Champaign council split on property tax figure
CHAMPAIGN — It will be a close vote when city council members come back in two weeks to decide on a property tax rate for next year, but officials are leaning toward keeping next year's rate the same as what homeowners paid this year.
Because the city's taxable property is expected to drop 0.88 percent, city council members face a choice between raising the property tax rate to collect the same amount of tax revenue they did last year or holding the rate and letting the revenue drop off a bit.
The difference is about $257,000 on the $19,955,632 collected each of the past three years. But as property values have dropped, the rate Champaign homeowners have paid has crept up.
If the city collects the same amount next year, homeowners would pay a rate of $1.3324 per $100 of assessed value — a bit higher than the $1.3152 they paid this year. The difference is about $8.60 on a $150,000 home.
The three council members who are preparing to run for mayor in 2015 have all taken the same side and cast votes this week for the lower of the two rates. Mayor Don Gerard and council members Deborah Frank Feinen and Karen Foster all voted against the increase.
With the help of one of their colleagues, Paul Faraci, they provided four votes against a property tax rate increase, forcing a 4-4 tie, with one member of the nine-member council absent.
That absent member, Will Kyles, likely will cast the tiebreaking vote on Nov. 5, and he said on Wednesday that he is inclined to support the lower of the two rates, but he's not yet committed to that position before he knows how it will affect officials' prior commitments.
"I want to hear how we're going to as a council support our previous positions, particularly minority inclusion," Kyles said.
Because of the dropoff in the city's taxable value, a flat rate means less tax revenue, and Kyles said he wants to be sure that the gap can be covered before he casts his vote.
"And that's why I'd like to hear the discussion on that more than anything," Kyles said.
The city council adopts a tax levy, which is the amount of money it wants to collect, and not a tax rate, which is set by the county clerk. But in the past, city officials have used the projected rate as a guide in selecting a levy.
Before 2011, council members adopted a tax levy based on a $1.2942 rate for several years in a row as property values gradually increased. That meant the tax levy grew each year, even though the rate stayed the same.
But as the recession started to take its toll on property assessments, one rate meant less tax revenue each year. That is when council members began adopting the same tax levy each year, which meant the rate started to creep up even though the city collected the same dollar amount.
Gerard, who has voted consistently in the past for new taxes — like a 4-cent gas tax and more recently a quarter-cent sales tax increase — said those revenue bumps have been good moves for the city. But he said on Tuesday night that his "gut feeling" tells him it's time to hold the line.
"I've had the opportunity to brag on some of our successes with using those taxes, but I would love to just be able to have nobody say we raised taxes semantically, technically or otherwise," Gerard said.
The $257,000 dropoff in property tax revenue could be covered for now with the excess leftover from a $2.8 million sales tax increase that will go into effect Jan. 1, Gerard said.
That is the line that Foster and Faraci took, too.
"We just passed that quarter-percent sales tax in June, and I feel that at this point and for this year, I'm thinking that we could use part of that one-time funding for the difference between the $1.31 (rate) and not raise it to $1.33," Foster said.
Feinen, who provided the lone vote against the sales tax increase in June, said the difference between $1.31 and $1.33 for the average homeowner might be small, but the city's share of the property tax is only a small portion of the overall tax bill.
The tax bill has been steadily growing during the past few years, Feinen said. And when you consider the other taxing bodies — like the school and park districts — the effect becomes more profound.
"When you add that to every governmental unit that is slowly creeping up, it becomes significant to an individual homeowner," Feinen said.
Earlier Tuesday night, council members were shown the city's five-year financial forecast depicting its structural deficit. Costs, primarily those associated with employee benefits, will outpace revenues and will generate budget issues if officials do not act.
A $257,000 difference in property tax revenue for the city would brighten the financial future a bit, and the four council members who voted for the property tax rate increase — which would mean they would collect the same dollar amount — said it is a prudent fiscal move.
Holding the tax rate, council member Marci Dodds said, would be a "feel good" move, but "short term to save a penny here ... will cost us a pound later."
Council member Michael La Due said it might be attractive to keep the tax rate down, but reality will hit hard later.
"It strikes me that the most fiscally prudent thing to do is pay your bills," La Due said. "Because they don't go away, they just get worse."