The cities of Champaign and Urbana – their tax bases bolstered by new construction, annexations and rising home values – are proposing significant increases in their property tax levies.
Champaign is proposing a property tax levy of $15.9 million, a 17.8 percent increase over last year's levy, on taxes payable next summer.
Urbana is proposing a levy of $6.2 million, a 12 percent increase.
Champaign levied $13.7 million last year and collected $13.5 million. Urbana levied $5.8 million and received $5.6 million.
Both cities are proposing to cap their property tax rate at $1.31 per $100 of assessed valuation, the same rate that they have imposed in recent years. The cities levy a specific dollar amount, but they have an arrangement with the county clerk's office – which sets tax rates – whereby they abate any tax income they would receive beyond what a tax rate of $1.312 can generate.
New construction, rising home values and, in Champaign's case, annexations of several outlying subdivisions are enabling the cities to collect record sums with that same tax rate.
Both Champaign and Urbana are home-rule cities, which means they are not subject to the property tax caps that many other local taxing districts work under. With tax caps, a taxing body is limited to an inflationary increase in its tax levy, plus any growth from new construction. For this year, that means a 3.3 percent inflationary increase.
If they were subject to tax caps, both cities would have to ask for smaller levies and would see their tax rates decline slightly. In Champaign's case, it would receive $440,000 less than its current levy request if the city were subject to tax caps, according to Renata Matousova, a budget officer in the city Finance Department.
Urbana Mayor Laurel Prussing said the city needs the additional property tax income.
"We're down to the end of our reserves," she said. "We're not rolling in money. Plus, we're trying to expand our police force."
Prussing also noted that Urbana has lost about $250,000 in annual utility tax income from the University of Illinois, though the UI is considering paying the city $200,000 this year and next to ease the transition. The decline in utility taxes came about because the UI expanded Abbott Power Plant and is generating more of their own power, which is not subject to utility tax.
"I don't feel this is a windfall (the tax levy request)," said Prussing. "We're trying to keep our heads above water. We certainly have demands from citizens for more services. I think it's going to be a balancing act."
Urbana Comptroller Ron Eldridge said Urbana, like Champaign, is asking for more money than it expects to be able to receive. That's because final equalized assessed valuation figures aren't known yet, so both cities are asking for more money than they really expect in case assessment growth is higher than projected.
He said he expects the city to be able to get a 9.8 percent increase in the levy, with 4.4 percent of that growth attributable to new construction and 5.5 percent due to assessment increases for existing property.
In Champaign, Finance Director Richard Schnuer said he expects the city to be able collect $15.7 million of its levy request, which would represent a 16 percent levy increase.
Schnuer said that while 16 percent seems like a big increase, city financial responsibilities are also growing. Of the increase, 6.9 percent is attributable to the annexation this year of several western and southwest Champaign subdivisions, 2.3 percent is from new construction and 6.8 percent is due to increases in the value of existing homes and commercial and industrial properties.
"Sixteen percent is a great rate of increase, very healthy," Schnuer said. "It looks to people like the city is swimming in money."
But the city is going to have to pay roughly $500,000 more this year toward firefighter pensions, he noted. A change in state law now requires the spouses of deceased retired firefighters to receive 100 percent of the pension benefit. Previously, surviving spouses received 54 percent of the pension benefit.
Champaign uses its property tax levy to pay for pension contributions and for city library expenses, with any leftover money going to the general fund. Schnuer noted that the amount that will be going to the general fund, $1.7 million, is about the same as last year.
If the city's property tax base weren't growing at such a healthy clip, "there's no question we would be cutting back services or raising taxes," Schnuer said.
The Champaign City Council will discuss the proposed tax levy at Tuesday's council meeting, which begins at 7 p.m. at the Champaign City Building, 102 N. Neil St. Both city councils will give final approval to the tax levies in December.