It is no secret that the issue of property taxes in Illinois is a sensitive subject.
Currently pending before the Illinois Legislature are a number of bills that attempt to stop any increase in property taxes; that legislation aims for what is commonly referred to as a property tax freeze.
Interestingly, property taxes are levied locally, not by the state. Therefore, a property tax freeze does not impact the state budget or financial situation, but rather imposes a burden on local taxing bodies, some of which already operate under limited taxing capability as non-home rule communities, like Flossmoor and Homewood.
The idea of a property tax freeze is politically popular, but here is the real question for taxpayers: Will legislation that attempts to limit real estate tax increases actually result in a tax bill staying the same or going down? To answer this question, let’s look at how property tax bills are calculated.
First, consider the amount of funds each taxing body assesses in order to pay for the costs of running operations and retiring debt. Taxing bodies set yearly budgets to determine the amount of funds that are necessary, then issue what is called a levy. Each governmental agency’s levy is then sent to the local county, which in turn calculates tax rates.
The second step is determining the market value of the home, which is set by township and county assessors. By law the assessed value of a home for tax purposes cannot be more than 33.3 percent of the fair market value — what the home would sell for on the open market. That percentage is used across Illinois except in Cook County, where residential properties are currently assessed at 10 percent of fair market value.
The third component is applying the state equalization factor, commonly known as the “multiplier.” In theory, the multiplier equalizes the differences in how county assessors determine the assessed value of homes. That way, at least in theory, all homeowners’ properties are assessed for tax purposes at the appropriate percentage of the home’s fair market value. The state multiplier is adjusted every year.
For non-home rule communities like Flossmoor and Homewood, the fourth step in the tax bill calculation is taken by the county clerk, who applies the state’s tax cap legislation to determine the village’s total tax rate.
To calculate the real estate tax bill, the property’s market value is multiplied by the assessed valuation, which is multiplied by the state equalization factor to arrive at an equalized assessed value (EAV).
Exemptions for senior citizens or certain homeowners, like disabled veterans, are then deducted to arrive at an adjusted EAV. The adjusted EAV is then multiplied by the tax rate. The result is your tax bill.
The current proposed property tax freeze legislation is an attempt to limit taxing bodies to no consumer price index (CPI) increase in levies from the previous year’s rates. Under state-imposed tax caps, our schools and villages can only collect tax increases that are set at the CPI or 5 percent — whichever is less.
This year, we are collecting a CPI limited tax increase of .8 percent.
Realistically, however, this does not mean that a homeowner’s tax bill will stay the same or decrease. Because a home’s assessed valuation and the state multiplier calculations can change and are not “frozen” by the proposed legislation, even though the taxing body’s levy may not increase, property tax bills can still go up or down depending on changes in a home’s valuation compared to other properties within that taxing body or changes in the state multiplier.
Under current legislation proposals, the village would also be able to levy for new property, an important and necessary component to capture economic development and annexed property.
In an attempt to do our share as a responsible taxing body, the Flossmoor Village Board and I have instructed village staff to evaluate a zero increase general fund budget for next year, whether the state passes a property tax freeze or not.
The Flossmoor Village Board continues to do its share as a responsible taxing body. As an example, village management evaluates budget changes of $750 or more on an annual basis. This year, the Village Board has asked staff to further evaluate budgetary decisions in an attempt to maintain or decrease our general expenses.
While this could directly translate to a lower tax bill for our property taxpayers, it reflects on our ability to manage our share of tax revenue responsibly.
In any event, homeowners should be aware that so-called property tax freeze legislation will not in and of itself guarantee that property tax bills will go down. In fact, a property tax freeze can still result in a higher tax bill for taxpayers.
Paul S. Braun is mayor of the Village of Flossmoor. He is also an executive committee delegate on the Metropolitan Mayors Caucus. This column first appeared in the February print edition of the HF Chronicle.