Executive Summary

Sylvania Schools continues to experience financial challenges that have led to deficit spending the last four out of five fiscal years. The district passed a new operating levy in November 2016. The levy will generate an additional $6.4 million for operating expenses and help to preserve Sylvania Schools’ educational foundation. However, a conservative, long term spending plan is necessary to maintain modest cash reserves critical in navigating the ebb and flow of public finance.

Rising costs have outpaced the district’s revenue weakened by lower real estate collections and limited state funding. The economic decline impacting real estate values in 2009 and 2012 has had a lasting effect on tax collections. To date, the district has lost
$11.1 million in real estate tax revenue from the depreciation of assessed values.  In
addition to real estate revenue, the district’s state funding was suppressed by the funding cap limit. The funding cap limit restricts the amount of state aid the district may receive from one year to the next, disregarding the funding calculation. Both factors continue to place added pressure on district reserves.

	Fiscal Year 	Fiscal Year 	Fiscal Year
2017 	2018 	2019	Fiscal Year 	Fiscal Year
2020 	2021	

Beginning Balance	
3,451,461 	5,924,924 	7,950,244	
8,680,842 	8,259,276	
+ Revenue
+ Proposed Renew/Replacement Levies
+ Proposed New Levies
- Expenditures	87,255,059 	89,520,309 	90,607,168
- 	- 	-
- 		- 		- (84,781,597) 	(87,494,989) 	(89,876,571)	91,618,652 	92,532,635
- 	-
- 		- (92,040,217) 	(94,254,512)	
= Revenue Surplus or Deficit	2,473,463 	2,025,320 	730,597	(421,566) 	(1,721,877)	

Ending Balance	
5,924,924 	7,950,244 	8,680,842	
8,259,276 	6,537,399	

Revenue Surplus or Deficit w/o Levies
Ending Balance w/o Levies	2,473,463 	2,025,320 	730,597	(421,566) 	(1,721,877)	
	5,924,924 	7,950,244 	8,680,842	8,259,276 	6,537,399	

Revenue

Real Estate Revenue

Real estate revenue is the largest funding source for the district and generates approximately 65% of the district’s total revenue. The economic downturn in the housing market led to a depreciation of real estate values which impacted the 2009 triennial update and 2012 reappraisal. Consequently, three operating levies were increased to their full voted millage and the collection of each levy was permanently lowered. The district has lost approximately $11.1 million in real estate revenue since
2010 and will continue to lose $2.2 million each year. The new operating levy will generate an additional $6.4 million in real estate collections beginning in fiscal year
2018. Lucas County will undergo a reappraisal in 2018 and triennial update in 2021. Looking ahead, slight increases to real estate revenue can be expected. Real estate
values experienced increases in the current calendar year as a result of new construction
in residential and commercial real estate. However, most of the commercial new construction will likely become exempt property. Requests for refunds for future exempt properties are anticipated and will lower revenue in fiscal year 2018. All future increases to real estate revenue are attributed to new construction and/or inflation to inside millage.

PUPP

Public Utility Personal Property consists of personal property of a handful of utility companies that conduct business in the district. The last two years PUPP values have increased over 20% due to the expansion of personal property of primarily two companies, Columbia Gas of Ohio and American Transmission System (a subsidiary of First Energy). Estimates for future years include a more conservative growth pattern that is closely aligned with historical increases.

Unrestricted Grants In Aid – State funding

The amount of state funding a district receives is based on a comprehensive calculation that is driven primarily by student enrollment and the property wealth of the district. Simply stated, the wealthier a district, the less state funding it receives. In the 2013-2014 fiscal year, the funding cap limit became part of the state funding calculation. The funding cap limit restricts the amount of additional funding a district may receive from one year to the next.  In fiscal year 2017, for example, the district received $3.8 million less than was calculated due to the funding cap limit.  The funding cap limit has effectively reduced the district’s state aid a total of $16 million since it was
implemented.  Estimates for fiscal years 2018-2021 were projected using the current
funding model but reduced funding cap limit of 3% from the current 7.5% limit.

Restricted Aid

Restricted aid is provided by the state and assigned to specific educational programs. The largest share of restricted funding the district receives is for its Career Technical programs. In addition, Sylvania Schools receives Economic Disadvantaged funding to help support district initiatives aimed at addressing poverty and its effects on education programs. Restricted aid is required to be spent according to the parameters set forth in legislation. Expenditure reports are submitted to the state to verify funding was allocated and spent appropriately.  Beginning in fiscal year 2017, catastrophic costs reimbursement will be reclassified to restricted aid. Catastrophic costs reimbursement
is state funding for special education for those students whose costs exceeded $27,375 or
$32,850 in the prior year. Projections for fiscal years 2018 -2021 are based on stable enrollment and minimal annual increases.

Property Tax Allocation

Property tax allocation is a state revenue source for real estate rollback and homestead exemption credits extended to taxpayers. This revenue is driven by property values with revenue normally increasing after county reappraisals and updates. The district will receive additional revenue as a result of the new operating levy passed in November 2016. Through fiscal year 2016, state reimbursement for tangible personal property was included in this line item. Tangible personal property tax reimbursement was eliminated beginning in fiscal year 2017. This revenue loss is reflected in estimates.

All Other Operating Revenue

All other operating revenue includes revenue from various sources such as tax abatements, Medicaid reimbursement, manufactured homes tax revenue, athletic and co-curricular participation fees, tuition paid by other districts, etc. Factors impacting this line item in fiscal year 2017 include:

1.   Reclassification of the catastrophic costs reimbursement
2.   Payment of 2015 excess costs received in fiscal year 2017
3.   Elimination of the business tax replacement subsidy

Estimates for future years are based on historical increases/decreases for this revenue source. In fiscal years 2018-2021 the increase is estimated to be 1.4% each year.

Expenditures

Personnel Services

Personnel Services includes all of the salaries and wages paid to employees. Salaries
and benefits make up 83% of total expenditures. In fiscal year 2017, employees received a 0% base increase to their salary.  Collective bargaining agreements with both unions expire June 30, 2017. Estimates for wages include contractual obligations for steps, experience level advances and longevity across all employee groups. The savings for anticipated employee retirements have been included in the salary estimates through
the end of the forecast period. Overall certified staffing is estimated to increase 6 full

time equivalents in fiscal year 2018. Staffing estimates beyond fiscal year 2018 are at estimated at fiscal year 2018 levels. While it is necessary to add staff in response to increased enrollment and/or educational mandates, it is done after careful examination of existing need and with great consideration to cost.

Employees’ Retirement/Insurance benefits

The employer’s share of retirement contributions is directly related to total salary costs.
Historical increases for the district’s health and dental premiums are as follows:
2013 - 9%, 2014 - 7%, 2015 - 7%, 2016 - 6.7% and 2017 - 8%. An increase of 10% has been estimated for fiscal years 2018-2021. However, we continue to negotiate cost savings as provider agreements expire.

Purchased Services

Purchased Services includes expenditures for legal fees, contracted services with the Educational Service Center, maintenance and repairs to buildings, utilities, tuition paid to other districts, copier maintenance agreements, professional development for staff, postage, open enrollment, college credit plus tuition, pupil transportation, ITC services, etc. The overall estimated increase from fiscal year 2016 to fiscal year 2017 is 6.6% due to anticipated increases to legal fees, utilities, and tuition paid to other districts. In fiscal

FY 2016 - Pu 	0

years 2018-2021, an average increase of 2.8% is projected.

FY 2016 - Purchased Services as a % of Total Expenditures

$12,000,000

$10,000,000

Purchased Services Actual and Projected

11.3%

$8,000,000

$10,077,292

$10,352,376

$10,641,823

$10,946,725

$6,000,000

$7,183,184

$8,086,704

$9,021,478

$9,386,912

$9,205,007

$9,815,564

$4,000,000

$2,000,000

$0
20 12     20 13     20 14     20 15     20 16     20 17     20 18     20 19     20 20     20 21

Supplies and Materials

Supplies and materials include all expenditures associated with the operational and instructional supplies and materials purchased by the district. Expenditures were lowered in fiscal year 2015 and 2016 in an effort to preserve the district’s cash balance. In fiscal year 2017 expenditures are expected to meet necessary technology needs that were suspended in prior years. A district wide textbook replacement schedule will be reinstated in fiscal year 2018. The replacement schedule will add $400,000 in costs to this expenditure line item in each year through 2021. In addition, an increase of 1% has been estimated in fiscal years 2018-2021.

Capital Outlay

Capital outlay includes purchases for all operational and instructional equipment. An increase of 5% has been estimated in each year of the forecast. In the last few years district suspended most equipment purchases in order to preserve its cash balance. An investment in instructional and operational equipment is necessary and replacement plans are being developed and anticipated to be implemented in fiscal year 2018.

Other Objects
Other objects includes expenditures for audit costs, professional memberships, auditor/ treasurer fees, election expenses , fleet/liability insurance, and other similar expenditures. An increase of 2% has been projected in each year of the forecast.

Encumbrances
Encumbrances at the end of each fiscal year are estimated at $500,000.