On September 8th, McHenry County Blog published the article below.
Since then the County has reduced the proposed Valley Hi levy to $10,000, but shifting most of the originally proposed $2.75 million for Valley Hi to other line items.
The bottom line is that this year’s $76 million real estate tax levy will be hiked back to $79,344,078–about the same level ($78,966,290.31) it was before the County Board cut the Valley Hi levy from $3 million to zero.
The biggest question before the County Board on Tuesday night is whether to kill the Valley Hi tax by lowering the proposed $10,000 to zero.
Below is the original article:
Valley Hi Low Hanging Budget Fruit
With the time rolling around when the McHenry County Board will be voting on how much to extract from our wallets in property taxes, there is $2.75 million still in the tentative budget for the Valley Hi Nursing Home.
As most readers of McHenry County Blog know, there is over $40 million ($41,283,178) in the bank in this segregated account.
It can’t be used, according to state law, for anything but Valley Hi.
No way to transfer it to cut some other part of county government’s operation.
Mike Walkup testified that the Valley Hi Nursing Home tax should be abolished. During the fall campaign Jack Franks agreed.
Last year the real estate tax levy was $79 million.
This year’s levy was $3 million less with GOP County Board Chairman candidate Mike Walkup leading the way to eliminating the proposed $3 million Valley Hi tax levy.
Now the County Board is faced with the question of whether to zero out the Valley Hi levy for a second year or not.
Doing so will eliminate the voter-approved tax rate FOREVER.
Not doing so will allow it to continue.
There are arguments on both sides.
Those wishing to keep the taxing authority point out that Medicaid payments are too low to allow a break-even operation.
The $10-11 million annual budget will be short something less than $1 million this year, which will come from the surplus.
Those in favor of ending the tax point out that a drawdown of a million dollars a year, even adding in enough money for a new roof on the ten-year old building, and taking into account inflation means the huge surplus will take a really long time to exhaust.
And, as McHenry County Board member Chuck Wheeler pointed out, if more money is needed down the road, the County Board can always as voters in a referendum for permission to levy it.
Jack Franks at his McHenry Town Hall Meeting
Now, to the donkey in the room.
State Rep. Jack Franks has been harsh in his criticism of Valley Hi’s management in his Town Hall Meetings.
Franks has criticized having money to cover four years’ budgets in the bank.
(Almost as if he has been taking pointers from McHenry County Blog, which I know he reads.)
So, let me address the following to the twenty-four Republicans on the McHenry County Board:
Franks has pledged to cut people’s tax bill by 10%.
We all know that he can’t do that, that he is just pandering for votes among those who don’t know much about how the property tax system works.
He can, however, have influence on the County budget, if he is elected.
He won’t have a vote.
But, let’s assume that you Republicans bump the budget back up to the $79 million level, where it was before you cut the $3 million Valley Hi levy back to zero.
10% of $79 million is $7.9 million.
$2.75 million is 3.4% of $79 million.
Now, if I were Jack Franks and had won the election, I would immediately propose cutting the Valley Hi levy to zero.
That would give Franks a two-fer.
He would be
- cutting the County Budget by 3.4% and
- abolishing a tax
“He can’t do that by himself,” some of you will say.
True, but he can beat opponents about the head in the paper who favors pretty much anything he does, knowing that the majority of local taxpayer-voters agree with eliminating the tax…forever.
If Franks does so, I predict that the majority of Republicans on the Board will go along with him.
Maybe kicking and screaming, but the hallmark of the Republican Party is lower taxes, not higher taxes.
So, Republican County Board members, should Republicans get the credit for abolishing a tax that is not needed?
Or do you want to take the chance of giving Jack Franks a chance to claim credit over the objections of Republicans?
Your choice.
The board is probably being presented the report by Scott Hartman, and basing decision on his projection.
This report projects Valley Hi will chew through its $42 million surplus and operating expense deficit will rise to above $7 million per year in under a decade, based upon current bed mix.
By law, county nursing home can only tax .10% of eav.
Our County eav around $7 billion means that Valley Hi will have little reserve left and no ability to tax more than $7 million per year to support it’s existence.
Of course the board may project we can inflate our way out of the problem, with eav rising due to general inflation.
(Problem is we can’t survive on ‘McHenry County Dollars’, we must buy resources from the outside world which is enjoying real property asset inflation at a steeper rate and taking significantly lower portions of citizens household income in property taxes.).
And of course while Illinois budget woes are always presented as a bugaboo, Medicaid funding is Federally sourced.
Board members surely know that in a year of delayed reimbursement there are at present ample time and funds to bridge the gap.
Finally, citizens should be informed which bank is enjoying the long term use of the sequestered $42 million while paying interest rates below market, whether the $42 million is insured for loss above FDIC limits, and whether this bank does business with any past or present board members for real estate purchase loans.
Levy $1.00 to keep the tax in place in case or go to a advisory ref this coming spring election and let the voters decide.
Put a 2/3 vote as a measure to retain or eliminate, pick one that is easy to understand
Publicize big time before the vote, so every body knows the pro and negative of the issue.
Elected officials tend to be terrible at guessing what the voters really want.
Solution: Get rid of it!
Return the money to the tax payers.
Let the private sector run it.
I second: “Solution: Get rid of it! Return the money to the tax payers. Let the private sector run it.”
Let’s vote!!
The difference between $1 and $10,000 is not worth talking about.
The difference between $0, which would eliminate the tax until voters would approve it again, and $10,000 is the issue.
Once again, McHenry County Board does not acknowledge that our County is in a Property Tax Crisis:
our property tax rate is double the national average, the amount of household incomes seized for property taxes are at least double the national average for median incomes/median value homes.
If there is a need for poverty elder care it is bitterly ironic that those served will be imported needy: local needy have been plowed under already during the past 8 years profligate spending.
The next round of economic crisis will bring a fresh round of property abandonment.
For example: Woodstock D200 has over $200,000,000 in pension obligation debt.
To put that in perspective, Woodstock D200 Eav is $700,000,000…so the pension debt obligation is 28% of EAV.
(That can be dumped back to local citizens when Illinois declares insolvency and pays bondholders).
In addition, Woodstock D200 has amassed over 20% of EAV actual debt for building new buildings which they have run at full expense but low percentage of enrollment capacity since their 2007 inception.
That means that about HALF OF ALL WOODSTOCK D200 EQUALIZED ASSESSED VALUE IS PLEDGED TOWARD SCHOOL DEBT.
In other words, the current value of half of our homes’ EQUITY is collateralizing CURRENT school debt.
That means that all you people lucky enough to live in other school districts (who knows what YOUR school debt obligations are, I haven’t seen any specific research presented) will have to pick up all COUNTY DEBT OBLIGATIONS FOR UNFUNDED PENSIONS, ETCETERA.
Because Woodstock properties will be plowed under rather than maintained at 40%-70% property tax rates.
The only self defense against taxing District profligate spending is to reduce one’s own taxable property value to near zero.
Woodstock D200’s pension obligation debt consists of TRS and IMRF.
The majority of that is TRS.
TRS debt is currently held by the State of Illinois on behalf of Woodstock D200.
Technically pension obligations are not debt, rather unfunded liabilities.
In layman’s terms, both debt and unfunded liabilities held by the government are taxpayer IOUs.
Since Illinois has the pension sentence in the state constitution which states retirement benefits are contractual and cannot be diminished or impaired, pension and retiree healthcare unfunded liabilities are a more extreme problem in Illinois as compared to other states.
A few states have wording about pensions in the state constitution.
Of those few states, the wording in the State of Illinois constitution arguably places the most extreme obligation on taxpayers.
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TRS = Teachers Retirement System of the State of Illnois.
It is one of 5 “state” pension funds in Illinois.
The other 4 state pension funds are SURS (state university), SERS (state employees), GARS (general assembly), and JRS (judges).
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IMRF = Illinois Municipal Retirement System.
The 20% of EAV actual debt for building new buildings is presumably bonds?
$120,000,000 acknowledged debt on 2006 and later bonds.
$25,000,000-and-growing unacknowledged accrued unpaid interest on 2006 $14 million capital appreciation bond, which comes due starting in 2022.
The pension unfunded liabilities are in most school district’s annual financial reports or audit reports, beginning with the fiscal year 2015 (FY 2015).
That is the result of GASB 68.
Search on “net pension liability.”
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GASB = Government Accounting Standards Board.
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The following, in layman’s terms, is helpful to understand pension unfunded liabilities.
Liability – funded liability = unfunded liability.
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Liability = Amount that should be in the investment fund as of a certain date.
Funded Liability = Amount that is in the investment fund as of a certain date.
Unfunded Liability = Amount that should be in the investment fund, but is not, as of a certain date.
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As of a certain date are key words because the actuary calculates these amounts as of a certain date.
The $120,000,000 is principal only?
Yes principal only is required to be reported!
Bringing back to relevance for ALL McHenry County taxpayers,
As communities impoverished by school taxation are plowed under and stricken from taxable property rolls, the tax burden on surviving property in the County will rise.
Each government entity should in the name of transparency produce a bond debt service schedule.
The bond debt service schedule should include principal, interest, and total on an annual basis.
For example:
2016 – Principal – Interest – Total
2017 – Principal – Interest – Total
2018 – Principal – Interest – Total
etc.
Grand Totals – Principal – Interest – Total
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If the school district does not have that information on its website, ask them to produce the information.
If they refuse to produce the information, ask the school district to have their in-house financial expert or their external planner to produce such a document.
If they refuse, write a letter to the editor and / or post the story on the blog.
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There is no good reason for government to not clearly disclose the bond principal and interest payments as they are taxpayer obligations.
The law does not require disclosure of sophisticated deferred interest debt obligation.
Why relevant to Valley Hi County Tax discussion?
Again, tax obligation of taxpayers in more prosperous communities will burgeon as impoverished communities like Woodstock are plowed under in self defense to double digit tax rates.
It’s not that sophisticated to calculate bond interest payments as indicated above when the Principal payments and interest rate is known.
Taxpayers are obligated to pay interest on the bonds.
Any conversation of bond principal should include bond interest.
OR vote to cut the board size and he is the first to GO!
Here are 4 areas of the McHenry County government (the county itself) that have issued bonds.
Any time a bond is issued there are interest payments (one form of investor profit from bonds is in the form of annual or semi-annual interest payments from the government to bondholders).
Apparently none of these bond issues included an estimated debt service schedules to taxpayers prior to passing bond referendums or issuing non-referendum bonds.
Apparently after the bonds were issued, there was not a debt service schedule presented to taxpayers.
McHenry County – list all the bond “issues”
McHenry County – Valley Hi project
McHenry County Conservation District (a component unit)
McHenry County Public Building Commission (a component unit) – jail project.
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The Conservation district has massive bond debt.
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For the purposes of this conversation, bond debt service schedule is for example:
Year 1 – Principal – Interest – Total
Year 2 – Principal – Interest – Total
Year 3 – Principal – Interest – Total
etc.
Grand Totals – Principal – Interest – Total
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By bond “issue” we mean for example Series 2016 bonds…that’s a bond issue…in layman’s terms.
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When someone in the government says it’s not the law to provide a debt service schedule including interest…
Ask them, do you think it’s a good idea to clearly disclose a bond debt service schedule (as described above) to taxpayers in the name of transparency?
Obviously one would say this, but do you think it’s a good idea to hide the bond interest from taxpayers?
Will you sponsor a law to require units of government to clearly disclose a bond debt service schedule (as described above) to taxpayers in the name of transparency?
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Think about this issue.
What special interest groups benefit from bond debt service schedules not fully being disclosed.
Basically, just about any special interest group that works with government, some more so than others.
There are those that construct or remodel a building which was the result of bonds being issues.
There are those that profit from issuing the bonds (bond counsel, bond underwriter, financial planner, etc.).
There are those that work in the resulting building (better working conditions).
Since the bonds are issued, the employees likely have higher wages and benefits, since most units of government do not save one penny to construct a new building, instead financing the entire amount with bonds.
Those are just a few of many special interest groups that benefit from not fully disclosing bond interest and bond debt service schedules before, and annually after, a bond referendum or issuing non referendum bonds.
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This is a major issue.
Unfortunately, a lot of water is over the dam.
But better late than never.
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Since Jack Franks is so concerned about taxpayers in every since taxing district in the county, he should sponsor such a bill and push for it.
typo.
Obviously one would not say this, ….