You may remember my dismay that McHenry County College is building its budget based on the assumption that new construction increased 3.29% in 2012.

2012 is the year whose value is being measured by assessors as of January 1, 2013, for the 2014 tax bills.

To recount how I reached the conclusion that MCC is assuming 3.29% growth, you will see below that the budget assumes 4.99% growth.

Although it took Trustee Chris Jenner four questions to elicit the reason for the odd figure from Chief Financial Officer Bob Tenuta, the reason is that any tax district that increases its levy by more than 5%. The hearings would be announced by newspaper ads bordered by thick black boxes.

(This law resulted from a campaign tactic during Governor Jim Thompson’s first re-election campaign.  His supporters passed petitions for an advisory referendum calling for public hearings to be held if the 5% level were exceeded and they had to be announced in newspaper ads.  You can bet newspapers supported the legislation.)

So, that’s why the number is 4.99%, not 5%.

The rate of inflation as measured by the Consumer Price Index last year is 1.7%.  That means, in the aggregate, no non-Home Rule tax district can increase the amount it collects on existing property by more than 1.7%.

If you subtract 1.7 percentage points from 4.99, you get. 3.29%.

Let me reprint my last Friday’s email to the college’s Public Information Officer:

Last night Bob Tenuta said I should pose this question to you and you would refer it to him and he would answer it.

I asked why the college administration was assuming that property tax revenues would increase 4.99% considering past new growth figures gave no reason to do so.

I include the new growth for MCC over the last ten years, information which was not shared with the Board:

Year       New

2012       0.5%
2011       0.4
2010       0.5
2009       1.1
2008       1.6
2007       2.3
2006       3.2
2005       3.8
2004       4.2
2003       4.3

So, why is MCC assuming a 4.99% increase, which is 3.29 percentage points more than the 1.7% hike the Tax Cap allows local governments to capture?

thanks, cal

I added this to the article about that email:

Taking the maximum amount allowed from current taxpayers–1.7% (in the aggregate)–will raise about $224,000 more for MCC, whose budget is $54.2 million.

Below is the college’s response received more that six days later:

The answer to your question is below. Please note that this information was covered thoroughly during the Board Meeting, at which you were present. Thank you.

The past information has been presented to the Board in the form of the CAFR, which includes all the information for the last ten years. I believe I sent you the link to the CAFR a few weeks ago. FY 2012 and FY 2011 reports can be found by visiting: www.mchenry.edu/finance.

As for the 4.99%, the amount the College is actually levying is the 1.7% based on the extended 2012 tax levy allowable under PTELL.

The amount above the 1.7% is only asking to capture any new growth of property that will be added to the tax roles.

It is not expected that MCC will receive that much, but we still have to budget for the expected increase and set a corresponding expense.

By not doing so, the College loses any new growth in property tax revenue.

If new growth is added, it would not be included in the budget in terms of any expenditure, which the College would be unable to use if it exceeds the total expense approved by the Board.

THE AMOUNT ABOVE 1.7% DOES NOT AFFECT THE CURRENT TAXPAYERS AS PTELL LIMITS IT TO A MAXIMUM 1.7% INCREASE, AND THE COUNTY CLERKS CONTROL THE CAP TO ENSURE IT IS MAINTAINED.

So, the answer says that the college administration wants to take the maximum amount out of district taxpayers’ pockets as is allowed by law.

The administration is saying that it could not save the approximately $224,000 that a 1.7% increase in taxes would raise in additional taxes from current property taxpayers.

Not mentioned in the email, but a common theme among those who thing tax districts are more capable of spending money earned by individuals and businesses than are they is the argument that once the $224,000 is lost, it is lost forever.

The converse of that argument, of course, is that the money is saved forever by taxpayers.

In addition to that $224,000, the college administration wants to capture all new construction growth.

But the numbers run by the CFO show the college getting $697,000 more next year–a complete fiction.

Compare the college’s approach to that of the McHenry County Board.

The County Board wants to capture all of the new growth, but is willing to forego the inflationary increase allowed by the Property Tax Cap (cited as PTELL in the MCC email).

It is not building its budget on the assumption that taxpayers will not see the allowed 1/7% extracted from their wallets next year.

It does intend to try to capture the new growth, however.

If County Board members overestimate that new growth, current taxpayers will pay part or all of the 1.7% allowed.

During the June 25th MCC Board meeting Trustee Molly Walsh asked how much new growth was gotten this past year.

“0.2349, something like that,” President Vicky Smith replied.

So, why did she recommend a levy increase of 9.99% last year?

No good reason that I can think of.