Urbana school board to focus on increased tax levy

URBANA — The school board is set to consider a proposed tax levy that could mean a property-tax increase for Urbana residents.

The board's meeting is scheduled for 7:30 p.m. Tuesday at the Burkholder Administrative Service Center, 205 N. Race St., U.

The board will take final action on the tax levy in December.

The levy reflects the fact that many of the Carle Foundation's properties are now off the tax rolls. The district will ask for the full amount of property-tax money it's entitled to this year, which means other taxpayers will have to make up for that lost Carle property-tax revenue.

In Chief Financial Officer Carol Baker's estimate, taxes could go up as much as $270 for the owner of a $150,000 home, but that depends on assessed values.

"We can't afford not to," Baker said, because the district needs the money to keep operating.

The district will levy for about $31.5 million.

Last year, it asked for about $29.1 million, and its tax extension, which usually reflects taxes received, was about $28.7 million. However, the district received about $3 million less than that, as Carle was exempted from paying in property taxes.

A new state law allows Carle's exemption, because its charity care is more than what it would pay in property taxes.

The school board may also consider, when a settlement with Carle over previously collected property-tax money is final, abating property taxes used to pay toward its debt service, or what it owes for bonds it sold in 2002. The board will have to decide that by February, Baker said.

Superintendent Don Owen said Judge Chase Leonhard has scheduled a hearing for Tuesday for issues related to the Carle litigation.

The district had been holding about $10.9 million of Carle's money in escrow, from tax years 2004 through 2011.

It will return about $5.7 million to Carle once the settlement is approved. The board approved the settlement earlier this fall.

The district is expecting property taxes to go down after 2018, because then, it will be done paying off those 2002 bonds. That money was used to renovate Urbana Middle School and Leal Elementary, build an indoor pool, and refinance bonds previously sold to renovate its high school.

The district is also using $1 million each year from the school facilities sales tax to abate taxes on those bonds, Baker said. Once they're paid off, the district will also be able to pay for other facility improvements with that money.

"To me, this is a temporary issue," Baker said, adding that she has a positive outlook for the district's finances after those bonds are paid off.

Earlier in November, the board indicated to Baker during a meeting that she should levy for the full amount the district is entitled to.

The district's ability to collect property-tax revenue is limited by tax caps, and Baker told the board that lowering the levy to keep property taxes level would result in a loss of $15 million over the next five years, and more into the future.

"If you don't levy at the max, you're basically losing that money forever," Baker told the board Nov. 5. "It's money you can never get back."

The district already has a deficit budget this year, partly because of lost Carle property taxes and partly because it sold bonds to pay for construction in previous years, but will pay for those projects this year.

The district also lost about $8 million in state aid because it was actually receiving property-tax money, even though that money was disputed. It won't get any of that state money now that it has settled with Carle, Baker said.

However, it will file a claim for state aid it lost because of the timing of Carle's property-tax exemption under the new law, Baker said.

The state pays general state aid based in part on how much the district receives in property taxes.

The tax rate the county set for the district last year assumed Carle would be on the tax rolls, but it was exempted. That happened after the district set its levy last year, which means it couldn't make up for that lost revenue.

Baker said the state will repay that lost state aid as much as its appropriations allow. Historically, she said, the state pays districts about 8 percent a year of what they're owed, so it takes a while for districts to get all lost revenue. Plus, she said, there's no guarantee the state will continue to appropriate that money.

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Skepticity wrote on November 19, 2013 at 10:11 am

Urbana's multiple taxing bodies all complain of the loss of Carle property tax revenue.  For years it has been apparent that this cash cow would soon cease being milked.  There is no end to the appetite of these taxing bodies, and no efforts to moderate continuing expansion of spending.  Instead, the automatic reflex of the bodies is to cite the need to increase the levies.  A logical extension of this trend would eventually result in tax bills equal to 100% of property value.  But it won't survive long enough for that to occur.

As a larger and larger annual tax bill is sent to homeowners and landlords, the cost of living in Urbana continues to increase.  Persons on modest and fixed incomes are placed under increased financial stress by the demands of these taxing bodies.  There were 9 local taxing districts listed on the 2012 tax bill, and they all blame Carle and they all will increase levies in the coming years to make up for the "loss".  None are cutting spending, though they might cut spending growth. 

The myopic policy of continually increasing the levies rather than limiting spending is flawed.   The sustainable (buzzword alert!) approach would be to stabilize taxes in order to attract businesses and subsequently grow the tax base.  Instead the taxing bodies increase housing and business costs and discourage businesses from developing in Urbana, thus placing a greater burden on residents to fund government. 

All this is done to fund ambitious government projects with the stated purpose of improving the quality of life for residents.  These develpment trends are promulgated in the academic ivory towers where development staff receive their degrees.  It is to these academics whom development staff and city officials turn for advice for city planning, and whose studies are cited as justification for increasing taxes. 

Consequently, as homeowning in Urbana becomes financial unfeasable for those on modest income, middle class housing increasingly is converted to rental property that is increasingly funded by Section 8, which uses tax revenue to pay the landlords who pay the taxes.  The homeowner residents don't have these government subsidies and are squeezed out of their homes, creating more rentals with public funding through Section 8.  This brings a resident clientelle to Urbana with increasing needs for services from government bodies.  Government bodies cite the increased need and increase government services, needing more funding, requiring raising levies. 

This is how a city largely consisting of middle class homeowners is converted to a community of publicly funded rental units.  Ultimately the money will run out as the rentals decay and property value decreases, but the damage will be done.  This death spiral will be executed in the name of providing needed government services to residents and implemented with the best of stated intentions. 

Unfortunately, the road to hell is paved with good intentions. 

Sid Saltfork wrote on November 19, 2013 at 12:11 pm

Well written.  Bravo!  I lived in Urbana for 27 years.  I moved for reasons you clearly explained.