Consultant: Senate Enrolled Act 1 will shrink districts' taxable base, forcing levy and borrowing choices for MSD Wabash County Schools

April Federling, an analyst with Policy Analytics, told the MSD Wabash County Schools board at a work session that provisions of Senate Enrolled Act 1 will shrink districts’ net assessed value and shift tax burden among residential, agricultural and business property over the next decade.

“By the end in 2031, your home will be taxed on 1 third of its value,” Federling said, summarizing the phased changes to the homestead and supplemental deductions. She described the presentation as “preliminary” modeling based on 2–4% growth in assessed values and said a parcel-level update for the district is forthcoming.

The nut of Federling’s presentation: the law increases homeowner and business deductions and creates a new local property tax credit that will lower homeowners’ tax bills but reduce revenue flowing to school districts. Federling described three central changes: phasing out the standard homestead deduction over six years while increasing the supplemental deduction; a homeowner credit equal to 10% of liability (capped at $300) starting in 2026; and a substantial raise to the business personal property exemption threshold from $80,000 to $2,000,000 beginning in 2027.

Why it matters: the district’s net assessed value (NAV) is the denominator used to set tax rates and calculate levies that fund operations and debt service. Federling’s scenario modeling shows NAV falling as these deductions phase in, which would require higher tax rates to generate the same levy amounts or else force districts to switch from a rate-based to a levy-based strategy to secure revenue.

Federling showed two scenarios the district is running: keep the existing tax rate (a “rate” scenario) or set levies to match prior revenue (a “levy” scenario). Under the debt-service-only view, she said the district’s debt service rate could exceed $0.93 by 2031 in the rate scenario, and the levy scenario could push that debt-service component above $0.79. She also pointed out a near-term wrinkle: Wabash County’s certified assessed value for 2026 was reported as an increase of about 11%, which would temporarily offset the projected downturn.

Staff and board members discussed the operational revenue impact. Federling said certified shares tied to Local Income Tax (LIT) would be eliminated and a post-tax replacement credit (PTRC) would reduce homeowner liability; both moves reduce dollars available to districts. She projected a circuit-breaker loss that would hit operations, estimating roughly $342,000 in 2027 under one model and a larger cumulative reduction through 2031. Federling said those circuit-breaker-style credits are “revenue that is just not going to be received.”

Board members and staff focused on how to protect planned capital projects for the southern portion of the district. The district has discussed a planned south-side project in the $40 million–$45 million range (Federling and staff referenced a hypothetical $40–$45 million borrowing). Staff noted common strategies: (1) authorize a larger bond authorization than the immediate need (for example, authorize $60 million but issue only $40 million), (2) do a small interim borrowing this year to cover architect fees and early costs so the district can hold the target tax rate, or (3) switch from a rate-based approach to a levy-based strategy in future years.

Administrators warned of timing constraints if the board wants to borrow this year. To maintain a $1.10 tax rate for 2026, staff said an estimated roughly $800,000 of borrowing or cash would be necessary, and that any bond sale to support projects would need to be initiated quickly to close by Dec. 31. Staff also noted statutory limits on how much cash may be held in the debt-service fund (about 15% of next year’s payments under current practice) and said excess cash can reduce the Department of Local Government Finance’s (DLGF) allowance when budgets are reviewed.

Board members pressed for clarity on options and timing. Staff said the district could borrow a small amount this year to reimburse itself later from bond proceeds (reimbursable pre-issuance expenditures such as architect fees or permitted project costs) and that doing so is a common strategy among Indiana school corporations. Federling said Policy Analytics will deliver parcel-level data for MSD Wabash County Schools in the coming weeks to help the board refine capacity estimates.

Several participants raised broader concerns about statewide impacts, including possible increases in referendum activity and consolidation pressure for smaller districts; those comments were framed as discussion, not as predictions of action. No formal motions or votes were recorded during the session.

Ending note: Board members and staff said they will review the parcel-level update from Policy Analytics, model borrower/timing options, and return to the board soon to set a strategy for 2026 budgeting and any bond authorizations.