The Duneland School Corporation is projected to lose $168,000 next year due to the state’s new “circuit breaker” tax caps, with the loss possibly growing in following years.

The funding cut would mainly affect Duneland’s Capital Projects Fund, which pays for a variety of non-operating expenses such as new computers, roofing projects and land acquisition. In 2008, the state set the fund at just under $8.5 million.

Duneland School Board member John Marshall said at Monday’s special school board meeting that the school board has made technology improvements one of its major goals, so it’s disappointing to see cuts in the fund that pays for school computers.

The school board began its annual review of the Duneland Schools’ proposed 2010 budgets Monday, after hearing a presentation about the state’s circuit breaker tax caps from Curt Pletcher of Umbaugh Associates of Plymouth.

Pletcher gave an overview of some of the major property tax changes that will take effect as a result of H.B. 1001, which passed the Indiana Legislature last year.

One of the more significant changes is the state’s new supplemental homestead deduction, which is a benefit for homeowners since it will reduce one’s assessed value by 35 percent after applying the standard deduction.

But as Pletcher noted, the cut in individual assessed values could drop a taxing unit’s overall AV, which in turn would boost the tax rates for all property owners.

Umbaugh’s analysis of how the circuit breaker will affect Duneland projects a drop in the school corporation’s net assessed value from $2.8 billion in ‘08 to $2.4 billion this year, due mainly to the new supplemental deduction. If the AV doesn’t increase in other areas, or if it doesn’t increase to keep up with increases in state-approved levies, tax rates could rise, causing the tax caps to have more of an impact.

The tax caps were in effect in 2008, but Pletcher said there was no significant impact seen statewide, since the circuit breaker capped residential properties at 2 percent of the assessed value; most homes are already below that cap. But this year, the tax cap will be 1.5 percent for homesteads and then in 2010, 1 percent.

That means that in 2010, a homeowner’s property tax will be capped at 1 percent of the gross assessed value. If a house is assessed at $200,000, the homeowner’s tax bill cannot exceed $2,000. If it does, then the circuit breaker tax credit kicks in, cutting the amount of the tax bill in excess of that cap.

The affected taxing units would have to eat that loss.

“There’s really no way to make those dollars up,” Pletcher said.

The projections, which the Umbaugh firm prepared using a parcel-by-parcel review of actual properties, estimates a $168,000 loss to the Duneland Schools in 2010 from the tax cap, and a loss of $203,000 the following year.

Pletcher noted that the projections show that the circuit breaker’s impact is projected to affect residential units only Ð both owner occupied and rentals. The projections show no revenue loss from commercial or industrial properties, which will be capped at 3 percent instead of 1 percent for homesteads and 2 percent for rentals, other residential facilities and agricultural lands.

The school board briefly reviewed two of its funds for 2010: The CPF and the bus replacement fund.

As it stands right now, the proposed CPF for 2010 totals more than $12 million, but Duneland Assistant Superintendent Dave Pruis said that as the budget reviews continue in the coming weeks, the total will likely get pared down to $11.4 to $11.5 million. Last year, the school corporation advertised a CPF of $11.4 million before it was cut to just under $8.5 million by the state.

The bus replacement fund is proposed to cover the $660,000 cost of replacing seven school buses.

Duneland Director of Transportation James Bonfield said the buses to be replaced were purchased in 1999, and have been damaged by rust and corrosion. “We have frames rusting through,” he said.

Bonfield also noted that severe winter weather in the northern part of the state can take its toll on school buses, a problem that doesn’t impact schools in central and southern Indiana as much.

Posted 6/23/2009