INDIANA TOWNSHIP TRUSTEES Township Budget Process Linda Lessaris

INDIANA TOWNSHIP TRUSTEES Township Budget Process Linda Lessaris Budget Division Supervisor Department of Local Government Finance September 29, 2010 1

Discussion n n Preparing a Township Budget 2011 Budget Process – Getting Started Budget Calendar – 2011 Annual Statistical Report (TA 7) Non-Binding Review and Recommendation Circuit Breaker and Debt Service Funds Maximum Levy Information Additional Appropriations Transfers of Appropriations Role of the DLGF Budget Division Questions and Answers 2

Glossary of Terms Appropriations – Authority by Township Board to expend funds Cash – Monies on hand or invested as evidenced by entry in the unit’s ledger Controlled Levy – Tax monies raised which are chargeable against the Maximum Permissible Levy such as General Fund, Township Assistance, Cemetery, Recreation and Fire Fighting Funds Excessive Levy – An amount of money, which exceeds the maximum permissible levy 3

Glossary of Terms Exempt Levy – Tax money raised which is outside the Maximum Permissible Levy such as a Debt Service Fund and Township Cumulative Fire Funds – A set of accounts established for the purpose of carrying out a specific purpose or activity Levy Excess – That amount of money which is actually raised in excess of 100% of the fund levy certified by the DLGF Maximum Permissible Levy – The maximum amount of tax money which may be raised in any budget year as determined by statute 4

Glossary of Terms Taxing Unit – An individual taxing authority such as a county, city/town, township, school, library Taxing District – A composition of multiple taxing units (tax statements are based on the “district” rate) 5

Responsibility For Budget Preparations n n Local Government Budgeting is organized into fund accounts that separate receipts and expenditures by source, purpose, function and organizational unit within the local government Township Trustee is typically responsible for developing and compiling all budget estimates and preparing the budget documents Township Board is charged with formally adopting the annual budget Township Board levies property taxes and appropriates public monies 6 6

Budget Process: Getting Started PUTTING THE BUDGET TOGETHER – Required Forms: n Budget Form 1 – Township Budget Estimate n Budget Form 2 – Estimate of Miscellaneous Revenue n Budget Form 3 – Notice to Taxpayers of Budget Estimates and Tax Levies n Budget Form 4 – Certificate of Appropriations n Budget Form 4 B – Budget Estimate – Financial Statement – Proposed Tax Rate n Budget Form 5 – Budget Submission Letter and Certificate of Tax Rates 7 n Line 2 Worksheet and Debt Worksheet (if applicable)

Budget Form 1 Township Budget Estimate n n Prepared for each fund budget within the township Used to estimate the necessary expenditures for the ensuing budget year Divided into four (4) classifications: – Personal Services – Supplies – Other Services and Charges – Capital Outlays Should reflect needs considered necessary to perform the functions of township government 8

Budget Form 2 Estimate Of Miscellaneous Revenue n n n Accounts for revenue from all sources other than property taxes Accounts for revenues over an eighteen (18) month period Separate Estimate of Miscellaneous Revenue must be prepared for each fund maintained by the township 9

Budget Form 3 Notice To Taxpayers Of Budget Estimates And Tax Levies n n n Used to advertise to taxpayers the budgets and levies which are to be raised in the ensuing year as well as comparing levies from previous year Notifies taxpayers of the dates of the public hearing and adoption of the budget Published two (2) times, seven (7) days apart, with the first publication at least ten (10) days prior to the public hearing and second publication at least three (3) days prior to the public hearing At least ten (10) days between the public hearing date and adoption date DLGF cannot approve a budget or levy in excess of the 10 amount published in the Budget Form 3

Budget Form 4 Certificate of Appropriations n n n Used to account for appropriations as adopted by the Township Board Form is divided by fund and major budget classification totals Only form which indicates the official action of the appropriating body 11

Budget Form 4 b Budget Estimate – Financial Statement Proposed Tax Rate n n Used to account for monies necessary to be raised for the ensuing budget year Designed to account for an eighteen (18) month period Commonly referred to as the 16 Line Statement Financial section of the form is divided into four (4) sections: – – The appropriations section (Lines 1 through 5) The income section (Lines 6 through 9) Amounts to be Raised by Tax Levy (Lines 10 through 16) Net Tax Rate (Lines 17) 12

Tax Levy and Tax Rate Budget Form 4 b Tax Rate = (Tax Levy/AV)*100 or Tax Levy = (AV/100)*Tax Rate Line 16 of Form 4 B: n This amount represents the total amount of taxes to be levied to fund the ensuing year budget and the cash flow for the first half of the subsequent budget year for a particular fund Line 17 - Net Tax Rate n Represents the tax rate necessary to raise the levy required by Line 16 Example: Net Assessed Value = $300, 000 divided by 100 = $3, 000 Tax Levy (Line 16) = $1, 000 Tax Levy / (Net Assessed Value/100) = $1, 000 / $3, 000 =. 3333 Tax Rate (Line 17) =. 3333 13

Budget Form 5 Budget Submission Letter and Certificate of Tax Rates n n Used by the Township Trustee to certify to the County Auditor that the budget was adopted Serves as notice of the tax rates adopted by the Township Board Adopted rates must reflect those calculated on Budget Form 4 b Certification section must reflect the day, month and year of the adoption hearing and signatures of Township Board 14

2011 Budget Calendar (And Other Important Dates) n August 2 Deadline for units to submit to the DLGF cumulative fund proposals (I. C. 6 -1. 1 -17 -16. 7) n September 2 Last day for first publication of Budget Form 3 (Notice to Taxpayers of Budget Estimates and Tax Levies) which includes the 2011 annual total appropriations, proposed tax levy, excessive levy appeals, and the current tax levy (at least ten (10) days prior to the public hearing) (I. C. 6 -1. 1 -17 -3) n September 9 Last day for second publication of Budget Form 3 at least three (3) days prior to the public hearing (I. C. 6 -1. 1 -17 -3) 15

2011 Budget Calendar (Non-binding Review and Recommendation Deadlines) n September 17 Last day for civil units (does not include schools) to submit proposed budgets, rates, and levies to county councils for non-binding review and recommendation (unless taxing unit has an appointed governing body that is either conservancy district, solid waste management district, or fire protection district, or has a proposed budget increase from previous year over the assessed value growth quotient)(forty-five (45) days before the civil taxing unit adopts its 2011 tax rate, levy, and budget) (I. C. 6 -1. 1 -17 -3. 5) n September 30 Last day to request an adjustment to max levy due to spending down cash balance. 16

2011 Budget Calendar (Non-binding Review And Recommendation Deadlines) n October 1 Last day for taxing units with appointed governing bodies that is either conservancy district, solid waste management district, or fire protection district, or has a proposed budget increase from previous year over the assessed value growth quotient, to submit proposed budgets, rates, and levies to appropriate city/town or county fiscal body for final adoption (thirty (30) days before city/town or county fiscal body is required to adopt their 2011 budgets). (I. C. 6 -1. 1 -17 -20) n October 15 Last day for county fiscal body to complete review and issue non-binding recommendation to civil taxing units regarding civil taxing units’ proposed 2011 tax rates, levies, and budgets (fifteen (15) days before civil taxing unit adopts its rate, levy, and budget). (IC 6 -1. 1 -17 -3. 5) 17

2011 Budget Calendar (And Other Important Dates) n October 19 Last day for units to file excessive levy appeals, other than shortfall appeals (I. C. 6 - 1. 1 -18. 5) n October 22 Last day for public hearing on 2011 budget (at least ten (10) days prior to adoption date) (I. C. 6 -1. 1 -17 -5(a)) n October 29 Last day for taxpayers to file objecting petitions to budget, rates, or levies with local units (I. C. 6 -1. 1 -17 -5(b)) 18

2011 Budget Calendar (And Other Important Dates) n November 1 Deadline for units to adopt 2011 budgets, rates, and levies (I. C. 6 -1. 1 -17 -5) n November 3 Units file adopted budgets with county auditor and Tax Adjustment Board (I. C. 6 -1. 1 -17 -5) 19

2011 Budget Calendar (And Other Important Dates) n November 18 Only if the budgets, tax rates, or tax levies are modified by the county auditor or TAB, the county auditor is required, within fifteen (15) days of the modification, to publish a notice of the adopted tax rates for the various funds in each taxing district (TAB hart) (I. C. 6 -1. 1 -17 -12) n December 15 Last day for DLGF to accept additional appropriation requests from units (I. C. 6 -1. 1 -18 -5) n December 30 Deadline for units to file shortfall appeals with DLGF (I. C. 6 -1. 1 -18. 5 -16) 20

Annual Statistical Report I. C. 12 -20 -28 -3(f) (TA-7) n n Report on township housing, medical care, utility, food and burial assistance filed with State Board of Accounts Statistical report for period ending December 31, 2009 must be filed with State Board of Accounts by March 1, 2010 State Board of Accounts compiles 2009 data into statewide statistical report by July 1, 2010 DLGF may not approve the 2011 budget of a Township Trustee who fails to file an annual report for period ending December 31, 2009 21

Non-Binding Review and Recommendation Process n Requires civil taxing units (schools are not included) to file with the county fiscal body a statement of the proposed or estimated tax rate, tax levy and budget for the following budget year 22

Civil Taxing Unit n n Must file their proposed tax rate, levy and budget with the county council for review and non-binding recommendation Must file at least forty-five (45) days before civil taxing unit fixes its tax rate, levy and adopts its budget Last date for civil taxing unit to file budget for non-binding review and recommendation is September 17, 2010 Failure to submit a proposed tax rate, levy and budget will result in the continuation of the most recent annual appropriations and annual tax levy for the following budget year 23

Deadline for County Fiscal Body to Review and Make Recommendation n County Fiscal Body must complete the following at least fifteen (15) days before the civil taxing unit fixes its tax rate, levy and adopts its budget: (1) Review any proposed or estimated tax rate, levy or proposed budget filed by a civil taxing unit; and (2) Issue a non-binding recommendation to a civil taxing unit regarding the civil taxing unit’s proposed tax rate, tax levy and proposed budget Last date for county fiscal body to complete its review and issue non-binding recommendation is October 17, 2010 Failure to complete the review and issue non-binding recommendations will result in the continuation of the most recent annual appropriations and annual tax levy for the following budget year 24

County Fiscal Body Recommendation must include: n A comparison of any increase in the civil taxing unit’s budget or tax levy to: (1) the average increase in Indiana nonfarm personal income for the preceding six (6) calendar years and the average increase in nonfarm personal income for the county for the preceding six (6) calendar years; and (2) increases in the budgets and tax levies of other civil taxing units in the county n DLGF must provide each county fiscal body with the most recent available information concerning increases in Indiana nonfarm personal income and increases in county nonfarm personal income 25

Circuit Breaker Credit n n Credit is applied to taxpayer’s property tax liability that exceeds 1%, 2%, and 3% of GAV Circuit Breaker Credit = The amount of property taxes that taxpayers do not have to pay and is the same amount that units of government will not receive in collections. 26

Circuit Breaker Credit n n County auditor shall notify each political subdivision in which credit is applied Political subdivision may not increase its property tax levy to make up the reduction Political subdivision may not borrow money to compensate the political subdivision for the reduction of property tax collections due to CB credit The higher the tax rates the greater the impact of the CB credit 27

Circuit Breaker Credit and Debt Service Funds n n n Debt obligations must be met regardless of circuit breaker credit Circuit breaker credit will first affect the debt fund operating balance If unit has no operating balance, unit will have to appropriate funds from another source, i. e. , Rainy Day or General Fund to meet debt obligations 28

Township Maximum Levy Information n n Townships normally have two separate maximum levies, i. e. , civil levy and fire levy Civil levy includes levies for general, township assistance, cemetery, recreation funds Fire levy includes expenses associated with fire fighting Cumulative Fire Fund is outside of the maximum levy 29

Maximum Levy Information n n Maximum levy limitations control the amount of property tax levied by a unit placing caps on revenues available through property tax Levy growth is limited to the amount that was levied in the previous year, plus an average statewide growth percentage Maximum levy amounts are determined by statute and certified by the DLGF If levies are certified below the maximum, at least one-half (½) will be lost: Example: Max levy (current year) = $500, 000 Council adopted levies (current year) = $400, 000 New max levy (ensuing year) = $450, 000 (+growth factor) Upon request, if the unit was reducing its previous year’s cash balance, the DLGF may make an adjustment to the max levy based on the unit’s use of cash balances. 30

Maximum Levy Information n Funds are classified as: – Levy controlled – Rate controlled (cumulative funds) – Debt service (or “need controlled” funds) LEVY CONTROLLED FUNDS n Controlled levies are included in the maximum levy calculation, i. e. , general fund, township assistance, cemetery, recreation, fire fighting n Exempt levies are exempt from maximum levy calculations, i. e. , debt service, cumulative fire n Cannot exceed the “maximum levy” unless permitted by statute, i. e. excess levy appeal process 31

Maximum Levy Information LEVY CONTROLLED FUNDS (Cont’d) n Maximum levy is allowed to grow each year by the statewide average growth in non-farm personal income or 6% whichever is less n Because the levy is limited, rates can increase or decrease based on assessed valuations RATE CONTROLLED FUNDS n Maximum allowable rates are set by statute n Capacity of funding is independent of needs n Rates are adjusted annually to changes in AVs due to “trending” or reassessment DEBT SERVICE (NEED CONTROLLED FUNDS) n Levies are set based on the amount necessary to pay principal and interest expense on debt 32

Additional Appropriations n n n Additional appropriations process is used to appropriate money in excess of the certified current year budget Fiscal body must act on all additional appropriations Approval by the DLGF is limited to: – Funds that receive revenue from property taxes – Rainy Day Fund Other additional appropriations must be reported to the DLGF (Reporting Only Funds) Legal notices for additional appropriations, whether or not they require approval of the DLGF, must be published one (1) time in one (1) or two (2) newspapers, no less than ten (10) days before the public hearing on the proposal 33

Transfers Of Appropriations n n n Transfer process allows for movement of appropriations between categories Transfer does not allow expenditure of more money than the total amount set out in the budget Transfer process merely shifts the use of the funds between line items in the fund Transfer is made at a regular public meeting and by proper ordinance/resolution Transfer is made without notice and without the approval of the Department of Local Government Finance 34

Transfer of Funds to the Rainy Day Fund n n n A political subdivision may establish a Rainy Day Fund to receive transfer of unused and unencumbered funds Rainy Day Fund is subject to the same appropriation process as other funds that receive tax money Political subdivision may transfer not more than ten percent (10%) of the political subdivision’s total budget for that fiscal year to the Rainy Day Fund DLGF may not reduce the actual or maximum permissible levy of a political subdivision as a result of a balance in the Rainy Day Fund Transfers to the Rainy Day Fund must be reported to the DLGF Resolution/ordinance approving the transfer must include the name of each fund and the amount being transferred out of each fund to the Rainy Day Fund 35

Role of the Budget Division n Conduct budget workshops in July & August for all units and advise in preparation of budgets – Units receive notice of budget workshop appointment – Only opportunity to meet with DLGF budget field rep – Field rep will assist in determining dates of public hearing and adoption hearing so that unit complies with all statutory deadlines (including non-binding review deadlines) – Unit must file Budget Form 4 b, Budget Form 3 and county council budget review form, if completed, with county auditor immediately after workshop 36 appointment

Role of the Budget Division n n After units receive non-binding recommendation and adopt their proposed budgets, rates and levies, DLGF schedules final budget hearing, field reps work unit budgets and issue 1782 notice Units respond to 1782 notices (10 days) DLGF considers and makes 1782 changes as proposed by the unit Review and approve budgets, tax rates and levies of all political subdivisions with tax levy authority 37

Summary of Budget Division Role in Budgeting Process n n Annually review and approve budgets, tax rates and levies of every political subdivision (over 2800 units) Ensure budget processes are followed and levy and rate controls enforced by state statute The Department of Local Government Finance makes final determinations of budgets, rates, and levies. TOP PRIORITY: ON-TIME PROPERTY TAX BILLING AND COLLECTION 38

DLGF Communications n n n To assist with the non-binding review and recommendation process, civil taxing units and county fiscal body can access budget review forms on the DLGF Web site at www. in. gov/dlgf/6800. htm Township budget information, i. e. , manual, forms, etc. can be access at http: //www. in. gov/dlgf/4952. htm Department of Local Government home page is located at www. in. gov/dlgf 39

Gateway: Online Budget Program 2010 Objectives • • Development of online portal • 3 budget forms • Form 1, Form 2, Form 4 B • Automatic load for reporting utilities • Annual report to SBo. A filed electronically Piloting in 7 counties (178 units) 40

Contact The Department • Karen Large, Budget Division Director • Telephone: 317 -234 -3937 • E-mail klarge@dlgf. in. gov • Dan Jones, Assistant Budget Division Director • Telephone: 317 -232 -0651 • E-mail djones@dlgf. in. gov • Linda Lessaris, Budget Division Supervisor • Telephone: 317 -233 -9239 • E-mail llessaris@dlgf. in. gov • Web site: www. in. gov/dlgf • “Contact Us”: www. in. gov/dlgf/2338. htm 41