Category Archives: Taxes

Property Rights, Taxes

Guest Editorial: How can a man’s home be his castle, if a man’s house is a heavy yoke around his neck?

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TaxesIn his work, “Democracy in America,” Alexis de Tocqueville notes, “A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it,” and he questions whether a free society can long survive that discovery. Obviously that discovery has been made, for many more are eligible to vote than are required to pay, and many who are required to pay are required to pay more than they can afford. Is this what the founders of this Democracy in America sacrificed their fortunes and lives to secure? I think not!

Now it is true that the descendents of the agents of old King George live on in Washington and Springfield, and they tax much more than tea.

But it is the reincarnations of those more notorious Tax collectors of Biblical fame who reside in our local seats of government. In like manner as those who confiscated in the name of Caesar and Herod, these publicans attach themselves not only to the current fruit of our labor, but they also have the audacity to lay claim to the essential roofs over our heads. Apparently, each June and September, these fellow citizens of ours have nothing better to do than enter our private dwellings and demand the silverware.

We have not yet been compelled to sell our sons and daughters into servitude to meet their annually increasing levies against our family homes. But, like the peasants of old in Palestine, many of us have had to mortgage our houses and lands to pay these taxes, and any of us who cannot pay the last farthing will shortly find our persons and kin thrown out into the street.

And what do they use these forcibly collected monies for? Some for services to the common good, too be sure. But much of it is used to built monuments to themselves; Civic Centers, airports, office buildings, and courthouses. And of course they must always be constructing bigger and better facilities in which to secularize our children, much as the Herods of old used the taxes from the Jewish people to forcibly Hellenize their culture.

The income taxes of the current King George, while not born by all, are at least only a one-time levy on our annual increase. The sales taxes of his vassal Rob are at least a levy on the consumption of all of us, (and on luxuries which are occasionally enjoyed by even the common citizen if he has a little something left over after paying his taxes.)

But the Real Estate Tax is Regressive and Oppressive. It is a tax, not on earnings but on principle. It is a tax not on spending but on savings. It is a tax, not on the peripherals of living but on the essential of family life. It is an ever recurring and increasing levy on false and inflated home values that has to be paid with the real sweat of real brows.

Presidential candidate Clinton has recently called for moratorium on foreclosures. What is needed is the abolition of one of the causes of these personal and family catastrophes – the Real Estate tax on private family homes.

Dennis W Dillard
Hanna City, IL

City of Peoria, Peoria Civic Center, Taxes

Higher taxes draw tourists?

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That’s what “two downtown hotel executives” (Donald Welch of the Hotel Pere Marquette and Sami Quereshi of the Holiday Inn City Centre) told the Journal Star. They are quoted in the paper as advocating a quarter-percent increase in the overall HRA tax to “draw large conventions and out-of-towners to Peoria.”

A quarter-percent increase in the (HRA) tax could generate $750,000 to $800,000 to the tourism reserve fund, allowing the Peoria Area Convention and Visitors Bureau to market the Civic Center and other venues to larger-scale conventions and events….

“The impact [of the tax increase] on the individual is insignificant,” [Welch] said. “The impact to the community to have a fund to attract conventions, out-of-towners, is huge.”

Well, that certainly defies conventional wisdom, doesn’t it? Ironically, there was an article in the State Journal-Register yesterday that says the exact opposite. Apparently there’s a proposal by a city alderman to raise Springfield’s hotel tax, and hoteliers are speaking out against it:

Michael Fear, general manager of the Hilton Springfield downtown, said the higher tax would raise only a pittance for the city but could rob Springfield of its competitive advantage when it comes to tourism. “It’s a bad idea,” Fear said. “We are able to attract conventions because of our tax rate. For large meeting planners, 1 or 2 percent can be thousands of dollars. It may be the difference between coming here and not coming here.”

In Springfield, the hotel tax is 10%, so the proposed increase would put it up to 11 or 12%. Here in Peoria, the hotel tax is 11.5%, and a quarter-percent increase would raise it to 11.75%. In Springfield, a tax rate that high would “rob Springfield of its competitive advantage when it comes to tourism.” In Peoria, a higher tax rate “could draw large conventions and out-of-towners to Peoria.” If anyone can figure that out, please explain it to me.

I also love the way hoteliers have turned Economic Development Director Craig Hullinger’s original proposal of a voluntary hotel tax into an overall HRA tax increase proposal in a little over a week and a half. That didn’t take long, did it?

This proposal should be blown out of the water immediately. The HRA tax was supposed to be temporary and for a single purpose — to support the establishment of the Civic Center. It was never supposed to be permanent nor a source of revenue for other agencies (although that hasn’t stopped the city from funding agencies like ArtsPartners from the proceeds).

Besides, didn’t the Civic Center just spend $55 million for expanded convention space so that that development would bring in tons of tourists and boost our economy? Didn’t the council just approve extending the HRA tax another 30 years for that effort? What, that wasn’t enough? Now we need to raise the HRA tax even more?

Hey, I have an idea: why don’t we all just set our money on fire instead?

City of Peoria, Taxes

Let’s talk taxes

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Since tonight is the Truth in Taxation public hearing (the Journal Star has a good article on this by John Sharp), let’s talk about taxes.

Here’s an interesting chart that I got from City Manager Randy Oliver. It shows a comparison of property tax rates from 1986-2006. The dark blue line is the City of Peoria’s tax rate (you can click on the graph to look at a larger image of it):

20-Year Tax Rate Graph (small)

Now the question is, what conclusions should we draw from this raw data?

Well, the thing that jumps out at you first is the precipitous drop in the city’s property tax rate around 1991-1992. I’d like to know what caused that. Did the city cut its budget that much that year? Or did they just shift the revenue source to something else, like motor fuel taxes or utility taxes? I’ve written a couple of people at the city with these questions, but they haven’t found an answer yet (any of my long-time-Peoria-resident readers happen to recall?).

Here are some other numbers to consider while comparing the tax rate over the past 20 years:

1986 2006 Difference
Population 117,766 112,936 -4,830
Total Area 41.02 mi.2 48.13 mi.2 +7.11 mi.2
EAV $733,041,040 $1,623,388,425 +$890,347,385
Tax Rate
per $100 EAV		 2.6596 1.2879 1.3717
Tax Receipts
excl. TIFs		 $13,036,924 $21,336,394 +$8,299,470

Interesting stuff, isn’t it? Even though the tax rate dropped by more than half between 1986 and 2006, revenue increased by more than 63% (or an average of roughly 3% per year). For most of the past 20 years, the city has locked down the tax rate and lived off the increase in Equalized Assessed Value (EAV). But can that go on forever?

The people I’ve talked to, including the city’s finance director, say no. In fact, adjusted for inflation, the tax receipts have actually gone down over the last 20 years. That $13 million in 1986 equals $23.98 million in 2006 dollars (according to this calculator).

A recent article in the National Cities Newspaper titled, “City Finances Okay for Now; Storm Clouds Ahead” (10/22/2007) warns about the near future:

“The picture for 2008 is less optimistic with city officials predicting a slowdown in revenues and increased spending pressures. Concerns about the health of real estate markets and their potential impacts on property taxes, combined with increased calls for property tax relief from homeowners and residents, will cloud the picture in 2008. Health care and pension costs, in particular, are increasing at a faster rate than city revenues.”

So what’s a city to do? People don’t want their property taxes to go up, but the city has obligations that it can’t just cut (e.g., basic services, health care/benefits for city employees, the combined sewer overflow project, etc.). And the rise in EAV obviously isn’t cutting it. That’s why we have the garbage tax. And the HRA tax. And sales tax. And the fuel tax. And a plethora of other taxes. These are new revenue streams that were created so the council could get the money the city needs and claim they “held the line on taxes.”

But that’s not really true, is it? Taxes are going up. Property tax revenues are going up because of increasing EAV, even if the tax rate remains the same. And in addition, other taxes are being raised and/or created to fill the gap that remains. So, we’re only fooling ourselves by insisting that property taxes remain low. We’re not saving any money or paying any less in taxes. The city’s still getting their money through other means.

So I think the real question we have to ask ourselves is, what’s the fairest way to raise revenue for the city? For example, is it fairer to put a $6 surcharge on water bills (a regressive tax), or to raise property taxes (a progressive tax)? Are these new revenue streams a bigger burden on the poor?

City Council, City of Peoria, Taxes

What’s the fairest way to raise revenue?

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ScalesThe city council is going to have a chance again to make some decisions about how they raise revenue. Specifically, they’ll have to decide whether they will be raising property taxes.

First, let’s talk about the council’s action last night. Here’s how the Journal Star reported the vote:

With an 8-2 vote Tuesday, the council endorsed a plan to have a public hearing to discuss the merits of hiking the tax rate 16 percent, from $1.29 per $100 of assessed value to $1.50.

Accurate, of course, but I think it’s worth parsing a little bit. There are two parts to this action: (1) a public hearing, and (2) a maximum tax rate to be considered.

Public Hearing

First of all, the public hearing was going to have to take place regardless of whether the council decided to do anything with the rate. That’s because tax revenue is projected to increase by more than 5% next year. City Manager Randy Oliver explains:

The increase in property tax revenue cannot exceed 5% of last year’s amount without a Truth in Taxation Hearing. The City is projecting a 3.5% increase from assessment growth and 3% from new construction. Consequently, a Truth in Taxation Hearing is required. The question is the amount to advertise.

The only way the city could get out of a Truth in Taxation hearing is to agree to lower the tax rate so the proposed revenue growth would be less than 5%. Well, no one’s calling for the tax rate to be decreased, so the hearing is a foregone conclusion.

Maximum Rate

Now the question is, as Mr. Oliver points out, “the amount to advertise.” When the city holds a Truth in Taxation hearing, they have to set a maximum rate. They could decide to set the maximum rate at its current level ($1.29 per $100 assessed value). Or they could decide to set the rate at any amount above that to leave open the option of a property tax increase. However, the maximum rate they set for the hearing does not obligate them to raise the rate to that level. Again, Mr. Oliver explains:

If you will recall last year, the Mayor and Council directed staff to advertise a rate approximately 20 cents higher than the current rate to provide the flexibility to consider elimination of the garbage fee and provide additional police and fire protection. While the Mayor and Council elected to advertise the increased rate they subsequently decided to leave the tax rate unchanged. The end result is that the adopted tax rate cannot exceed the advertised rate.

The council voted 8-2 to set the maximum rate at $1.50 per $100 assessed value — 16 cents higher than the current level. It doesn’t obligate them to raise the rate to that amount, but it does give them the option of raising the rate to that amount, if they so choose.

What’s the fairest way?

And that brings me to the real subject of this post. What is the fairest way to raise revenue for things like police and fire, garbage pickup, public works, etc.? Is it to raise that revenue through property taxes or service fees?

If you talk to at-large councilman George Jacob, he’ll tell you that he doesn’t think raising taxes is the fair way. There are lots of properties that don’t pay property taxes in the city — hospitals, churches, credit unions, and other non-profit groups. Why shouldn’t all the people/institutions who benefit from police and fire services pay to support those services?

Those who hold this view look for ways to collect revenue from these not-for-profit entities through things like utility taxes. If the city were to impose a 5% water usage fee, for instance, the elderly widow that uses hardly any water would pay next to nothing in utility taxes, but the hospitals and churches and other tax-exempt institutions that use lots of water would pay a hefty sum.

Talk to at-large councilman Gary Sandberg, though, and he has a different idea. If the belief is that the people who benefit from a service should pay for that service, then we don’t need to institute new fees, he says. Let’s start by simply eliminating subsidies that only benefit a few people and make them pay their own way. For example, instead of subsidizing downtown parking decks for over $1 million a year, let’s double our parking rates and use that money on something that would benefit the most citizens — such as eliminating the garbage fee, adding police resources, and/or improving our infrastructure.

Sandberg also points out that to replace the $6 garbage fee with a property tax increase would mean that people with homes valued under $250,000 or so would actually be paying less.

If you ask me, it seems the underlying argument here is really about whether non-profit institutions should be exempt from property taxes or not. In one sense, it wouldn’t do the city any good to debate that topic because there’s nothing they can do to change it. But it would appear that those who favor service fees over property tax increases philosophically believe that all property owners should be paying for the services from which they benefit, and service fees are a way to get that money. Thus, even though the city can’t do anything about it, I think the topic should be discussed, since it’s the underpinning of the service fee argument.

*Full-disclosure: I work for a non-profit organization that doesn’t pay property taxes.

City of Peoria, Dunlap School District 323, Peoria Public Schools, Taxes

Cheaper taxes another perk of living in North Peoria

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House GraphicIf you live in the older part of Peoria like I do (Uplands neighborhood, near Bradley), your total property tax rate is 8.35885%. If you live where fifth-district councilman Patrick Nichting lives (Sleepy Hollow Rd., north of Route 6, near the corner of Knoxville and Mossville Rd.), your total property tax rate is only 7.69782%. And if you live where at-large councilman George Jacob lives (Dana Dr., north of Route 6, off Wilhelm Rd.), your total property tax is 8.02308%. (Note: I picked Nichting and Jacob merely for descriptive purposes and because, as public figures, their addresses are already widely published.)

Why the differences? It’s because different taxing bodies have different borders. Both Nichting and Jacob live outside the Greater Peoria Airport Authority’s taxing district, saving them 0.24087% on their tax bills. They also both live in Dunlap’s school district (4.0644%) instead of District 150 (4.48456%), saving them another 0.42016%.

Jacob’s rate is a little higher than Nichting’s because Jacob lives in Medina Township instead of Peoria Township. Medina assesses 0.13019% for township government expenses plus 0.33166% for road and bridge maintenance. That totals 0.46185% for living in Medina Township versus only 0.13659% for Peoria Township.

So how does that translate into dollars and cents? Well, a $200,000 owner-occupied home in the Uplands will cost you $407.64 a year more in taxes than a $200,000 home in Nichting’s neighborhood, and $207.06 more than a $200,000 home in Jacob’s neighborhood. That’s not chump change.

On May 29, the Illinois legislature passed Senate Bill 263 which makes the airport authority’s boundaries coterminous with Peoria County. Once the governor signs that into law, those in northern Peoria will have to begin paying their share of the airport’s expenses. Since the levy will stay the same, but be spread among more taxpayers, those currently paying the airport authority’s tax will actually see their rates go down a little.

That will leave the 200-pound gorilla — school taxes — as the biggest difference between living out north or closer to the center of the city, tax-wise. In the older part of the city, you can find a wide range of housing prices, but the farther you go north, the more homogeneous the housing prices become. Pretty soon, you’re in an area where the lowest-priced housing is out of many people’s price range.

Those who can afford $200,000+ houses out north are rewarded with lower taxes and better schools. Meanwhile, those who can only afford a home costing less than $180,000 have few if any options out north. In Peoria, their choices are all within District 150, which means they get relatively poorer schools (based on Illinois Report Card info) and proportionately higher taxes.

I’ve suggested before that school districts 150 and 323 be combined. I still think that’s a good idea. But there’s something else that needs to be done: new neighborhood developments in northern Peoria need to have a broader range of housing prices. Instead of building homogeneous neighborhoods where every house is $280,000, new neighborhoods should include a diversity of housing prices. I’m not talking about low-income housing (that’s a different topic); I’m just talking about a range of, say, $120,000 to $250,000 homes being built within the same neighborhood.

All of these issues intertwine. Tax disparity, school disparity, and housing disparity all converge to make Peoria a tale of two cities. Things need to change, because our current trajectory is unsustainable. Some people actually believe that it’s desirable for the city to consider South Peoria the place for the violent and criminal element to live, the East Bluff to be a buffer, and the northern part of the city to be the “safe” part of Peoria. Folks, this is not healthy thinking. “A house divided against itself cannot stand.”

We can dream more inspiring dreams for Peoria. Let’s set higher goals for our city. Let’s not abandon our friends and neighbors on the south side out of fear and ignorance. Let’s not build neighborhoods that keep people out, but rather invite people in. Let’s make all of Peoria a great place to live.