McHenry County Blog

"Oooh. Ahhh," real estate taxpayers will sigh as they contemplate a lower property tax bill next year when Jack Franks' legislation files out of the Illinois House this week.

That’s “firework.” Singular.

Jack Franks

In order to give cover to House Democrats who voted to hike state income taxes by 67%, House Speaker Mike Madigan is going to allow Jack Franks to have the spotlight one day this week.

One bill.

A big one, if it becomes law.

Franks will be allowed to call House Bill 3793.

That’s his Property Tax Cap modification bill that will prevent tax districts from increasing the amount billed taxpayers last year, if assessed valuation is decreasing. The technical term for this number, which is set by County Clerks, is the “extension.”

All the hopes brought forth by the publicity over Jack Franks' bill will amount to nothing after Franks' Democratic Party colleagues in the Senate let his tax relief bill die an ingnominious death.

The bill will fly out of the House like a rocket off the launching raft on Crystal Lake on the 4th of July.

And then it will die away like the phosphorus and other chemicals exploded during an Independence Day celebration.

There will be no vote in the Illinois State Senate.

Nothing will be left but smoke.

Local tax districts will continue to ask for as much money as they are allowed to request by law and our taxes will continue to increase, even though the value of our property is declining.

If there are elected officials on boards that levy taxes brave enough to go to taxpayers’ side, here’s my suggestion:

Move to amend your tax district’s levy to replace the suggestion from the employees or lawyers

(which undoubtedly will be crafted to bring in as many tax dollars as possible) with

the “amount the McHenry County Clerk extended last year.”

The specific number can be put in later.

You don’t really have to worry about not having the number.

Odds are good you won’t even get a second to your motion.

Once elected, almost all board members forget that they represent taxpayers.

And once again Springfield politicians will have done what they do best:

Raise expectations for constituents,
who will see them go up in smoke as local governmental tax districts prepare to burn through more recession-dimiinsished taxpayer dollars.

There is widespread misunderstanding about the tax process. Today, we won’t look at the assessment part.

Instead we will examine what tax districts do to pry more money out of our pockets.

News stories talk about levies this time of year.

They are important, but not nearly as important as they are made out to be.

What tax districts almost uniformly do is levy, that is request in an ordinance, not what they expect to get, but an amount that is high enough to get the maximum amount of money allowed under the Property Tax Cap law (called PTELL by those who consider themselves in the know).

So, how does a local government figure out how to maximize its tax take from you.

The Illinois Department of Revenue publishes the increase in the Consumber Price Index each year. The percentage increase determines the amount of new money that tax districts can extract from real estate taxpayers.

Let’s use McHenry County government as an example.

The levy being proposed for next year is $78,809,995.

Last year the levy was $77,807,910.

So the levy, that is the request for money is up 1.3%.

Sounds modest, doesn’t it?

It’s even less than the increase in the CPI, which you can see in the Illinois Revenue Department table above.

The increase in the Consumer Price Index was 1.5%.

The amount the County Clerk requests the County Treasurer to collect is called the “extension.”

This requested amount takes into account the Tax Cap’s limits, which are applied to the amount collected the year before.

If deflation continues, eventually statutory tax rate limits will prevent tax districts from increasing their extension without a tax hike referendum

Will the two McHenry County Board Democrats try to cut the levy this year to match Democratic Party State Rep. Jack Franks' legislative proposal to prevent local governments from getting more money in years when assessments decline?

For McHenry County government, the extension this year was $76,847,205.11.  Almost all of it will be collected.

Do the division and you will find that the levy being considered by the County Board this year is 2.55% higher than last year’s extension.

That means county government will be able to collect the maximum amount allowed by law.

So, one can expect one’s county tax bill to increase the maximum allowed by the Tax Cap, 1.5%.

Don’t let any of the County Board members get away with telling you that they are lowering taxes.

It’s worth mentioned that if State Rep. Jack Franks’ Tax Cap amendment bill is passed, the county would receive the same amount it got (not 100% is paid, so the word “got” is a tiny bit of an exaggeration) this year.

The County Board could, of course, take the lead and cut its budgeted levy by $1,963,000–about 2.5%–and local property owners would see about the same tax bill than last year.

Someone could make a motion by substitution to the motion to approve the levy as presented to make the levy the same as last year–$76,847,205, rounding to the nearest dollar.

Let the County Board vote on that and see who votes “Yes” and who votes “No.”

Then, make the budget fit the levy.

When I was a baby budget examiner in the U.S. Bureau of the Budget, one of my hardest lessons involved making the Small Business Administration Budget fit the bottom line dictated by Sam Lawrence, the Section Chief.

He was a bright guy who, upon considering hiring me off the Management Intern list, asked by to-be Senior Budget Examiner Roger Adkins, if he could work with a Goldwater Republican. No matter that my mother and I had supported Scranton in 1964. It was my father who supported AU H20. (That was his bumper sticker.) Roger said he could work with anyone.

The SBA budget didn’t have a lot of lines. I tried to figure out what was needed in each of them and for at least two times I exceeded the bottom line laid out by Mr. Lawrence.

The third time he said, “You don’t understand. I don’t care what those numbers are, but they must add up to this bottom line.”

All of a sudden I got it.

And so can the Finance Committee, if the County Board dictates a lower bottom line.

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I have noted previously, that the two County Board Democrats have voted against raising the salaries of McHenry County officials.  If they added a second financial issue to their bag of arrows, they would be able to make the case that local Republicans are the “big spenders.”

That, of course, would fight with the Democrats’ state and national images, but it might make for an interesting campaign.

A press release from Grafton Township Supervisor Linda Moore:

Residents of Grafton Township now have the ability to show the members of the township board how they would cast their vote regarding the township tax levies for the Township and Road District. By visiting the township website, www.graftontownshipsupervisor.us residents can vote on whether they want to see the board increase the levies, decrease the levies, or levy for a zero change in the levy.

The place on the page to register your opinion looks like this.

“As the Township Supervisor, I will use this poll to determine how I will vote when this matter comes before the board. I hope the rest of the board will also consider the public’s response when they determine their vote sometime in December. The question that is being posed is as follows:

If you were on the Grafton Township Board, how would you vote regarding the Levy? (A Levy is the use of government authority to impose or collect a tax.)

1. I would increase the levy.
2. I would decrease the levy.
3. I would make no change to the levy.

The website has had more than 15,000 hits to date. It includes township financial information, press releases, upcoming township events, meeting video and audio recordings, food pantry hours, financial assistance information and downloadable forms, a sign-up form to receive emails from the township, etc. Please visit here and vote on the

• increase or
• decrease

of township taxes.

State Rep. Roger Eddy. Photo credit States News Service.

No doubt which side of the taxpayer Downstate Republican State Representative Roger Eddy is on.

It’s not the taxpayers’.

This is the legislator who wanted to loosen the Real Estate Tax Cap in the early 2000′s in order to allow local governments, including the one for which he serves as School Superintendent, to pry more money out of citizens’ pockets.

As I remember the bill, Eddy wanted to tie the rate of increase not to the Consumer Price Index, but to an index that pretty much measured public employee salaries.

That would, of course, set up circular process whereby high teacher salaries would have triggered the ability of schools and other local governments to get more taxes than would be allowed under the CPI.

That was the case in four out of five years I looked at back then.

Well, now double-dipper Eddy has filed a couple of requests for notes that will slow down the consideration of House Bill 3793, as you can see below:

Requests for notes like this are usually an attempt to slow down the legislative process.

Not only the Township Officials of Illinois, but the more powerful Illinois Municipal League has lined up against State Rep. Jack Franks’ bill to keep property taxes constant in years when real estate assessments are declining.

Under the way that the 1991 Property Tax Cap works, local schools and other tax districts are allowed to obtain the real estate taxes they extracted last year, plus the increase in the cost-of-living, as defined by the Consumer Price Index.

Since property values consistently exceeded the CPI until the late 2000′s, County Clerks had to cut tax rates in order to make certain that tax districts did not get more than the law (acronym: PTELL) allowed.

That drove tax rates down well below their statutory maximum.

Once assessments grew less that the CPI, with tax districts still asking for what they got last year, plus the inflationary increase, County Clerks complied by hiking their tax rates, which were still under the maximum limit.

Back to the Illinois Municipal League. Here’s what’s on the front page of the organization’s web site:

House Revenue Committee Votes to Take Taxing Power Away from Communities

On October 25, 2011, the House Revenue and Finance Committee voted to adopt House Amendment No. 1 to HB 3793 (Representative Franks, D-Harvard) This legislation amends the Property Tax Extension Limitation Law (PTELL) to provide that the capped property taxes may not be adjusted for inflation if the total equalized assessed value of all taxable property declines from the previous year.

If this legislation were to pass, it would be an explicit acknowledgment by the General Assembly that local government should not be allowed to raise enough revenue to cover any increase in the cost of providing service. The bill would limit revenue collections without limiting the costs of salaries, pensions, fuel, and other goods and materials necessary to provide public services.

Please contact your Representatives at their Springfield offices and ask them to OPPOSE HB 3793.

As with the Township Officials of Illinois, the Illinois Municipal League lobbying is financed by your tax dollars.

The lobbying arm of Illinois Township Officials is urging local members to call their legislators to ask them to oppose two bills.

One takes money from a state subsidy that should have been phased out decades ago. It looks like an income tax to business. Actually, it is an income tax, but it was levied when the hated Personal Property Tax was lifted from business in order to replace the lost local tax.

I wish I had been in office so I could have tried to keep the total amount replaced from increasing. It should have been a tax whose negative impact on business would have decreased over time as the rate needed to raise the lost local tax revenue would have gone down.

In any event, the Township Officials of Illinois object to diverting part of that replacement tax to pay the salaries of Regional Superintendents of Schools.

The lobbying group also opposes Jack Franks’ bill to prevent increasing local governments’ tax take when property values and, hence, real estate assessments are going down.

Here is the email of lobbyist Bryan E. Smith, Executive Director of TOI:

• House Bill 3828 was introduced and would divert money from the Corporate Personal Property Replacement Tax Fund to pay the salaries and benefits of Regional School Superintendents. TOI is OPPOSED to a diversion like this that would take money away from local governments, including townships and road districts. Late yesterday the bill was called in the House Revenue and Finance Committee and was passed out on a strictly party-line vote despite the opposition of virtually all local government groups. WE NEED YOUR HELP NOW! We need to have everyone call their State Representative(s) NOW and ask them to vote NO on House Bill 3828 when it is called for a vote in the House. It is time the State stop diverting money that is designated for local governments.
• Another bill we have been closely following is House Bill 3793. This bill amends the Property Tax Extension Limitation Law (PTELL) to prevent a taxing district (Townships and Road Districts included) from capturing the CPI increase for its extension limitation if the district’s total EAV is less than the previous levy year. TOI OPPOSES this bill because it would reduce available property tax revenues for Townships and Road Districts. PTELL (Tax Caps) already limits (in those counties that have tax caps) the ability of Townships/Road Districts to capture all available growth during good economic times. It would be very unfair to also prevent a township/road district from capturing minimal cost-of-living increases that are available.

Naturally, tax dollars finance the Township Officials of Illinois.

Don’t you wish you could get tax dollars to finance your lobbying of the state legislature?

Jack Franks

A Jack Franks’ bill that would prevent most local governments from getting more money in year two than they did in year one if real estate assessments are declining flew out of the House Revenue Committee 6-1 Tuesday.

There is a caveat in the legislation.

Voters could approve a higher percentage increase by referendum.

This is bill that will be fought tooth and nail by all non-Home Rule units.

Home Rule units are those municipalities with over 25,000 people, plus those, like Barrington Hills, where local voters have approved the Home Rule status by referendum. Cook County is also a Home Rule unit.

Home Rule units have no taxing limits.

All the other tax district, schools, parks, counties, small villages and cities, townships, etc., would have their tax take capped under this proposal

The bill has been placed on “Short Debate,” which means only two people may speak on each side of the issue.

You can safely assume that more will want to talk.

Proponents to make points for the taxpaying public and those who view their role as primarily protecting the self-interest of schools and other tax districts to defend them.

My guess is that the bill will not clear both houses of the Illinois General Assembly.

And, if it does, who knows what this on-again, off-again progressive government will do. He owes an awful lot to public employee–including teachers’–unions and less money from taxpayers potentially means less money for them.

With State Rep. Jack Franks about to get lots of publicity about keeping real estate tax bills down, it’s worth looking at the underlying problem.

This is the third or fourth article I have written on the subject.  It’s a complex topic, so worth repeating.

After the Tax Cap (PTELL to insiders) was passed, real estate inflation exceeded the increase in the Consumer Price Index.

I remember the year before the law took effect in 1993, Crystal Lake High School District 155 took the entire 17% hike in property value out of our pockets. The CPI increase, of course, was much lower.

After the the Property Tax Cap took effect, the County Clerk’s Office had to impose limits on the increase in the

(Home Rule cities, those over 25,000 automatically, e.g., Crystal Lake, Algonquin, Lake in the Hills, and those where citizens have approved Home Rule status in a referendum, e.g., Barrington Hills, can get as much money as their elected officials want. Indeed the main reason that cities like Woodstock and Huntley will have a special census as soon as they think they have crossed the 25,000 person level will in order to get revenue not otherwise available. See most recent U.S. Census results for McHenry County municipalities here. Woodstock is 270 people short of the magic number of 25,000; Huntley – 707.)

Bill Vaselopulos, the long-time and quite knowledgeable tax rate guy for the Cook County Clerk, was quoted in an article about a little over a week ago about how the system works.

Reporter Lisa Donovan summarized Vaselopulos’ explanation well:

“This year, a drop in assessed values of homes, along with a drop in the state equalizer, drove the tax rates up in most parts of the county to meet the demands of the taxing districts.”

Note how she uses the word “demands” to describe what tax district officials do.

I mention this because it is so rare that reporters present tax information from a taxpayers’ point of view.

Reporters would usually use the word “request,” not “demand.”

School board, special district and municipal officials are not forced to ask for more money.

They could ask for the same amount they are getting in the current year.

But, I don’t know of any tax district under the tax cap whose elected officials did not try to capture the maximum amount of money allowed under the tax cap, in other words, the entire 2.7% increase in the CPI allowed by law.

McHenry County property owners have already paid that increase…assuming they had enough money set aside to pay on time.

Next year, greedy tax districts will only be able to extract 1.7% out of homeowners’ pockets. (For a history of CPI’s since the Tax Cap took effect, click here.)

That, of course, means tax bills will go up next year.

Newly-appointed State Rep. Kent Gaffney sends this press release:

Gaffney wants tax relief for homeowners

Property tax bills should reflect declining home values

Wauconda, IL… In response to increasing property tax bills in the collar counties, State Representative Kent Gaffney (R-Lake Barrington) has signed on to House Bill 3793, a measure that would change Illinois’ Property Tax Extension Limitation Law.

Gaffney says that since he was recently sworn in a State Representative, he has received many phone calls from constituents upset that their property tax bills increased despite the fact that their property assessments decreased.

Kent Gaffney

“Written in Illinois’ tax code is a ‘cap’ on tax levies, either 5% or the rate of inflation,” said Gaffney.

“Back when this was first introduced, the housing market was in the middle of a bull market and it saved homeowners thousands of dollars from increasing assessments.

“Now that everyone’s assessment is going down, this ‘cap’ is being used as a loophole by taxing bodies to increase property taxes.”

The Property Tax Extension Limitation Law (PTELL) limits local taxing bodies from increasing their tax levies each year at 5% or the rate off inflation, whichever is less.

However, in 2008 when the housing market crashed and assessments went down, taxing bodies began increasing their levies at the rate of inflation, increasing most homeowners’ overall tax bill.

HB 3793 would prohibit taxing bodies from increasing their levies in years that property assessments decrease.

“To me, it is completely unfair for people to be paying higher property taxes when their property values are declining,” said Gaffney. “This legislation will update Illinois’ tax code to reflect the economic reality of the current housing market.”

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The mechanics of why local tax districts, including schools, can raise their tax rates without voter approval has been explained previously on McHenry County Blog:

• “School Tax Rates Soar as Assessment Plunge“
• “Lakewood’s Tax Rate Up Most, Richmond’s Only One Down“
• “Real Estate Assessments Down Almost 10%, Don’t Expect a Lower Tax Bill“
• “The Primal Urge of Government:  Take as Much as It Can“
• “Local School and Tax Districts Not Bragging about Lower Tax Rates“
• “Why Townships Don’t Just Reduce the Amount They Tax“
• “The Skunk, the Meerkats and the Elephant – Part 2“

Virtually unknown is that the McHenry County Clerk's Office applies the law to determine how much each tax district can bill real estate owners. This sign is in front of the McHenry County Treasurer's Office.

A comment from Allen Skillicorn to my article on the Sun City overlapping tax district inequities prompted an explanation of how tax rates are set by county clerks.

Here is Skillicorn’s comment:

With a 1 yr average, I assume the McHenry County portion has lower accessed values right now. How much different is the levy though? Kane County is not known for it’s thrifty ways…

In my opinion the levy is more important than the assessment. Lower the levy, and our bills go down. Raise the levy and bills go up, regardless of values.

Here’s my reply:

There are maximum tax rates set by statute.

However, since the Tax Cap was instituted in the early 1990′s, property values have almost always been higher than the increase in the cost of living. In order to limit the tax take, which is set by the county clerk’s tax extension, that meant the tax rate had to go down.

Some will remember the annual tooting of horns by local municipalities and school districts about how they had lowered their tax rate. It meant nothing, but most young reporters have only a vague understanding of how the property tax works.

Now, with the CPI increasing more than property values, which, as all know, have been decreasing, county clerks have to increase the tax rates in order to give tax districts who over levy the maximum allowed under the Tax Cap.

When a tax district reaches a tax rate that is the maximum allowed by law, that tax district will not be able to get an increase in tax take equal to the increase in the CPI.

At that point the tax district in question will have to economize as family units do when their income does not increase as much as the rate of inflation.

Then, tax district boards will have to get voter approval to get more money.