Spreadsheet: 1dc39454-70f6-426b-bf7c-ea90d87730c6
Sheet: Policy Basis

NOTES ON TBRA
1. | Tax Base Replacement Aid (TBRA) was created to minimize certain potential tax increases created by
 | the removal of farmland and seasonal recreational property from referendum market value (RMV).
 | These potential increases are based on this simple fact:  All other things equal, the removal of a
 | portion of a tax base will increase taxes on the rest of the tax base.
 | This is because a tax rate is determined by dividing the total tax to be collected by the total tax base.
 | Regarding the referendum rate, the removal of certain properties from the RMV reduces the tax
 | rate's denominator.  TBRA helps provide a corresponding reduction to the tax rate's numerator.
2. | It is important to note that [NAME] is based entirely on referendum authorities that were already in place in
 | FY 2002.  Here's why authorities with later creation dates aren't included:
 | * | If the redefinition of RMV increases taxes that are associated with referendums that were held prior to 2001,
 |  | people who voted to approve these referendums may have reasonable complaints that they would have
 |  | voted differently had they foreseen these increases.  [NAME] addresses these complaints.
 | * | If the redefinition of RMV increases taxes that are associated with referendums that were held in November
 |  | 2001, people who voted to approve had already been informed about estimated tax rates that reflected the
 |  | redefinition.  So they have no basis for complaint, and there is no need for these referendums to influence
 |  | TBRA.
3. | When FY 2002-based referendum authority expires, the corresponding TBRA also expires. Since all referendum
 | authorities that apply in FY 2002 will expire by FY 2012, it follows that all TBRA will also expire by FY 2012.
4. | Puzzling observation:  After [NAME] is calculated, the first thing we do is to deduct it from a school district's
 | initial referendum aid. We don't actually reduce a district's referendum levy unless its TBRA exceeds its
 | initial aid.   Given that the TBRA is designed to reduce levies, why do we start by reducing aids?
 | The answer relates to the fact that under the laws that applied until FY 2003, everything that is received under
 | current law as referendum revenue would have been generated by levies.  This is because all the referendum
 | revenue that was equalized (i.e., separated into aids and levies) under the old law has been rolled into basic
 | revenue. Therefore, the FY 2003 referendum aid that is generated under current law has already done part of
 | the job of appropriately reducing the tax rate's numerator.
 | TBRA, as we calculate it, represents the appropriate TOTAL reduction to the FY 2002-based referendum
 | levies. Therefore, [NAME] should reduce levy only to the extent that it EXCEEDS the initial referendum aid that is
 | already providing a levy reduction. This is what happens when we deduct TBRA from aid before we deduct it
 | from levy.
5. | The referendum aid that districts receive starting in FY 2003 is similar to TBRA in that it counteracts certain
 | tax increases created by the new definition of RMV.  However, post-FY 2002 referendum aid differs from TBRA
 | in this respect:  The tax increases it is intended to counteract include those that are associated with
 | referendum revenues that are created after FY 2002.