North Riverside’s village board has not extended the property tax levy that funds village services in 20 years. And despite going through a rough patch economically, North Riverside homeowners in 2012 are on pace to levy even less in property taxes to the village.
That’s because last year the village issued $4 million in debt certificates after a bond issue was blocked by a petition drive. While issuing debt certificates meant that the village would be paying a higher interest rate when paying off the debt, it also had the effect of voiding the village’s ability to collect additional property taxes to pay off the debt.
So, while the debt service each year must be funded through general operating funds, there will no longer be taxes levied to pay the debt service – hence lower taxes.
In response, North Riverside government may at long last reverse its 24-year tradition of freezing its property tax levy to begin building up that particular revenue stream.
“I think this time we’ve got to do it,” said Trustee Hugh Hermanek during the board’s budget workshop on April 18.
The village board flirted with extending the property tax levy in 2011, but eventually decided against it. At the time, the board was also contemplating a possible tax referendum to fund police and fire pensions, they held off on the general tax levy extension.
But the board never followed through on the referendum, and taxes remained flat. North Riverside again levied $490,000 to fund general operations and an additional $240,000 for debt service. Now that the debt service levy has been eliminated, local property taxes will be going down.
That provides an opportunity to break the cycle of levy freezes, said Sue Scarpiniti, the village’s finance director.
“If you’re going to look at a property tax increase, this would be the time to do it, when the … removal of that debt service levy … [is] going to soften the blow to the residents and taxpayers,” Scarpiniti told trustees.
Trustee H. Bob Demopoulos suggested that the time wasn’t right for a property tax increase. He also said he was against a proposed hike in garbage rates for the 2012-13 fiscal year, which a majority of the board supports.
“People can’t afford it,” Demopoulos said.
While it isn’t clear whether trustees will ultimately support a tax levy extension in December, enough trustees were interested last month to direct Scarpiniti to start analyzing the numbers.
“There will be a lot more discussion by the board, but it will at least give staff the direction that we need to provide the board with the direction and to do the analysis for it,” Scarpiniti said.
Of the almost $14 million North Riverside expects to spend for general operations during the 2012-13 fiscal year, just $490,000 – or 3.5 percent – will be funded through local property tax revenues.
Just for comparison, the $3.5 million Riverside collects in property taxes funds about 44 percent of its general operating expenses. Brookfield’s $7.86 million in property taxes funds almost 57 percent of its general operations.
As a result, sales taxes in North Riverside represent more than 80 percent of the village’s total general operating revenues. When there’s an economic downturn and sales taxes lag, as they have in recent years, the village takes a hit.
Part of reason for the lower tax revenues for North Riverside is its smaller residential property tax base. But North Riverside far outstrips both of those other villages in commercial property.
Officials have estimated that, because of property tax cap laws, North Riverside’s would only see between $5,000 and $7,000 annually through a property tax levy extension. By foregoing the increase for two decades, the village has cumulatively left between $100,000 and $140,000 on the table that could have been used to fund operations.
“We’re looking at literally not a lot of money here,” said Scarpiniti. “But there is the change in the philosophy that we’re really talking about.”
And by freezing the property tax levy every year, the village has also lost out on capturing the maximum amount it could have from new commercial development. And with a potential turnaround in the local economy due to the expected arrival of new restaurants along Cermak Road and a big-box store at the Edward Don site, there is the prospect of capturing additional future tax revenues as a result of that new construction.
Scarpiniti said she expects that to come into play for the tax levy extended next year, when that construction is projected to begin.
“That’s why this decision is really important, in light of the Edward Don property, because we probably will be able to capture a lot more money than the standard $5,000 to $7,000 that we normally would have captured under the tax cap laws.”
