DANVILLE — City officials are taking advantage of recent police and fire pension reforms at the state level and pulling more than half a million dollars from other city funds, like sewer and solid waste, to deliver a second consecutive property tax decrease next year.

It would be a 2 percent reduction in the property tax levy next year and less than a 1 percent decrease in the city's property tax rate, according to the proposal Mayor Scott Eisenhauer presented Tuesday.

The owner of a $100,000 home would see less than $1 in savings on the city portion of his property tax bill next year.

According to the plan, the city would ask for $6,617,974 in property tax revenue, $137,709 less than the $6,755,683 that property owners paid to the city this year. The city council must approve the tax levy by Dec. 30.

Even as city officials anticipate another decline in the city's equalized assessed valuation, they are asking for fewer property tax dollars partly because the city's fire and police pension costs will decrease for the first time in six years, thanks to changes in state law.

The city's property tax pays for police and firefighter pensions in addition to other city employee benefits, bond and interest payments and the Danville Public Library's tax levy.

Recent changes in state law allow police and firefighter pensions to be funded at 90 percent rather than 100 percent, and the year of amortization was moved from 2033 to 2040.

Eisenhauer said the city could make the largest reduction in its police and fire pension costs by taking advantage of both changes, but city officials want to continue funding at 100 percent but still take advantage of the later amortization date.

Eisenhauer said the city is already financially burdened, because it did not fund police and fire pensions at 100 percent many years ago. The city's current annual obligation is about $274,000 for the police pension and $368,000 for the fire pension, but the city owes another $1.17 million for police and $1.54 million for fire because of underfunding years ago.

"Our largest cost in the property tax is the unfunded liability that exists within the police and fire pension funds. Years of not meeting 100 percent of the obligation has caught up with us, and what I don't want to do is extend that burden by taking advantage of the state law reform," he said.

So, taking advantage of only the later amortization date means a $385,540 reduction in the city's police and fire pension costs for next year, the first decrease in six years. Since 2005, the police pension costs increased about $487,000 and fire pension costs by $623,000.

But the savings from state pension reforms alone is not enough to decrease the city's tax levy and tax rate next year, especially with the city's equalized assessed valuation — the tax base — on the decline. Danville's tax base declined 4.4 percent last year and 3 percent the previous year.

Generally, if the assessed value declines, then the city's tax rate would increase to generate the $6.61 million the city is asking for in property tax revenue.

Eisenhauer said he's committed to keeping the tax rate, which determines what the individual property owner pays, below $2 per $100 of assessed value. And more specifically, he said he wants to keep it at $1.97, regardless of what happens to the city's tax base.

Eisenhauer said the property tax rate is a critical element that people and businesses look at when considering a community.

"We need to maintain a reasonable property tax, so when people are looking at where they want to live or do business, our rate doesn't become an impediment," he said.

But the mayor's proposal for next year's levy hinges on the tax base declining only 2 percent.

Matt Long, Vermilion County supervisor of assessments, said there's a good probability that it will go down more than 2 percent. He said in smaller towns like Catlin, Westville and Georgetown, the assessed value is holding steady for now, but it's not as steady in the more populated townships, like Danville, Newell and Blount. He said school district officials have been calling him for input as they put together their tax levy proposals, and he's been telling them it likely will decrease more than 2 percent.

This year city officials learned that the tax base had declined more than they had anticipated and would have bumped the city's tax rate over $2. Eisenhauer said there's a small window of time when the levy can be amended. Using that window, the city took more money from its general fund to abate a larger portion of the levy and keep the rate at $1.97.

Eisenhauer said he will do the same next year if the EAV drops more than 2 percent.

But that would mean using more money from other funds when the current plan already pulls $600,000 out of four city funds to offset a portion of the levy. That money will come from capital improvements, $160,782; the sewer fund, $136,566; the solid waste fund, $58,953; and the general fund, $243,697.

Eisenhauer said it's difficult to say whether the city can continue year after year pulling money from other funds to keep the rate below $2 when other revenue sources are unpredictable. The city's largest revenue stream is sales tax, and Eisenhauer said if that grows, it can offset increases in the property tax through further abatement.

"The fact of the matter is as pensions continue to increase and unless there are other revenue sources down the line or unless there are increases in the EAV similar to what we saw 10 years ago, it will become more and more difficult on an annual basis to keep that property tax rate between $1.95 and $1.99," he said.

PROPOSED 2011 PROPERTY TAX LEVY

The following is a breakdown of a 2010 Danville city property tax bill and a projected 2011 Danville city property tax bill. Both are based on a house with a fair market value of $100,000 with a homestead exemption. It shows the total amount owed in city property taxes and a breakdown of what those dollars would fund.