tax revenues to pay off bonds, then you have to tap property taxes. ... For example, if you have $125,000 in revenue, legally you are allowed to pledge $100,000 for bonds, so you have a 25 percent cushion or 1.25 plus coverage.”

Crabtree and Rendleman said if districts use the facilities tax for bonding, the cushion could be more to ensure property taxes are not tapped.

“The state requires a feasibility study to protect the taxpayers,” Rendleman explained. “There are bonds outstanding in Jefferson County which were used to pay for the jail. Those bonds have three revenue sources — leasing jail space, sales tax and property tax. Unfortunately, there was no feasibility study done on the sales tax receipts prior to issuance of the bonds. What was done was, they took the numbers off audit reports and used them as hard numbers for projected numbers for Jefferson County.”

Pat Garrett, who sits on not just the Mt. Vernon Township High School Board of Education but also on the Jefferson County Board, asked if districts could issue the bonds without prior voter approval. Crabtree answered that if voters approve the facilities tax, it is with the understanding that districts would use the funds for capital projects.

“Inherent in the vote would be the improving of facilities and possibly building new schools,” Crabtree said.

County Board Chairman Ted Buck said the voters in the county are “sour” on issues of alternate revenue bonds.

“There is a history in Jefferson County of issuing bonds without the feasibility study and without due diligence by the board that has affected the voter base,” Rendleman said. Rendleman said the act calls for bonds to be issued with the primary revenue source being sales tax generated by the facilities tax. If districts don’t utilize the feasibility study and allow for an adequate cushion between receipts and borrowing, Rendleman said then the bonds would hit property taxes.

Rendleman said many of the counties Stifel Nicolaus has been discussing the tax with have indicated they would be going to referendum in April rather than November. For a referendum to be placed on the ballot in November, school districts in the county would have to pass a resolution asking for the referendum and the issue brought before the Jefferson County Board no later than Aug. 18. To be placed on the April ballot, the referendum request would have to be brought before the County Board no later than Jan. 20.