"For the first time since Illinois created a cap on property tax hikes more than 30 years ago, local governments can seek the maximum 5% increase this year.
Because of the tax cap instituted in 1991, most local governments can’t increase the amount of property taxes they receive from one year to the next by more than the rate of inflation or 5%, whichever is lower. Until this year, inflation had always been the lower figure and averaged 2.2% since 1993, reaching more than 4% only once in 2008.
But a 7% growth in the inflation rate from December 2020 to December 2021 means local governments can boost their property tax haul to the maximum allowable level this year, Illinois Department of Revenue officials said. This rate hike affects property taxes paid in 2023.
That could translate to more than a billion dollars combined in additional property tax revenue for local governments throughout the state if elected officials seek the maximum amount when they submit requests at the end of this year.
“We don’t know what the taxing bodies are going to ask for, but we assume they’ll ask for the max,” said John Dabrowski, Bloomingdale Township’s assessor. “We don’t have a crystal ball, but what I can say will happen if everyone takes that 5%, our phones will be blowing up. That I can say.”
He expected an influx of assessment appeals if residents see much larger tax bills.
The state’s Property Tax Extension Limitation Law, or PTELL for short, applies only to local governments that don’t have home-rule powers — generally larger cities, villages and counties have greater autonomy. Home-rule authority allows those taxing bodies to increase property taxes to whatever level they choose. School districts, which derive much of their annual revenue from property taxes and receive the largest share of them, do not have home-rule authority.
“The budget includes a 5% increase,” said Dale Burnidge, director of financial operations at Elgin Area School District U-46, the state’s second-largest school district. “The 5% increase is only on the capped funds, but the debt service portion of the tax bill will decrease, so the net increase to taxpayers will be less than 5%. We will have more details when the tax levy is presented in November.”
In 2020, the most recent available year with data, local governments throughout Illinois received $33.8 billion collectively in property tax revenue, according to IDOR figures. That was up just 2.9% from the previous year and represented nearly $1 billion more in property tax revenue.
Yet, some financial government experts aren’t so sure that many taxing bodies will seek the maximum increase.
“I think you’ll see most taxing authorities exercise some rational judgment here and go to the level they absolutely need to make sure they’re covering their growth and costs,” said Ralph Martire, executive director of the bipartisan Center for Tax and Budget Accountability. “Most school districts are composed of people who live in the community, so going to the grocery store becomes very uncomfortable if you do something that looks like a grab of your neighbor’s dollars.”
Lauren Hummel, chief operating officer at Palatine-Schaumburg High School District 211 said the school board won’t begin discussing the levy amount until October in anticipation of a December vote.
“The district works diligently to provide an exemplary education for students while operating efficiently and keeping in mind our obligation to taxpayers to spend wisely,” she said.
But Hummel noted two district tax abatements last year amounted to $6 million in “tax relief” to property owners.
Given the effects inflation already is having on taxpayers, some watchdog groups and elected leaders are recommending local governments dip into reserves to offset the need to hike property taxes to the max next year.
“It’s a Catch-22, because taxpayers’ expenses are going higher and governments’ expenses are going higher, and the governments have to raise taxes to pay for it,” said Sheila Weinberg, CEO and founder of Glencoe-based Truth in Accounting. “It does seem unusual that if they have these large reserves, then why do they need to keep raising taxes?”
For years, Democratic state Rep. Fred Crespo of Hoffman Estates filed legislation that would prevent school districts with more than 50% of annual operating expenses in reserve from boosting property tax levies.
“I took a pause this year because when you keep banging your head against a wall, you eventually wonder why,” he said. “I am going to file it again, and hopefully with the rate increase this year, people will pay attention.”
Property values also have increased in many parts of the state, particularly single-family homes, which may cause a shift in the overall tax burden in the coming years, some experts warn.
Gov. J.B. Pritzker is urging taxing bodies to budget conservatively. “Gov. Pritzker strongly urges school districts not to tax property owners to the inflationary cap, and in fact signed into law a measure that helps protect property owners from high inflation,” spokeswoman Emily Bittner said.
Pritzker’s $1.8 billion Family Relief Plan in this year’s budget set aside $520 million to cover property tax rebates of 5% per household, up to $300, this year, starting this month.
Pritzker’s Republican challenger in the Nov. 8 election, state Sen. Darren Bailey of Xenia, said previous tax relief initiatives have not gone far enough. “For too long the political entities have failed to fix the big problems like property taxes,” said Bailey spokesman Joe DeBose.
Bailey is calling for greater transparency in any property tax hike process, including sending notices to residents affected by such increases, requiring estimates of the financial effect on all property owners, public hearings where taxing bodies must explain the necessity for a tax increase, allowing public comment on each proposal, closing the home-rule loophole and requiring all taxing bodies to abide by PTELL.
IDOR will set the 2023 property tax levy rate in January."
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