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clear Property Tax Levy Process

Taxpayers express frustration when they hear of District 64's present financial challenge. How can the schools be strapped for funds, they ask, when property taxes are “going through the roof?” In fact, state law limits the amount of funds District 64 is able to collect from homeowners. So while the value of property assessed in Park Ridge-Niles has been rising 11% or better over the last five years, the increase in property taxes collected by the District has been in the 2% - 4% range.

District 64 depends on local property taxes for almost 80% (about $36 million) of its total revenue. Many homeowners realize this, but suffer from ever increasing taxes in spite of state laws placing legal limits, or “caps,” on the amount that can be collected by District 64. Community members have expressed a variety of beliefs with regard to the present challenge:

  • “Doesn't the school district receive an automatic increase every three years?”
  • “The tax rates stay the same, but the pie gets bigger—right?”
  • “We wouldn't be having this crisis if it weren't for funding cuts and tax refunds given to large corporations.”
Fiscal Year
($ millions)
2001
2002
2003
2004
2005
CAGR2
Average
District1 Revenues
$40.9
$40.4
$43.0
$42.4
$46.0
3.0%
 
Net1 Property
Taxes Collected
$32.4
$32.7
$34.8
$34.8
$36.2
2.8%
 
% of Revenues
79.2%
80.9%
80.9%
82.1%
78.7%
 
80.4%
Notes
1. All Funds
2. CAGR = Compound Annual Growth Rate

A better understanding of the Illinois property tax system will shed light on the financial challenge facing District 64. Each year, the Board of Education must determine the amount of revenue it will need from local property taxes. That requested revenue amount is called the levy. However, the amount actually billed to property tax owners, called the extension, is lower.

Why?

Because the Property Tax Extension Limitation Law (PTELL), popularly known as the "tax cap,” limits the annual levy increase from existing real estate to the lesser of (a) 5% or (b) the growth in the previous year's Consumer Price Index.

According to the city of Park Ridge, single-family home values are rising about 12 percent annually. Meanwhile, increases in the approved extension – the amount billed to taxpayers – have recently averaged about 3%.

Tax Year
2000
2001
2002
2003
2004
Average
Tax1
Extension
Increase
2.8%
5.2%
2.3%
3.1%
3.9%
3.5%
Notes
1. All Funds

There are only three exceptions to the tax cap:

  • Voter-approved bond issuance or a tax rate increase, through a referendum. 
  • Board of Education-approved temporary tax rate increase for limited value, limited purpose bonds.
  • Non-capped assessment on brand new construction. This means that new houses built from complete teardowns can be taxed using the levy rate on their new value, which in Park Ridge can be significant. Because of new residential construction, increases in collected property taxes have been about one-quarter higher than they would have been.

Because state law limits annual extension increases, the District’s property tax revenues are not affected by assessment regulations. That is, the various complicated rules for owner-occupied residences, seniors, and remodeling can affect individual tax bills but do not affect the taxes collected by the District.

Clearly, tax cap legislation has held school tax increases far below property value appreciation – in this sense, the tax cap has succeeded.

However, revenues received from property taxes are affected by the property tax appeal system. Refunds approved after the mailing of tax bills result in unrecoverable revenue losses for the school district. In these cases, there is no way to refigure the tax rate in order to recover this lost revenue. In recent years, the amounts lost by these refunds are almost equal to the gains from annual extension increases.

Fiscal Year
2001
2002
2003
2004
2005
Property Tax
Refunds ($'000)
$988
$886
$1,459
$668
$692
% of Extension1
3.0%
2.6%
4.1%
1.8%
1.8%
Notes
1. All Funds

Given the heavy reliance on property tax revenues, the Board of Education faces two persistent challenges: (1) How to maximize revenues when growth is essentially limited to the inflation rate and (2) How to collect the approved taxes when these are reduced by sporadic homeowner refunds, refunds approved for large taxpayers, late payments, and bankruptcies. The Board also acknowledges the implicit “contract” in the property tax cap legislation: the expectation that the Board of Education and Park Ridge/Niles voters should have regular dialogues about the state of the District's education finance situation and the periodic need for tax rate increases.

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