McHenry County Blog

When there were so, so many tax hike referendums, Libertyville’s Jack Martin had these generic signs printed.

I guess progress is being made.

The Northwest Herald did not endorse the creation of a 337 tax district to funnel $9 million more dollars into carrying for the developmentally disabled in McHenry County. (The 337 designation is from the number of the section in the Illinois statutes that authorizes the referendum to approve the tax.)

There was a time when every tax increase proposal seemed to automatically receive the NWH stamp of approval.

But the paper’s editorial board could not bring itself to recommend a “No” vote.

I can.  You can read why in these articles:

• 11-9-12 McHenry County Board Resolution for 377 Board Tax Hike Referendum Seems to Endorse It
• 3-8-13 Tax Hike Referendum Set for April 8th
• 3-22-13 Campaign Against 377 Board Referendum

I guess taxpayers should be grateful passage of a referendum is required before this ten cents per $100 of assessed valuation tax is imposed.

The majority on the current McHenry County College Board seem bent on borrowing over $40 million to build a health & fitness club, plus almost double the size devoted to classrooms and labs without allowing a public vote.

A email has been sent this morning soliciting parental opposition to State Rep. Jack Franks’ bill to prohibit the collection of more property tax dollars when assessments go down.

Apparently Superintendent Donn Mendoza and School Board President Jeff Mason were not privy to the widespread understanding among state representatives that the legislation was just another “headline” bill to enhance the re-election chances of Democrats who voted to hike state income tax rates by 67%.

As one suburban Republican joined at the hip with the Illinois Municipal League put it, “It’s all for show.”

In any event, below is the use of District 47 tax dollars to try to get you to contact State Senator Pam Althoff and State Reps. Mike Tryon and Mike Gaffney to allow the school district to be able to collect more money (3% next year), even though the value of your home has tanked.

It should be noted that Tryon and Gaffney have already voted for the bill.

Donn Mendoza

Dear District 47 Families:

Crystal Lake School District 47 had been closely following recent legislation (Amendment 6 of Senate Bill 2073) approved in the Illinois House of Representatives on February 21, 2012, which, had it passed in the Senate and been signed by Governor Quinn, would have had a significant impact on our ability to provide high quality educational services for students for whom we are responsible.

Jeff Mason

This is the third time in the past few weeks that this sort of law has been proposed.

Based on that, there may be additional attempts in the future.

We wanted to make you aware of the potential impacts, as we see them in District 47, were this type of legislation to eventually become law.

Currently, local taxing authorities, such as District 47, are limited to increasing taxes by the rate of the Consumer Price Index (CPI) or 5%, whichever is less.

Simply stated, the Franks Amendment to Senate Bill 2073 would have capped the ability of local taxing bodies, such as District 47, to raise the tax rate when property values decline unless approved by voters.

Effectively, the legislation would have capped the increase to 0%.

District 47 has lost over $8.6 million in revenue since the 2006-2007 school year with interest income down $2.3 million and State revenue down $6.3 million.

New property, which adds to the district property tax revenue, is down from $54 million in the 2003 tax year to $7 million in the 2011 tax year.

Since the current economic crisis began, our school district has managed its finances by cutting approximately $6.2 million in expenditures.

By the end of the 2012-2013 school year, we will have:

• Eliminated 72.5 positions through attrition and layoffs
• Frozen salaries
• Eliminated or reduced benefitsRestructured programs and contracts to secure savings
• Utilized $6 million in reserves to weather the loss of revenue in order to maintain our current level of programs and services

Should this type of proposed legislation eventually become law, we estimate given the current economic climate, that District 47 would have to initiate a discussion regarding

• the possibility of closing a school,
• significant staff layoffs thus further
• increasing class sizes and would consider a reduction in programs and services which have become part of District 47’s culture. Examples of these programs include but are not limited to Art, Music, Health, Clubs and Activities, Extended Curriculum, Reading Recovery, Band, etc.

As part of the community, we understand the property tax burden being placed upon everyone in a time of declining home values.

However, we cannot pull back from investing in our children’s future.

We believe that legislation such as Amendment 6 to SB 2073 damages the ability of local schools to provide quality education and would potentially be devastating to District 47’s students.

We encourage you to contact your state senator and state representative to discuss this. Local legislators include

• Representative Mike Tryon-mike@miketryon.com,
• Senator Pamela Althoff- Pamela@pamelaalthoff.net  and
• Representative Kent Gaffney- repgaffney@gmail.com.

Sincerely,

Donn P. Mendoza, Ed.D.
Superintendent of Schools
dpmendoza@d47.org

Jeff Mason, School Board President
jmason@d47.org

= = = = =
Although State Rep. Jack Franks and Dan Duffy represent parts of District 47, their email addresses were not included in the message.

When I was over  at my state legislators’ offices Wednesday, I was complaining passionately about the way the Crystal lake City Council wasted money on changing the streetscape of part Route 14.

That’s a term I first ran into in Algonquin.  Some planner used it.

The Virgina Street Tax Increment Financing District was explained at a Crystal Lake Kiwanis meeting before it was passed, but I missed the meeting.

Wish I hadn’t.

I might have picked up some advance notice of the profligate spending the new TIF District would bring.

I have previously published examples of waste on Route 14.

I showed you the old and the new “decorative” street lights.

Pam Althoff pointed me to a thrid monument to the Crystal Lake City Council near the Crystal Lake Motel.

Before they were uniform.

Now there’s a mishmash.

The City Council folks won’t stand for that, I surmised.  They will take more commercial property off the tax rolls of the school, park, Conservation, township, junior college and county tax districts.  They’ll form another TIF and borrow money to make the area from Pizza Hut to the Vulcan Lake TIF look “pretty,” too.

Then, I saw the cemetery monument on Virginia Street near the Pizza Hut.

But that wasn’t all.

I found another one at the northern end of the TIF District, across from Kwik Kopy.

While complaining how I, a resident of Lakewood and Althoff, a resident of McHenry, and everyone else in McHenry County would be forced to pay for Crystal Lake extravagant spending, she told me there were more than two pillars.

“What!?” I exclaimed, inquired.

She said there was another one just down the street from her office.

When I drove home, I saw it, right before the Crystal Lake Motel.

I can’t help but wonder what they cost.

There other similar monuments in Crystal Lake.

They are in front of Crystal Lake Central High School.

The Class of 1924 gave twin pillars in front of Crystal Lake Community High School.

They, however, were not financed with tax dollars over a 23-year period.

The CLCHS Class of 1924 paid for them.

They were a graduation gift to the Crystal Lake Community High School.

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.

= = = = =

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.

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.

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.

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.

There are three types of school districts in Illinois--Unit Districts, which educate K-12, Grade School Districts (K-8), and High School Districts (9-12).

School districts take most of our property tax dollars.

It is fair to compare unit districts to unit districts.

These are how all schools were originally.

During the run-up to the 1870 Constitutional Convention, there was tremendous borrowing by local and state governments. It was the era of canals, but the railroads came quickly and made them unprofitable.

And that left lots of debt.

There were two reactions embodied in the 1870 State Constitution:

• state government was prohibited from selling bonds without passage of a statewide referendum
• local governments were prohibiting from borrowing more than 5% of their assessed valuation

Eventually, local tax districts like schools decided that 5% limit was too strict.

They asked the General Assembly to allow them to create more tax districts so they could borrow more.

By splitting unit districts into dual districts–grade and high school districts–an area could borrow twice as much money.

You can see what parts of McHenry County took advantage of that end run around the 1870 Constitution.

If you add a grade school rate to its high school rate, you will generally see a higher total tax rate than for surrounding unit school districts.

Because a high school teacher, State Rep. Gene Hoffman (R-DuPage County) pretty much wrote the 1973 Resource Equalizer State Aid to Education legislation, high schools ended up with a larger share of the financial assistance from state government than elementary schools.

That pretty much explains why high school teachers are paid more than grade school teachers…unless the elementary school teachers are in unit districts. In the latter case, the pay is equalized across grades.

If you look at the changes in the tax rates above and realize that probably all school districts are under their statutory tax rate limit, the reason comes to light.

Tax districts are limited by the Property Tax Cap (PRELL, as the professional tax folks call it) in what they can take from taxpayers.

They can get what they got last year, plus any increase in the Consumer Price Index, plus assessed valuation resulting from new growth or the end of a Tax Increment Financing district.

Virtually all tax districts levy to the max, arguing that, if they don’t they will “lose” that money forever.

By their very use of that rhetoric, one can see that they are not on the taxpayers’ side.

If they retained a taxpayers’ viewpoint, the “lost” tax dollars would be described as money the taxpayers would “save.”

So, most follow the taxeaters’ primal urge and tax to the max.

You will note that of the high school district that increased its rate the least was Crystal Lake’s.  Thanks might be offered to the Grafton-Algonquin-Nunda-Dorr Community Advocates. (GAND for short).  They pushed for not taking the max.

And the District 155 School Board actually listened and followed GAND’s advice.

The district whose rate increased the most was Huntley School District 158.  That’s because its board took as much as was possible.

Grafton Township, where most of the district’s assessed valuation is located, saw property values plunge more than anywhere else in McHenry County.  The housing bubble of the 1990′s and beyond just burst.

This is an interactive map in the original. (See link below.) Just click on an area and you will see how property values fared over the last year.

According to a Chicago Tribune analysis, prices decreased 14% in just the last year.  Note that the Barrington area had a similar drop in home values and its tax rate jumped almost as much as Huntley’s

Remembering the reciprocal formula, when assessed valuation goes down, tax rates must go up to raise the same amount of money.

Districts used to brag that their rates were going down.  What they didn’t tell you was that was not because of any local decision.  It was mandated by the 1992 Property Tax Cap legislation.

You will see no press releases from school districts or municipalities this year, just as you didn’t last year.  As was reported yesterday, the tax rates for all cities and villages in McHenry County, but Richmond, went up.

As far as grade school rates go, Crystal Lake’s increased the most–13.9%.

Richmond-Burton High School District 157 won the “prize” for increasing its tax rate more than any other high school district.

A funny thing happened on the way to the end of the calendar year.

The Consumer Price Index has been decreasing.

It’s still up 1.1% for the last twelve months.

That is probably enough to earn an

from many tax district officials.

Why?

The “Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average” is the percentage increase (until now) upon which the property tax cap is based.

This coming year, tax districts are allowed an increase in their “tax take” of 4.1%, plus new construction.

But look what is happening since August. It’s on the table below:

The cost of living was the same in September as it was in August.

From September to October, however, it decreased a seasonally adjusted 1%.

And from October to November, the seasonally adjusted CPI fell 1.7% more.

That’s good news for consumers, but very bad news of tax districts.

Will the CPI fall more than 1.1% from November to December?

Will the schools, non-home rule villages, junior colleges, townships, fire protection districts, park districts, etc., get no increase whatsoever in property taxes collected in 2010?

Will their friends in the General Assembly change the tax cap law?

Will that offer legislative challengers the opportunity to label supporters of gutting the tax cap the title of “tax hiker?”

Stay tuned for the “sturm und angst.” (And, no, I don’t know how to lay in an umlaut above the “u” in “sturm.”)

And the tip for this story? It came from CPA and Nunda Township Supervisor John Heisler.

For those in the Chicago metropolitan area, here is a press release telling what happened locally in the last month.

A funny thing happened on the way to the end of the calendar year.

The Consumer Price Index has been decreasing.

It’s still up 1.1% for the last twelve months.

That is probably enough to earn an

from many tax district officials.

Why?

The “Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average” is the percentage increase (until now) upon which the property tax cap is based.

This coming year, tax districts are allowed an increase in their “tax take” of 4.1%, plus new construction.

But look what is happening since August. It’s on the table below:

The cost of living was the same in September as it was in August.

From September to October, however, it decreased a seasonally adjusted 1%.

And from October to November, the seasonally adjusted CPI fell 1.7% more.

That’s good news for consumers, but very bad news of tax districts.

Will the CPI fall more than 1.1% from November to December?

Will the schools, non-home rule villages, junior colleges, townships, fire protection districts, park districts, etc., get no increase whatsoever in property taxes collected in 2010?

Will their friends in the General Assembly change the tax cap law?

Will that offer legislative challengers the opportunity to label supporters of gutting the tax cap the title of “tax hiker?”

Stay tuned for the “sturm und angst.” (And, no, I don’t know how to lay in an umlaut above the “u” in “sturm.”)

And the tip for this story? It came from CPA and Nunda Township Supervisor John Heisler.

For those in the Chicago metropolitan area, here is a press release telling what happened locally in the last month.