Uncertainties surrounding talk of a proposed property tax freeze by lawmakers in Springfield looking to secure a state budget deal loomed over the March 21 forum for officials in New Lenox.
The forum, hosted by New Lenox Mayor Tim Baldermann, sought to inform constituents of the advantages and disadvantages to altering the way local taxing authorities fund their operations. A number of civic leaders were on hand to serve as experts.
“With the state’s financial condition, freezing property taxes does nothing,” Baldermann said. “The State of Illinois has not received property taxes to their budget since 1932, so it has no impact on the $11 billion hole that they have, the $11 million dollar a day, further into debt hole that they’re digging, and by the end of the next governor’s election in 2018—whoever the next governor that takes office in January of 2019—they’re looking at somewhere from $22 [billion] to $24 billion dollars in the hole if they don’t resolve this crisis.”
Dr. Jeremy Groves, an associate professor and director of graduate studies at Northern Illinois University, took a moment to note the complexity of the matter at hand.
“In my discussion with individuals and so forth, I find out the property tax is one of the most misunderstood taxes that we have, and there’s very good reason for that,” he said. “It’s the most complicated tax that we have. It also happens to be one of the most hated taxes that we have.”
Groves said what makes the property tax so unusual is the rate it fluctuates; it’s not set like a sales tax rate is.
“[The sales tax] rate doesn’t change very often,” Groves said. “As long as the good fluctuates in price, you know what your tax is going to be. You can’t do that with the property tax because there’s actually three things that determine what your individual property tax is going to be.”
To calculate one’s property tax bill, the levy, the assessed valuation of property within a district and the assessed value of one’s property must all be considered.
“There are so many moving parts to [a] property tax that it’s hard to pin down one thing as being able to say, ‘if this changes, this is what’s going to happen to property tax.’” Groves said. “That’s what difficult about the property tax, and that’s why it’s so confusing and why it’s one of the most hated taxes. It’s not very transparent how it’s calculated.”
Groves noted that the State of Illinois, which has a habit of having large property taxes, is dealing with a growth in property taxes and said this has actually been dealt with by the state under the Property Tax Extension Limitation Law.
Will County, like a number of other counties, has become subject to the PTELL. This law limits the extension in which a district can levy by not allowing the amount to reach a lesser of 5 percent or the consumer price index, which is the rate of inflation.
However, there are exceptions to the law. This includes the referendum process, the fact that not all funds are subject to this limit and the powers granted to home-rule municipalities.
What’s more is lawmakers in Springfield have been in talks over a proposal that seeks to modify PTELL for either the years 2017 or 2018 or permanently, Groves said.
“If they modify it, they’re going to redefine such that everybody is subject to this—it doesn’t matter if you’re home-rule, it’s doesn’t matter if you’re a school district, everybody’s subject,” Groves said. “That five percent or the CPI rule, we’re going to change that to zero. There will be absolutely no growth in the extension, period. With a couple of exceptions, you can go and ask your voters to allow you the increase more than zero percent… or certain funds will not be subject to the zero percent. Those funds will be subject to the inflation, and those funds are bond funds, pension funds and public safety.”
Groves said there are a number of drawbacks to this proposed rule, as it will not allow taxing districts to capture increasing values or new construction. That means property taxes will remain constant, as will operational revenues.
Groves took time to review possible scenarios to highlight the impact of a potential property tax freeze on residents, with the first being a tax payer who owns a $300,000 home that can expect to receive a $3.40 savings on their 2017 property tax bill culminating in the village losing $105,000.
Another scenario shows that in 2017, residents save $15 and New Lenox School District 122 loses $1.2 million. That same effect holds true for Lincoln-Way School District 210 if a property tax freeze is implemented. Next year, the taxpayer saves $34 and the school district loses $1.3 million. In total, that means residents could save roughly $750 and these three districts lose $26.1 million over the course of five years.
Groves questioned if the taxpayer savings are truly worth it, especially considering the other changes proposed by legislators in Springfield.
“The thing is you have to realize is the quality of your schools, the quality of your parks, the quality of your fire districts, that feeds into the value of your house, and if they’re making $26 million worth of cuts, you’re going to get fewer services,” Groves said. “That’s going to decrease the value of your house.”
The Village of New Lenox, which has served as a home-rule municipality the last eight years, is not subject to the PTELL caps. Since that time, officials have adhered to rules limiting extensions valued higher than the CPI.
“Even though we were not subject to those caps, we kept to CPI anyway, because that was a promise that we made,” Baldermann said. “I don’t know if we’re going to be able to continue do that if this property freeze happens, especially if they talk about permanently.”
Baldermann said the only reason the state is looking to extend a property tax freeze is because lawmakers are talking about raising taxes on income, services and retirement. The legislature wants to distract the taxpayer while they look to narrow the state’s debt, he said.
“There are changes that need to be made, there’s no doubt about it, but they have to propose something that’s going to hold muster with folks,” Baldermann said.
Attendee Robert Buonadonna, of New Lenox, recognizes how important the matter of passing a budget is and said he wishes he had the solution.
“I don’t have good answers, I just know that right now they’re talking about taxing retirement incomes,” Buonadonna said. “They’re going to see the state lose probably every single one of the seniors who can afford to move. I’m here because I like New Lenox.”
“Being a senior, I have different values or different things I need to look at,” Buonadonna said, noting that roughly 72 percent of his property tax bill goes to fund the schools. “I cost you guys zero. I have no kids, no grandkids that go to our district. It’s my obligation to make sure the youth of today get educated.”
Buonadonna said it’s not conceivable the way the districts keep raising taxes.
“It’s just a matter of just can’t afford it anymore,” he said.
Baldermann urges people to tell their neighbors and friends and contact the governor as well as their respective senators and representatives.