State law on hospital exemption sends property taxes up in Urbana
URBANA — Memo to Urbana residents: better hold on to any state and federal income tax refunds. You're going to need them to pay your new property tax bill, or your rental costs.
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County property tax bills that will go out in the mail May 2 will reflect an average 10.43 percent increase for Urbana residents. Champaign residents will be paying about 3.84 percent more.
The owner of the typical Urbana home worth $100,000 with a $6,000 homestead exemption will pay about $298 more in property taxes this year than last, according to the Champaign County clerk's office. The owner of a $150,0000 home in Urbana with the same exemption will pay about $480 more.
The culprit is legislation approved by state lawmakers in May 2012 and signed by Gov. Pat Quinn that grants not-for-profit hospitals a property tax exemption up to the value of the charity health care the hospital provides. Urbana-based Carle Foundation said that in 2012 it provided $35 million in free or discounted health care to more than 25,500 patients.
In Urbana the new law means the loss of millions of dollars in taxable property and in tax income. That lost revenue has to be made up by the remaining taxpayers.
"I've been talking about this for a year. I had assumed that they'd be 11 percent higher," said Urbana Mayor Laurel Prussing.
The city council voted to lower its tax levy this year to make up for larger increases from the school and park districts, she noted. The city government will receive about $650,000 less in property tax revenue this year. But the school district's levy is up more than $2 million, or 6.55 percent, to $36.65 million, and the park district's property tax revenue increased 6.46 percent to $6.27 million.
"The city made a conscious decision that we keep our rate the same ($1.36 per $100 of assessed valuation)," she said.
The change means that Urbana's overall tax rate is now $10.46 per $100 of assessed valuation and Champaign's is $8.34 — a $2.12 gap. Last year Urbana's rate was $9.37 and Champaign's was $8.02. Just five years ago the gap between the two cities' tax rates was $1.02 — $8.34 in Urbana and $7.32 in Champaign.
The big tax increase and the disparity is worrisome to Prussing and other city officials.
"This could kill Urbana, and that's why we're fighting it," she said.
"People are looking at a big increase in their property tax bills," said Urbana City Council member Diane Marlin. "But the value of our homes hasn't changed. That's the thing."
Asked if she feared that more people would want to leave Urbana because of higher taxes, Prussing said, "I don't know. But I think they'd be making a mistake if they did."
Phillip Trautman, president of the Champaign County Association of Realtors, said the growing gap between Champaign and Urbana property tax rates "will make a difference" in home sales and home values, but noted that Urbana's taxes always have been higher than Champaign's.
"To be honest with you, Urbana and their taxes and the buyers who buy in Urbana, it really doesn't seem to faze them very much. Urbana always been right there at the top. People seem to accept it more than the typical market, which is unusual," he said. "I think it's always affected Urbana's market because they've never had the level of activity that Champaign has had."
Marlin, the city council member who also is a small-scale landlord, said about 63 percent of Urbana residents are renters who also will end up paying more. Landlords also will be hit, she said.
"This is a fixed expense and it's going to hit people who own rental property," she said. "The fact is that landlords have set their rents for next year and have signed leases so now they have this big tax bill but they're locked into rents for the coming year. Some landlords may have reserves but we have so many landlords who are kind of marginal, so what are they going to skimp on? It could be maintenance and fixing things. That bothers me."
Prussing contends that Urbana is bearing the brunt of Carle's charity care provision because more than 80 percent of Carle's property is in Urbana.
"We rank very highly in many things, but we shouldn't be burdened unduly with property taxes to give other people charity care," she said. "They serve 1.2 million people in 25 counties in two states, Illinois and Indiana. They got a huge change in the definition of what is charity and that means that 41,000 people (in Urbana) are paying for charity care for 1.2 million people. That's what it boils down to. That is really wrong.
"The assumption is that charity care and property taxes are linked, but they're not. There's a huge disconnect that a small a city could be stuck with a burden that is many, many times its population."
But Mike Billimack, Carle's vice president for marketing, strategic planning and government relations, said that of the $35 million in charity care provided, $5.6 million went to about 4,400 Urbana residents.
"That's roughly 10 percent of the Urbana population," he said.
Billimack also noted that Carle didn't have to pay any property taxes until about a dozen years ago.
"The local taxing bodies in 2002 denied the property tax exemptions which up to that point had always been granted," said he said. "So it wasn't that we always paid and now we don't. We never paid until 2002, and from 2002 to 2011 we paid under protest. And now we don't have to pay because we received those exemptions because of the 2012 law."
Urbana is fighting the 2012 law in court — Prussing said she believes it's unconstitutional — and in the Legislature. A bill, sponsored by Rep. Naomi Jaobsson, D-Urbana, says that a hospital's tax exemption couldn't disproportionately affect one community. The bill, introduced last May, remains stuck in the House rules committee.
Marlin contends the Legislature has to fix the results of the legislation.
"The solution has to come from the General Assembly. They're the ones who created this new definition of charity care. There's got to be a fix," she said.
But Billimack noted that when the legislation was being negotiated "there were a number of parties at the table, the hospital association, the attorney general, the governor's office, patent advocacy groups, the municipal league. They were all involved in those discussions and what came out of that was an agreement that everyone was comfortable with. It wasn't a win-win for every point of view, but it was a process of trying to come up with an agreement that everyone feels is appropriate and fair."
To undo the 2012 agreement, he said, "would require reopening that whole process."
Billimack said Carle has reached agreements with the Urbana school and park districts to "basically give them a five- to six-year glide path" to make up for lost revenue.
"We extended a similar offer to the city of Urbana many times and they have not been willing to come to the table," he said.
Although the loss of the Carle property has its biggest impact on Urbana, it will be felt countywide, according to the county clerk's office. Tax levies and tax rates are increasing for a number of districts including county government, Parkland College, the county forest preserve district, public health and mass transit. That's part of the reason taxes are higher in Champaign as well.
Urbana residents still don't have the highest property tax bills in the county. Their $10.46 per $100 of assessed valuation tax rate isn't as high as the $11.34 rate paid by some in Rantoul. The lowest in an incorporated area of the county is Bondville's $6.93 tax rate. The lowest in an unincorporated area is in Scott Township, on the central west edge of the county, with a $5.74 rate.