URBANA — Mayor Laurel Prussing admonished the school and park districts on Wednesday for settling with the Carle Foundation, a move that she said could have serious consequences for Urbana taxpayers.
Meanwhile, the city of Urbana, Cunningham Township and Champaign County are not settling a legal battle over millions more in escrowed tax payments while they maintain their effort to challenge the constitutionality of a law that helped Carle achieve property tax-exempt status.
"I think they got intimidated by Carle," Prussing said. "I think they're willing to give up taxpayer money back to Carle without even testing the law."
Prussing said a lawsuit challenging the law that granted Carle's property tax-exempt status is "imminent." She has argued all along that, with profits reported at more than $106 million, Carle is one of the most profitable businesses in the area and not a charity.
Carle CEO Dr. James Leonard said he's disappointed that the city of Urbana and Cunningham Township, which share a board, refused to negotiate a settlement. He said Carle has approached the city three times to work out a deal.
"I wish we were done with the whole thing," Leonard said, rather than just settling with two of Urbana's taxing bodies.
Leonard said it is "shortsighted" to look only at Carle's property tax contributions when considering its value to the community. He said Carle brings "tens of thousands" of visitors to town, where they buy food, gasoline, hotel rooms and other items from stores.
"It doesn't look at the full scope of what we contribute and how vibrant this community is," he said.
For years, Carle has been arguing its tax-exempt status before the courts, saying the millions of dollars per year it gives away in free or discounted care qualifies it as a tax-exempt charity. While that case was argued, the property taxes it owed to Champaign County taxing bodies were held in escrow, awaiting the court's ruling.
But earlier this year, a recently passed state law codified Carle's charity status as long as the value of Carle's free or discounted cares exceeds the amount it owes in property taxes.
That eliminated $6.3 million in tax revenue Champaign County governments expected to receive from Carle this year. More than $61 million in Carle property — and nearly 11 percent of Urbana's total taxable property — will be removed from the tax rolls for the foreseeable future.
Prussing said on Wednesday that, by settling their disputes over the property tax money held in escrow, the school and park districts have essentially abandoned the fight to keep Carle property on the tax rolls. Prussing thinks that will shift the property tax burden from Carle to the rest of Urbana property owners, thereby locking in large property tax rate increases in the future.
That would ultimately make Urbana less competitive with other cities.
"It would set Urbana on a downward spiral," Prussing said. "Higher tax rates, that's a very bad thing for us, and I think the school district and the park district should appreciate that."
Urbana school Superintendent Don Owen said the purpose of the district's action was "to get out from under all litigation," which was diverting important human and fiscal resources away from the classroom.
He said whether those actions will have property tax implications will be discussed in open school board meetings during the next couple months.
However, he added that even if the school district needed to raise its property tax rate, it is limited in a way that the city is not.
"The school district is limited by tax caps," Owen said. "We're limited in our extension, and so we can't raise by more than" the consumer price index.
Most Urbana residents this year already paid higher property tax rates than their Champaign counterparts: $8.02 per $100 of assessed value in Champaign compared with $9.37 in Urbana. The school district, park district and Cunningham Township tax rates make up the bulk of the difference.
The vast majority of that Carle property is in Urbana, and officials think the difference between the two cities will be even greater if the Carle property stays off the tax rolls, presenting Urbana government agencies with unexpected deficits.
The Urbana Park District is already looking at a property tax increase as high as 11.55 percent next year. Park officials are projecting the tax rate will rise to $1.14 per $100 of assessed value, up from about $1.01 this year.
The school district comprises more than half of a homeowner's tax bill and could have a more profound effect were it to raise its tax rate.
The city of Urbana, meanwhile, is looking at levying the same $1.345 rate as it did last year, Prussing said. At the same rate, the city would see less tax revenue with Carle property off the tax rolls.
The park district had been holding $1.9 million and the school district had $10.9 million of Carle tax money in escrow. Under the terms of the settlement, both agencies will return more than half of that money to Carle.
The city of Urbana continues to hold about $3.6 million in escrow.
Prussing said the school and park districts are not looking at the long-term effect the move will have on property tax rates in Urbana.
"That's what their problem is," Prussing said. "They're looking short term and saying they're going to put this behind them and have a world class education system. They're not putting it behind them. They're creating an issue that's going to last forever."
Staff writer Meg Dickinson contributed to this report.