EDWARDSVILLE — Madison County State’s Attorney Tom Gibbons Tuesday announced a settlement in a tax objection lawsuit filed by WRB Refining LP against the Roxana School District, the village of Roxana, the Roxana Library District and the Roxana Park District.
“The settlement of this tax objection case marks the beginning of a return to fair taxation for these districts,” Gibbons said in a press release. “No single taxpayer should see their tax bill more than quadruple from one year to the next, especially when a district has demonstrated the ability to make ends meet on a much lower rate of taxation for all taxpayers of the district. We have to fight to maintain fair taxation and ensure the kind of economic viability for businesses that keeps good-paying jobs right here in Madison County.”
The settlement of the lawsuit resolves the taxpayer objections without need for further litigation or expense to taxpayers. Of the 28 points of objection cited by WRB in their complaint, Gibbons and his legal team successfully defended the districts on 20, including every objection made against the Roxana Library District. Had the objections against the library district been sustained, the library would have been left with no money to operate in 2011, requiring a refund of all of the taxes they collected that year.
The tax objection case arose out of a change in the tax levy against the WRB Refinery, which is located primarily in the village of Roxana and Roxana School District. WRB objected to the tax levy imposed by four of the 18 taxing districts that levy against the refinery. The court pleadings filed by WRB objected to the amount of the levy of the four taxing bodies as grossly exceeding the operating needs of each district.
The largest portion of the objection related to the Roxana School District. In 2010, their tax levy brought in approximately $3,535,000 in property taxes from WRB. In 2011, the Roxana School District set their property tax levy to receive approximately $14,455,000 from WRB – an increase of approximately $10,920,000. This increased levy caused WRB’s tax bill to be over 408 percent of the previous year’s tax bill. The amount to be received by Roxana School District under the settlement for tax year 2011 is approximately $6,000,000 – a nearly 70 percent increase over the amount they received from WRB in 2010.
Gibbons said he is skeptical about the district’s claims of financial hardship and suggested a review of the district’s financial decisions.
“These questions remain unanswered because even their lawyers were not able to adequately show how they were spending all the money received under the original levy, or for the continued increases they were asking for in the following years,” Gibbons said.
The school district’s tax levy for 2012 put WRB’s tax bill at $15,909,295 – another 10 percent increase of the refinery’s tax bill on top of what was paid for 2011. WRB has also filed an objection to this tax levy and the case remains in litigation.
“Unfortunately, the district had attempted to grossly inflate the property tax bill of the refinery to an unsustainable level – without the ability to lawfully justify the need for the increase,” Gibbons said. “While each taxpayer must pay their fair share, it is not a proper exercise of taxing authority to single out one taxpayer as a means to overinflate spending. After looking at the case carefully, there were some serious concerns about the financial practices of the Roxana School District, including the legally questionable transfer of taxpayer funds, and their inability to adequately justify how they were spending the huge amounts of money they began receiving for 2011. There was also some concern about how two top administrators got extraordinary raises beginning in 2011.”
The WRB complaint documents how the district improperly transferred millions of dollars of taxpayer money from the working cash fund to the capital improvement fund – without the approval of taxpayers of the district.
“This money belongs to the taxpayers of the district, and the law requires the district to seek voter approval before engaging in capital improvements,” Gibbons said. “This attempt to bypass the approval of the voters is a cause for serious concern.”
According to Gibbons, there are also questions surrounding administrators’ salary increases. Public records show Superintendent Debra Kreutztrager’s salary increased from $125,898 in 2010 to $150,756 in 2013, and Business Manager Cris Hagen’s salary went from $115,120 in 2010 to $135,534 in 2013. Kreutztrager received a 6.1 percent raise in 2011, a 4.4 percent raise in 2012 and a 6.9 percent raise in 2013. Hagen received a 5.25 percent raise in 2011, a 4.1 percent raise in 2012 and a 6.5 percent raise in 2013.
The settlement was reached at a court-ordered settlement conference that saw negotiations over the specific objections in the pleadings and attempted to negotiate a long-term taxation deal among the 18 taxing districts affecting the refinery. Gibbons said every district except the Roxana School District was ready to accept the refinery’s offer. The lowest level of funding under the settlement for the school district would be $11 million for 2013.
“It has always been my hope that the representatives of the taxing bodies would be able to come to a mutually beneficial, long-term agreement on taxation with WRB,” Gibbons said. “This would provide excellent financial stability for the funding of public services and ensure the continued viability of one of the most vital economic engines of our community. Hopefully, the school district will see the light and join in this important effort.”
In a letter to parents, Superintendent Debra K. Kreutztrager said refunding the money to the refinery will have a “devastating” effect on the district. The text of her letter, sent to parents Wednesday, May 14, follows:
“As many of you know, the Roxana School District has been positively impacted by the recent expansion of the Wood River Refinery (WRB) and subsequent reassessment. Unfortunately, the District along with a consortium of local taxing bodies, has been in litigation with WRB Refining since the refinery reassessment in tax year 2011. The Madison County Board of Review, following completion of WRB’s $3.8 billion Coker and Refinery Expansion (or CORE) Project, increased the refinery’s total assessed value from $93.4 million in tax year 2010 to $402 million in tax year 2011 and to $429.4 million in tax year 2012.
Prior to completion of the CORE Project, WRB paid approximately 33 percent or $3.5 million of the Roxana School District’s total $10.6 million in property taxes. After completion and the Board of Review’s reassessment, the district’s total property taxes increased to $20.8 million with WRB’s share at approximately 70 percent or $14.5 million.
The Board of Review’s reassessment of the refinery in 2011 resulted in an additional $10 million in property taxes across all district funds, even as the district’s total tax rate decreased from 4.37 to 3.89, the lowest school district tax rate in Madison County. For the owner of a $100,000 home or other property, this represents a savings of $161 in school taxes alone, and as much as $450 in total property taxes.
The increase in revenue has had a positive impact. However, it did not result in a $10 million surplus for the district. Under the Illinois school funding formula, the district lost $1.9 million of state revenue because of the increase in local property value. Additionally, the district lost another $400,000 of supplemental payments. After erasing deficit spending that was incurred during the recent recession, the district was able to retain $6 million of the much needed additional revenue.
With the additional revenue, the Roxana School District was able to:
• Lower the District’s tax rate by 48 cents (the lowest school district tax rate in Madison County)
• Maintain low class sizes
• Restore educational programs and resources
• Upgrade school security at every building for the safety of students and staff
• Start a one-to-one technology program, providing laptops for all students in grades 6 through 12
• Provide teacher training to improve instruction
• Install air conditioning at the Junior High and Senior High campus to improve air quality for students and staff ($7 million project)
• Replace outdated equipment and upgrade facilities (replace theater lighting, renovate locker rooms, build pole barn for district storage)
• Increase fund balances (reserves) to ensure long term financial stability
The $14.5 million in 2011 property taxes paid by WRB to the School District was used to fund the 2012-2013 school year, for which the district was very grateful. Yet, in February 2013, WRB filed a tax objection complaint in the Madison County Circuit Court seeking a refund of $12.3 million from the District’s Educational Fund, Operations and Maintenance Fund and Transportation Fund. WRB’s tax objection complaint was filed against the Madison County treasurer, who is represented by the Madison County State’s Attorney, Mr. Thomas Gibbons. However, the district filed a request to intervene in the lawsuit and vigorously defended the lawsuit.
As State’s Attorney, Mr. Gibbons has the authority to settle a tax objection case. On April 17, 2014, without the knowledge of the Roxana School District or input regarding the negative impact for the district, Mr. Gibbons entered into a proposed settlement agreement with WRB regarding the 2011 tax objection requiring the district to refund $8.4 million plus interest to WRB. WRB and the state’s attorney asked the judge to enter an order approving their settlement. At this time, the judge has not entered the order. The District has asked the judge to conduct a hearing on the proposed settlement, but the judge has not ruled on that request either.
If the State’s Attorney’s settlement with WRB for tax year 2011 is approved and WRB receives over $8.4 million in refunds from the District, the Board of Education would be forced to exhaust nearly all of its reserves in the Educational Fund, leaving little balance in the fund. While the Board of Education’s goal is to maintain reserves at 50 percent of expenditures in the Educational Fund, reserves would essentially be wiped out.
In February 2014, WRB also filed a tax objection complaint against the Roxana School District for tax year 2012 seeking a refund of over $12.9 million from the District’s Educational Fund, Operations and Maintenance Fund and Transportation Fund. The District has intervened in this new lawsuit and intends to vigorously defend the matter as well.
If the State’s Attorney agrees to a similar settlement with WRB for tax year 2012, and it is approved by the judge, then the district would very likely be ordered to pay refunds of nearly $9 million to WRB. The Board of Education would be forced to cut $6 million, or one-third, of its educational budget for the 2015-16 school year. Eighty percent of the District’s budget is salaries and benefits for employees, so the Board of Education would be faced with major reductions.
With refunds to WRB the Roxana School District will be forced to:
• Eliminate 30 to 40 teaching positions
• Eliminate 1/3 of all other staff positions
• Increase class sizes
• Reduce educational programs and provide fewer class offerings
• Reduce the one-to-one technology program necessary for 21st century learning opportunities
• Halt progress on facility upgrades (unable to eliminate portable buildings, no Jr. High gymnasium, no Pre-K addition)
• Increase the school district’s property tax rate
In addition, the Board of Education has the approval to issue approximately $9 million in working cash fund bonds. Under Illinois law, monies in the district’s working cash fund can be used for any and all school purposes and the board has the authority to transfer monies in its working cash fund to any fund most in need of the money. Upon sale of the working cash fund bonds, the district’s intent was to transfer monies in the working cash fund to other funds of the district so that outstanding facility needs of the district could be addressed with no impact to the tax rate. The high-priority facility needs include the elimination of old portable classrooms at the elementary schools and building a gymnasium for the Junior High School. However, on March 21, 2014, WRB filed yet another lawsuit against the Roxana School District seeking to block the sale of these working cash fund bonds. Recognizing the significance of the district’s facility needs, the Board of Education intends to vigorously defend this latest lawsuit.
It has always been the district’s goal to achieve a long-term agreement with WRB. After negotiating for over three years, it is disappointing that WRB is resisting the obligation to pay its fair share of local property taxes to support our schools. The District has made concessions in the past and has looked forward to the benefits for students due to the refinery expansion. It was anticipated that the district would be in a position to build a much-needed new high school. Minimally our students deserve facilities, programs and educational opportunities equivalent to those in neighboring districts. If the judge approves the state’s attorney’s settlement with WRB, it will have a devastating impact on the education of all students in the Roxana School District. The Board of Education is prepared to exhaust all avenues available through the legal system to prevent that from happening.”
Kreutztrager also released an official statement from School Board President Jim Smith on the issue.
“The taxing bodies all supported the refinery’s efforts to get the CORE Project because we believed it would protect the long-term viability of the plant, as well as the Roxana community into the future,” Smith said.