County Legislative Committee Considering Tax Cap Modification

Valley Hi Cash on hand 2006-13

The build up of “reserves” in the Valley Hi enterprise fund since 2006.  The annual budget for Valley Hi is $10 million.

You may remember that McHenry County Blog revealed that the County’s nursing home, Valley Hi, has $35 million in the bank.  That’s as of the end of November, 2013.

Now, it’s $36 million.

A lot of that is clearly surplus and, in my opinion, should never have been taxed.

Valley Hi has a quite competent administrator, Tom Annarella.

He balances the $10 million budget.

$10 million out.

$10 million in.

Yet the McHenry County Board has kept taxing us more over the years.

“Why?” you might ask.

The reason is the Property Tax Cap.

If the County lowers the amount collected to nothing, the tax is dead.

Under a perverse and unexpected side effect of the Real Estate Tax Cap, the amount collected in year 2 can only be what was collected in year 1, plus the increase in the Cost of Living.

The amount of tax requested for Valley Hi has gone from $6 million to 5 1/2 million to 4 3/4 million.

Next year, the plan was to ask for $3 million.

Unless the County can figure out how to spend that $3 million, the $36 million balance in the bank will increase next year.

Valley Hi from distance

Valley Hi

The Administrator of Valley Hi stated that there is $15 to $20 million too much in the fund.

My guess is that his estimate of the surplus is too low, but let’s go with it.

So, how can the taxpayer be protected?

How does one give tax relief to the taxpayer?

My suggestion to several county officials has been to think outside of the box.

Instead of looking the law as it is, figure out how it would have to be to allow the surplus to diminish.

Ask local legislators to change the law.

If I could write the law, I would allow an immediate rebate of $20 million.

That would allow $16 million or so to sit idle.

$10 million would be earmarked for the worst case scenario of the state and Federal government’s providing no reimbursement.

The rest would be set aside for capital improvements.

There could be political cover for this.

Think of how those running for office in 2016 could brag about having cut taxes.

So, how does one meet the goal of some county officials to have the ability to levy the tax approved by the voters without another referendum and give the surplus millions back to taxpayers?

Valley Hi Rerf Questoin 11-2002

The 2002 ballot question.

I don’t know the answer, but the subject seems to be up for discussion at the Thursday morning (8:30) meeting of the Legislative Committee.


County Legislative Committee Considering Tax Cap Modification — 14 Comments

  1. This is a brilliant observation which eluded us all.

    The solution may be the key to reining in runaway school district levies as well.

    As a taxpayer, I assumed that managers of tax money had the opportunity to annually calibrate amounts demanded from taxpayers, up OR down.

    You are pointing out that stewards of nursing homes and schools and other community services are hogtied in this way, and actually feel compelled–mandated– to raise levy every year.

    The solution could incorporate an ’emergency access’ to funds which needs to pass a second check-and-balance at municipal or County level?

  2. Jack Franks is the State Rep for some or all of the Valley Hi taxing district?
    Certainly Jack Franks the lawyer can figure out how to solve this problem of Valley Hi having more money than it wants or needs?
    Just think of the headlines.
    Jack Franks and Cal Skinner collaborate to save taxpayers money.

  3. In New Jersey, voter approval was previously required for school budgets, but a new law in 2010 or 2011 allowed districts to opt out of that process.

    But even prior to that the turnout wasn’t great because most people don’t understand school district budgets.

    Most school districts only want more money.

    Sometimes there are legitimate reasons for that, sometimes not.

    They want to tax to the max not because they are compelled to, but because they want to.

    School boards typically claim they don’t want to lose the money forever (they don’t worry about saving
    money forever).

    School districts typically complain they don’t have enough revenue.

    Teacher unions typically complain public schools need more money.

    No matter how much money they have, public schools and teacher unions typically complain there is not enough money.

    Remember, the biggest expense in most school districts is pay and benefits, and Illinois teacher pay and benefits is higher than neighboring states.

    One should compare similar areas, such as urban, suburban, and rural when doing such comparisons.

    The unions are very crafty at how to get more money.

    One frequently used tactic is lower class sizes.

    What parent wouldn’t want lower class sizes so their kids get more personalized instruction?

    Well there are many factors that go into better instruction and as the system sits now in Illinois, lower class sizes is often not the best use of taxpayer money to achieve better instruction.

    Depending on the class size, teacher, district, type of class, etc. there are exceptions.

    Lower class size is teacher union code for more teachers and thus more dues paying members.

    Teacher unions almost always want lower class sizes for that reason.

    In most school districts there are no knowledgeable or organized taxpayers watching how money is spent.

    There are exceptions.

    One exception is the taxpayer group in Crystal Lake – Grafton, Algonquin, Nunda, Dorr Community Advocates (GANDCA) – which achieved some concessions from the Crystal Lake / Cary / Fox River Grove high school district 155 school board.

    Also, if legislators can write a law for a union leader to substitute teach for a day to qualify for a teacher union pension more lucrative than whatever pension he would have otherwise received, certainly they can write a law to address the Valley Hi situation.

  4. I look at this as a conciliatory gesture.

    Here is a wonderful face-saving opportunity for managers of public money.

    If they reject the chance to craft meaningful governors on the amount of money to which they are granted access and control, we taxpayers can revert to cynical distrust and disapproval.

    At least we will have a quantifiable documentation of common sense solutions and who is resistant to such solutions.

  5. The correct answer is: DUMP THE LEVY COMPLETELY!

    Quit asking for another friggin law!!

    If the Nursing Home needs money and it is run by the County, use money from the General Fund!!

    Eliminate this tax which is not needed instead of doing what Progressives are soooo good at: FINDING WAYS TO SPEND TAXPAYER MONEY!!

  6. Mark

    The union will just fund supporters election with confiscated (from the teachers) donations.

    The problem vanishes money spent NO problem.

  7. Seems logical a taxing district which has more money than it wants, with appropriate checks and balances, should be able to send that money back to the taxpayers.

    Every once in awhile you come across a taxing district with a hoard of excess cash with no plans on how to use it.

    Oak Park River Forest High School District 200 comes to mind.

  8. We should give Valley Hi credit where it is due. Most schools and other taxing bodies invent reasons to spend surplus cash, to justify ever- escalating budget demands. Valley Hi has not done this.
    This is a really important opportunity to brainstorm together for solutions which may benefit all of us.

    What are the components of a good resolution?

    1. If a taxing body lowers its levy one year, but finds it needs money in excess of PTELL limits in subsequent years, there must be a mechanism to obtain that money (with provisional cap: not to exceed the amount levy might have been if maximum levy had been obtained in all intervening years? This would ensure that the taxing body is losing nothing by failing to ‘tax to the max’ any given year).

    2. There would need to be protections for taxpayers against spikes and volatility of tax rates. Also there would be temptation for other taxing bodies to ‘fill in the gap’ and overspend if they are aware of decreased levies by others.

    3. Perhaps financial incentives could be offered for budget- cutting measures? A leader like the Valley Hi Director should have incentive and reward for such excellent results. If schools had such incentives, perhaps individual teachers would come up with novel cost saving ideas.

  9. Whatever the solution keep it as simple as possible so voters understand it and can remember it.

    Too many verbose complicated laws in Illinois.

    To that extent clawbacks in subsequent years after a tax reduction, and bonuses for year over year budget reductions, might have unintended consequences, so that would have to be carefully thought out, not to mention would make the law more complex.

    Thanks Tom Annarella for doing his job.

    Here’s the 2002 and 2003 Valley hi referendums.

    2002: Proposition to levy and collect a tax (not to exceed .1%) for building, maintaining and operation a county nursing home.

    2003: Proposition to levy and collect a tax not to exceed .025% for Social Services for Senior Citizens.

    Both passed.

  10. Referenda which passed when times were better might not pass today.

    I voted yes on both those referenda in ’02, and don’t believe I was alone in my naive interpretation: that only as much money as was needed would be taxed.

    And I thought need was defined by need of recipient, not need of administrative Boards to overtax due to a systemic snafu.

    Now, I will never vote for another spending referendum again.

    There is no possible method for practice of prudent fiscal stewardship of public funds within Illinois government.

  11. Valley Hi had a budget of about a million a year in the old building .

    We were told the new building would be more efficient.

    I was not a believer then are you now?

  12. I think efficiency means optimal deployment of resources at hand.

    Medical reimbursement characteristics have changed a great deal this decade.

    I cannot venture an opinion without more research of that question.

    But if the question is whether the County should be subsidizing a competitive business in elder/ rehab healthcare industry my answer would be no.

    Unless, contrary to current conditions, the residency of the home could be restricted to County residents ( whose tax dollars have been paying these subsidies all these years).

    Furthermore, the point recently highlighted in this Blog about the inability to lower any levy (ever) due to unintended consequences of PTELL illustrates the need to obtain much more information before ever voting yes for new spending projects.

    Promises of new efficiencies can never offset the crushing burdens inherited when passing spending referenda.

    Taxpayers can always be polled again, with the same question but more detailssupplied: to levy and collect a .1% tax, whether needed for operations and maintenance and building or not, in perpetuity, for a nursing home not restricted to County residents?

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