Carle exemption felt in government budgets
URBANA — With an economy in recovery, the budget outlook in Urbana has not improved much — particularly as a new exemption for $68 million worth of previously taxable Carle properties goes into effect.
Interim Comptroller Bill DeJarnette delivered his analysis to the Urbana City Council this week, not long after word began spreading that the Illinois Department of Revenue granted tax-exempt status to Carle's properties under new legislation approved last year.
More details will emerge in coming weeks about how local governments will deal with the expected drop-off in revenue — "the Carle effect," as DeJarnette called it. July starts a new budget year, and local agencies will use the next two months to finalize the details of their spending plans.
About $61 million worth of Carle property lies in Urbana, and it represented about 10.7 percent of all the city's taxable properties in 2012, when the city reported a total assessment of $569 million.
Now that the Carle chunk will be knocked off the tax rolls for this year — and property assessments continue to decrease anyway — DeJarnette is estimating Urbana's taxable property value will drop to $500 million next year. The money that area taxing bodies expected to collect from Carle will not be collected this year.
Government officials are predicting that other taxpayers are going to have to pick up the bill for Carle — DeJarnette estimated this week that the total property tax rate for people living in Urbana could top $10 per $100 of assessed value next year, up from the current $9.37 rate.
That rate has risen during the past two years anyway, from $8.85 in 2011. Most of the increase between 2011 and 2012 went to the Urbana school district, which accounts for more than half of property owners' tax bills. Property taxes are payable the year after a public body sets its tax levy.
But Urbana Alderwoman Diane Marlin, D-Ward 7, said she's not ready to call this a permanent change, yet. She hopes state leaders take another look at the legislation they passed last year to make the Carle exemption possible.
"At this point, I would like the state Legislature and the governor to revisit this entire legislation," Marlin said. "They need to fix this. I'm not sure they understood the consequences for some small cities like ours with a regional medical center."
Senate Bill 2194 made health centers exempt if they can show their "charity care" exceeds their property tax payment. Marlin thinks the definition of what is charitable is too broad.
But for the next year, at least, the city will need to adjust its budget.
"We're going to have to look at our ways we can save and we may have to look at ways to make up the revenue loss," Marlin said. "We haven't even started that discussion yet."
For the city, "the Carle effect" is just one variable, DeJarnette said. Urbana schools will take a multimillion-dollar hit and will be more profoundly affected than the city.
Other taxing bodies operate solely on property tax revenues. Cunningham Township, for example, expects to take a $131,613 hit — more than 10 percent of its budget.
Township government is statutorily required to provide "general assistance" welfare to the neediest of its residents and cannot cut there.
"We can't not provide benefits," said Cunningham Township Supervisor Carol Elliott. "We're really hoping that the caseload issues we've had will go down a little bit when the Affordable Care Act goes into effect."
Township cuts would have to come from administration costs in the supervisor's and the assessor's offices, and potentially lowering the $100,000 amount that it contributes to local nonprofit social service agencies.
"Social service funding is often the first place to cut just because it's not something we're mandated to do, even though we've done it for years and years and years," Elliott said. "It's really the only place where we have extra money."
Carle's is a big chunk of cash that will not be collected in the first year of the exemption — roughly $6 million throughout Champaign County, including more than $3 million for the Urbana school district alone and probably $824,100 for the city — but only one item on a list of budget problems officials expect to encounter.
"It's not a major thing" for the city, DeJarnette said. "It's just one more variable when you look at insurance rates climbing at exorbitant rates and a number of other things."
Outside of property taxes, major sources of city revenue are beginning to improve. Sales tax revenues jumped 5 percent between 2011 and 2012, to just more than $8.3 million. But city officials are only expecting it to rise another 0.5 percent this year.
That would not be enough to return sales tax revenues to where they were in 2008, when the city collected nearly $8.5 million.
"Our revenues are improving, but they're still at the 2007 level," DeJarnette said. "Clearly, any revenue like that just has an operational impact."
City officials are expecting a 2.5 percent increase in income tax revenues this year after an 11 percent jump in 2012. That assumes that the state does not cut the amount of income tax revenue it shares with local government — a plan that Gov. Pat Quinn has tossed around.
Overall, DeJarnette said, the city is in a struggle to get revenues back to where they were just before the recession took hold in 2008, especially as the cost of employee health care and retirement benefits continues to rise.
"Just to stay even costs a lot of money," DeJarnette said.