Financial Presentation

Five-Year Forecast

October 17, 2005

REVENUE “LINE” & EXPENSE “LINE”

$40,000,000

$50,000,000

$60,000,000

Total Revenues Total Expenditures

Repeal of Cap on State Aid

*Passage 5.5 mill levy

*Building Carryover

Critical Pt.

HB66 & HB95

Critical Pt.

Reduction to Programs

Ending Cash Balance Comparison5/16/05 vs. 10/17/05 vs Target Balance

9,182,021

7,541,570

-19,574,410

-7,893,792

643,253

6,292,166

9,180,770

-18,743,791

-7,142,720

1,465,359

7,240,176

10,342,71310,318,140

8,139,723

FY2002/03 FY2003/04 FY2004/05 FY2005/06 FY2006/07 FY2007/08 FY2008/09 FY2009/10

Projection @ 05/16/05 Projection @ 10/17/05 Target Balance - 12% FY Exp.

$0

`

Graphical Summary of Five-Year Forecast 10-17-05(FY2000/01 – FY2004/05 Actual; FY2005/06 – FY2009/10 Estimate)

($15,000,000)

($5,000,000)

$5,000,000

$15,000,000

$25,000,000

$35,000,000

$45,000,000

$55,000,000

$65,000,000

Total Revenues Total Expenditures Ending Cash Balance Trend Line

5.5-mill Levy

Deficit

New Levy

3-Year Levy Collection

Overview of Operating Revenue Mix Fiscal Year 2006

• Key factor - limited revenue growth– Operating Revenue Mix -

1. Local Property Taxes (Includes H &R) 74% or $37.9M– Growth restricted by HB920 – Impacted by HB66 (State Legislature)

» 8% or $3.7M or 7.2% Represents Personal Tangible Receipts

2. State Revenue 23% or 11.8M– Growth influenced by State Legislature

» HB66

3. Other Revenue (Interest, Payments in lieu of, etc.) 3% or 1.4M– Growth influenced by economy

– HB66 will impact approximately 30% or 1/3 of the HCSD operating revenue.

Property Tax Revenue

HB66 Tangible Tax Reform (EFFECT continued)

• 5-Year 100% Hold-Harmless period tied to a Tax Year 2004 base level, beginning in Tax Year 2011 phase-out of hold-harmless begins until 0% in Tax Year 2018.– Over the 13-year phase-out period, Hudson CSD will need to

replace $13.8M in lost tangible taxes with other local taxes Just to equal that which it otherwise would have received prior to HB66. Essentially, a 1-mill shift to remaining taxpayers.

• Hold-harmless does not factor in the previous legislated phase-out of inventory taxes.

• Hudson CSD will experience a tax base shift to residents to make-up tangible tax base loss with upcoming levies.

HB66 Tax Base Effect

Tax Year Residential Business1981 51% 49%

1983 56% 44%(1988 Terex closes)

1993 73% 27%2003 79% 21%2010* 85% 15%

* Estimated & All district property valuation subject to the effects of HB920

• Table 1.4– Property Tax Revenue

• Fiscal Year 2005/06# 2006/07& 2007/08 2008/09 2009/10*• Residential Real $27,346,491 $27,826,154 $28,379,584 $29,004,788 $29,566,477 • % Chg. Last FY -0.48% 1.75% 1.99% 2.20% 1.94%• $ Chg. Last FY $ -131,936 $ 479,664 $ 553,430 $ 625,203 $ 561,689

• Other Real Estate $ 5,550,741 $ 5,678,145 $ 5,851,487 $ 5,879,629 $ 5,883,054• % Chg. Last FY -1.05% 2.30% 3.05% 0.48% 0.06%• $ Chg. Last FY $ -58,627 $ 127,405 $ 173,341 $ 28,143 $ 3,425

• Public Utility+ $ 1,313,283 $ 786,204 $ 755,296 $ 721,612 $ 552,502• % Chg. Last FY 13.77% -40.13% -3.93% -4.46% -23.43%• $ Chg. Last FY $ 158,909 $ -527,079 $ -30,908 $ -33,684 $ -169,109

• Pers Property• (incl inventory)+ $ 3,613,651 $ 2,783,851$ 1,830,620 $ 906,064$ 0• % Chg. Last FY -12.31% -12.31% -34.24% -50.51% -100.00%• $ Chg. Last FY $ -507,399 $ -829,800 $ -953,231 $ -924,555$ -906,064

• TOTAL: $ 37,824,165 $ 37,074,354 $ 36,816,987 $ 36,512,093 $ 36,002,034• % Chg. Last FY -1.41% -1.98% -0.69% -0.83% -1.40%• $ Chg. Last FY $ -539,052 $ -749,811 $ -257,367 $ -304,894 $ -510,059

STATE AID

HB66 Modified State Foundation Program EFFECT

23% or $11.8M

• The district is no longer a “formula” district and is subject to an FY2005 “guarantee” calculation– The lesser of the FY2005 Total Basic Aid $9.3M or

Basic Aid per pupil of $1,767• All other non-basic aid state payments (transportation,

preschool unit, etc.) is added to the $9.3M to arrive at $11.8M

• Over the next five forecasted periods, the district will receive subsidy payments totaling $3.4M in order to achieve a state aid amount close to that which was received in FY2005 “the guarantee”.

• Table 2.2– State Basic Aid

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10• ADM & 5,200.50 5,196.00 5,191.00 5,186.00 5,181.00• Basic Aid Per Pupil# $5,283 $5,399 $5.518 $5,639 $5,763• Cost of Doing • Business Factor 1.0361 1.0181 1.0000 1.0000 1.0000

• Gross: Basic Aid $28,466,886 $28,561,321 $28,643,985 $29,245,956 $29,860,549

• Adjust Recognized• Valuation $866,605,072 $868,605,072 $885,722,164 $907,219,748 $922,114,468• Local Millage 23 23 23 23 23• Less: Local • Charge Off ($19,937,872) ($19,977,917) ($20,371,610) ($20,866,054) ($21,208,633)

• Net Basic Aid• (calculated) $8,574,783 $8,583,405 $8,272,375 $8,379,901 $8,651,916

• STATE GUARANTEE the lesser of a or b:• a.) 2005 Total $9,318,228 $9,318,228 $9,318,228 $9,318,228 $9,318,228•• b.) 2005 per Pupil $9,190,457 $9,182,505 $9,173,669 $9,164,833 $9,155,997• NET BASIC AID• (w/2005 Guarantee) $9,190,457 $9,182,505 $9,173,669 $9,164,833 $9,155,997

• State Hold-Harmless • Reimbursement $ 615,675 $ 599,100 $ 901,294 $ 784,931 $ 504,080

• Table 4.2– Hold-Harmless/Guarantee Payment HB66

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• Personal Tangible

• Property Tax • Reimbursement $ 146,975 $1,152,807 $2,103,510 $2,887,586 $3,945,207

• State Foundation

• Hold-Harmless

• Reimbursement $ 615,675 $ 599,100 $ 901,294 $ 784,931 $ 504,080

• TOTAL STATE• HOLD-HARMLESS/• GUARANTEE• REIMB $ 762,650 $1,751,907 $3,004,804 $3,672,517 $4,449,297

• TOTAL GUARANTEE OF $13.64M over the next 5-years

Estimated Revenue Effects of Tax Law Changes in HB66 Source: ETPI, August 2006

Revenue Impact (In Millions)FY06 FY07 Biennium FY2010

Tax Reductions

• Personal Income Tax -$306 -$622 -$928 -$2,025

• Sales Tax -$719 -$752 -$1,471 -$850

• Corp Franchise Tax-$142 -$292 -$434 -$790

Tax Increases

• CAT $265 $550 $815 $1,550

• Cigarette Tax $499 $423 $922 $400

• Repeal 10% Bus. Prop $155 $319 $474 $365Net State Impact -$248 -$374 -$622 -$1,350Tang Pers Prop Tax -$71 -$527 -$598 -$1,700COMBINED EFFECT -$319 -$901 -$1,220 -$3,050

• Table 4.1– General Fund Revenue Summary

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• TOTAL • REVENUE $51,119,727 $51,095,381 $51,602,262 $52,174,972 $52,783,715

• % Chg. Last FY -1.60% -0.05% 0.99% 1.11% 1.26%

• $ Chg. Last FY ($833,057) ($24,346) $506,881 $ 572,710 $ 658,743

• HISTORICAL FISCAL YEAR CHANGES

• 2002/03 -0.13%• 2003/04* 6.34% - HB95 resulted in a calculated loss in future revenue of $2.18M

• 2004/05* 7.06%

• * Passage of 5.5 mill operating in November 2003

Overview of Operating Expenditure Mix Fiscal Year 2006

• Operating Expenditure Mix• Salary & Benefits - 85%• Purchased Services – 11%

– Utilities (20%)– Contracted Transportation (44%)– Repairs & Maintenance Agreements (9%)

• Supplies, Materials, & Equipment – 3%• Other Expenses – 1%

– Auditor & Treasurer’s Fees (66%)– Summit County ESC Deduction (15%)

• Table 6.1– Personnel Services• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• Certified • Payroll $26,544,203 $28,091,680 $29,735,094 $31,480,065 $33,332,794

• % Chg. Last FY 5.76% 5.83% 5.85% 5.87% 5.89%• $ Chg. Last FY $1,446,282 $1,547,477 $1,643,414 $1,744,971

$1,852,730

• Classified • Payroll $5,213,418 $5,531,560 $5,867,180 $6,221,244 $6,594,144

• % Chg. Last FY 6.44% 6.10% 6.07% 6.03% 5.99%

• $ Chg. Last FY $315,337 $318,142 $335,620 $354,065 $372,899

• TOTAL

• PERSONNEL

• SERVICES $31,757,622 $33,623,240 $35,602,274 $37,929,894 $39,926,938

• Table 7.1– Employees Retirement/Insurance Benefits • Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• Certified• Retirement $ 3,905,772 $ 4,130,348 $ 4,367,838 $ 4,618,981 $ 4,884,567• % Chg. Last FY 3.82% 5.75% 5.75% 5.75% 5.75%

• Classified • Retirement $ 895,135 $ 937,656 $ 982,514 $ 1,029,840 $ 1,079,708• % Chg. Last FY 6.05% 4.75% 4.78% 4.82% 4.84%

• Medical $ 5,092,829 $ 5,551,183 $ 6,050,790 $ 6,595,361 $ 7,188,944• % Chg. Last FY 8.58% 9.00% 9.00% 9.00% 9.00%

• Dental $ 239,303 $ 256,054 $ 273,978 $ 293,156 $ 313,677• % Chg. Last FY 7.10% 7.00% 7.00% 7.00% 7.00%

• Term-Life $ 91,130 $ 97,473 $ 104,064 $ 111,105 $ 118,625• % Chg. Last FY 7.20% 6.96% 6.76% 6.77% 6.77%

• Medicare $ 460,827 $ 525,342 $ 598,890 $ 682,735 $ 778,318• % Chg. Last FY 22.12% 14.00% 14.00% 14.00% 14.00%

• WorkersComp $ 158,627 $ 167,674 $ 177,237 $ 187,345 $ 198,029• % Chg. Last FY 62.31% 5.70% 5.70% 5.70% 5.70%

• Other $ 18,313 $ 89,728 $ 179,593 $ 291,730 $ 430,719• % Chg. Last FY -30.67% 389.98% 100.15% 62.44% 47.64%

• TOTAL • BENEFITS $ 10,861,934 $ 11,755,458 $ 12,734,904 $ 13,810,253 $14,992,585

• Table 8.1– Purchased Services

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• Health Services $ 300,734 $ 309,756 $ 319,049 $ 328,621 $ 338,479

• Contracted • Professional $ 299,947 $ 388,406 $ 397,118 $ 406,092 $ 415,335

• Repairs &• Maintenance $ 537,514 $ 542,889 $ 548,318 $ 553,801 $ 559,339

• Copier Leases $ 356,111 $ 366,524 $ 377,250 $ 388,298 $ 399,677

• Pupil • Transportation $ 2,633,596 $ 2,712,604 $ 2,793,982 $ 2,877,802 $ 2,964,136

• Property & Fleet• Insurance $ 127,049 $ 133,401 $ 140,071 $ 147,075 $ 154,429

• Utilities $ 1,185,025 $ 1,246,372 $ 1,287,817 $ 1,330,667 $ 1,374,972

• Tuition $ 387,866 $ 411,996 $ 440,398 $ 473,974 $ 513,827

• Other $ 186,901 $ 186,901 $ 186,901 $ 186,901 $ 186,901

• TOTAL $ 6,014,743 $ 6,276,739 $ 6,467,910 $ 6,669,315 $ 6,907,094

• Table 9.1– Supplies

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• Educational $538,691 $547,902 $557,298 $566,881 $576,657

• Textbooks $245,000 $245,000 $245,000 $245,000 $245,000

• Library Books & • Periodicals, etc. $102,900 $102,900 $102,900 $102,900 $102,900

• Software $90,000 $90,000 $90,000 $90,000 $90,000

• Building & • Grounds $300,000 $300,000 $300,000 $300,000 $300,000

• Fuel $224,700 $262,700 $269,540 $276,585 $283,842

• TOTAL $1,501,291 $1,548,502 $1,564,738 $1,581,367 $1,598,399

• Table 10.1– New & Replacement Equipment

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• TOTAL

• EQUIPMENT $122,947 $122,947 $122,947 $122,947 $122,947

• Table 11.1– Other Expenditures• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• TOTAL

• OTHER EXP $799,117 $811,421 $823,812 $836,444 $849,322

• Table 13.1– General Fund Expense Summary

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10

• TOTAL

• EXPENSES $51,095,153 $54,197,917 $57,377,080 $60,783,050 $64,434,785

• % Chg. Last FY 6.05% 6.07% 5.87% 5.94% 6.01%

• $ Chg. Last FY $2,916,712 $3,102,764 $3,179,163 $3,405,971 $3,651,735

• HISTORICAL FISCAL YEAR CHANGES

• 2002/03 4.74% - $925K perm cut, $274K result of mid-year State Aid reduction

• 2003/04 3.89% - $900K cut to base-line budget

• 2004/05 0.52% - Made perm $900K from 2003/04, $1.0M of perm cuts primarily via a reduction in force, $154K mid-year reductions, $200K

increased utilization of Federal monies.

Expenditure Per Pupil – FY2004 (LRC 2005)

(Summit County Schools)# DISTRICT RANK Total RANK Classroom RANK Admin RANK Operations

1 Akron 1 $10,129 1 $7,341 6 1,047 2 $1,7412 Hudson 2 $9,670 2 $6,901 5 1,062 4 $1,7063 Woodridge 3 $9,460 3 $6,416 1 1,327 3 $1,7174 Revere 4 $9,428 7 $6,096 4 1,138 1 $2,1935 Twinsburg 5 $8,815 8 $6,008 3 1,189 9 $1,6186 Mogadore 6 $8,754 12 $5,809 2 1,269 7 $1,6757 Springfield 7 $8,688 5 $6,174 14 821 6 $1,6938 Barberton 8 $8,665 4 $6,253 13 826 10 $1,5869 Cuyahoga Falls 9 $8,454 6 $6,097 11 878 12 $1,47910 Nordonia 10 $8,420 11 $5,857 12 859 5 $1,70311 Copley-Fairlawn 11 $8,381 9 $5,995 10 887 11 $1,49812 Tallmadge 12 $8,275 10 $5,948 8 1,004 16 $1,32413 Green 13 $7,960 14 $5,588 17 741 8 $1,63214 Stow-Munroe Falls 14 $7,880 13 $5,632 16 774 13 $1,47315 Coventry 15 $7,163 15 $4,969 7 1,046 17 $1,14916 Manchester 16 $7,158 17 $4,766 9 959 14 $1,43417 Norton 17 $7,127 16 $4,879 15 813 15 $1,434

O HIO -- $8,755 -- $6,048 -- 1,040 -- $1,666

Exp Per Pupil – FY2004 (LRC 2005) (Cuy. Co. Schools)# District RANK Total RANK CLASS RANK Admin RANK OPER

1 Beachwood 1 $18,685 1 $11,942 1 $2,689 1 $4,055

2 Cuyahoga Heights 2 $17,042 2 $10,843 2 $2,213 3 $3,986

3 Orange 3 $15,573 3 $10,600 5 $1,725 4 $3,248

4 Cleveland Hts-Univ. 4 $14,442 5 $8,847 7 $1,597 2 $3,998

5 Shaker Heights 5 $13,719 4 $8,874 4 $1,742 6 $3,102

6 Warrensville Hts 6 $11,768 12 $7,469 3 $1,900 9 $2,399

7 Mayfield 7 $11,488 6 $8,144 20 $1,149 11 $2,196

8 Independence 8 $11,405 7 $7,942 13 $1,284 12 $2,179

9 Bedford 9 $11,158 22 $6,623 11 $1,416 5 $3,120

10 Cleveland 10 $11,121 8 $7,911 24 $1,085 14 $2,126

11 Solon 11 $10,820 9 $7,628 25 $1,081 16 $2,111

12 East Cleveland 12 $10,680 15 $7,155 6 $1,723 22 $1,802

13 South Euclid-Lynd 13 $10,664 17 $7,009 16 $1,208 7 $2,447

14 Westlake 14 $10,601 11 $7,475 26 $1,080 17 $2,047

15 Fairview Park 15 $10,351 10 $7,490 21 $1,138 25 $1,725

16 Euclid 16 $10,335 19 $6,959 14 $1,258 15 $2,119

17 Chagrin Falls 17 $10,305 18 $6,981 19 $1,185 13 $2,139

18 Bay Village 18 $10,247 16 $7,060 10 $1,467 26 $1,720

19 Parma 19 $10,069 23 $6,598 15 $1,241 10 $2,229

20 Rocky River 20 $10,028 21 $6,849 17 $1,204 18 $1,975

21 Lakewood 21 $9,816 13 $7,416 32 $819 28 $1,582

22 North Olmsted 22 $9,793 14 $7,288 29 $1,012 32 $1,492

23 Hudson 23 $9,670 20 $6,901 27 $1,062 27 $1,706

24 Berea 24 $9,443 24 $6,529 23 $1,091 21 $1,822

25 Richmond Heights 25 $9,415 29 $5,993 9 $1,495 20 $1,926

26 Brooklyn 26 $9,390 25 $6,306 8 $1,567 31 $1,516

27 Brecksville-Brdvw Hts. 27 $9,199 26 $6,276 30 $962 19 $1,961

28 Olmsted Falls 28 $8,926 27 $6,149 28 $1,045 24 $1,733

29 Maple Heights 29 $8,827 32 $5,189 18 $1,191 8 $2,447

30 Garfield Heights 30 $8,804 30 $5,720 12 $1,340 23 $1,744

31 Strongsville 31 $8,679 28 $6,002 22 $1,099 29 $1,578

32 North Royalton 32 $7,984 31 $5,568 31 $881 30 $1,535

O HIO $8,755 $6,048 $1,040 $1,666

• Unreserved Fund Balance (w/hold-harmless/guarantee payments)

• Fiscal Year 2005/06 2006/07*& 2007/08 2008/09 2009/10

• TOTAL • UNRESERVED• FUND • BALANCE: $10,342,713 $7,240,176 $1,465,359 ($7,142,720)

($18,743,791)

• * - Deficit spending anticipated, -$3,102,536.• & - Successful levy passage necessary during calendar year 2006 to receive ½ collection in FY2006/07 and full

collection 2007/08 to offset escalating deficit.

• ________________________________________________________________________

• Unreserved Fund Balance (w/o hold-harmless/guarantee payments)

• Fiscal Year 2005/06 2006/07 2007/08 2008/09 2009/10• TOTAL • UNRESERVED• FUND • BALANCE: $ 9,580,163 $4,725,720 ($4,053,901) ($16,334,496)

($32,384,863)

REVENUE “LINE” & EXPENSE “LINE”

$40,000,000

$50,000,000

$60,000,000

Total Revenues Total Expenditures

Repeal of Cap on State Aid

*Passage 5.5 mill levy

*Building Carryover

Critical Pt.

HB66 & HB95

Critical Pt.

Reduction to Programs

*Higher Millage Rate

*Further Reductions to expenses & Programs

*???????