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RSD205 keeps promise to reduce property taxes this year

This year’s property tax rates and levies, which are to be paid in June and September, have just been deemed official by the Winnebago County Clerk’s office and the Rockford School District has kept their promise to reduce the district’s portion of the property taxes.

Under the existing Property Tax Extension Limitation Law (PTELL) or Tax Caps, the district was not legally bound to reduce their levy, could have simply extended its current levy of $170 million without voter approval, and could have further raised the levy to $175.1M by adding in last year’s Consumer Price Index of 3%.

However, members of the Board of Education voted unanimously to reduce the levy last November, and Chief Financial Officer Cedric Lewis and interim Superintendent Robert Willis were quoted last year in the Rockford Register Star promising to end the 58-cent levy that had been used to fund the desegregation lawsuit.

The levy was twice extended by the voters beyond the 2002 Unitary Status ruling in the U.S. 7th Circuit Court of Appeals, with the last approval in the 2006 Kids Win campaign.

Excerpt:

Officials made the promise five years ago to go back to the taxpayers to ask their opinion before imposing the tax for the coming years.

“But we’re going to do it for them, without having to spend money to take it to the taxpayers,” Willis said. “We want to honor that commitment that was made five years ago, and we will live within our means.”

Finance and Operations Committee Chairman, Tim Rollins is quoted in the same article saying, “We want people to know that we’re serious and we’re actually going to do this.”

It’s all about trust and interim Superintendent Willis summed that up very well in his statement to the Rockford Register Star last year emphasizing that, “This board will keep its word.”

The board did keep its word.

The Equalized Assessed Valuation (EAV) of the district continued to decline during the last tax cycle by over 5%, so the district calculated the tax rate to maintain last year’s $170M levy, then waived the 3% CPI to which it was entitled under tax caps.

The 58-cent equivalent levy to be refunded to taxpayers was then subtracted, which reduced this year’s tax levy to $157.4M from $170M on last year’s tax bills, and $17.7M or 10.1% less than the $175.1M maximum the district could have levied under state law using the 3% CPI.

When taxpayers receive their property tax bills around the middle of May this year, they should compare the “Prior and Current Taxes” paid on their property for the “Rockford School Dist 205,” not the “Prior or Current Rate,”  because the tax rates are a function of both decreasing property assessments and a very complicated PTELL formula.

Remember, the “taxes paid” are what comes out of your pocket, not the tax rate.

The RSD205 taxes on my property, now valued at $136,600, will be $168 less than last year. The property was valued at more than $183,000 in 2008.

Even though this year’s tax rate is 12.9 cents more ($6.6884) than last year’s rate ($6.5595) due to the lower EAV across the district, the property taxes levied by the district have been reduced by 10.1% from the amount the levy legally could have been under tax caps.

The new tax rate proportionally would have been almost 75 cents more per hundred dollars of assessed valuation if the board had not cut the levy and ignored the CPI.

Taxpayers must remain vigilant, however, to a quirk in the PTELL law that allows the school district in the year immediately following a reduction in the Aggregate Extension base to revert to the highest level in the prior three years, which would be the previous $170M tax levy, and the taxpayers would have had only a one year reprieve from the 58-cent tax rate.

This provision of the PTELL law may be used only the first year after the Aggregate Extension is reduced and applies to any reductions in extensions, including tax abatements.

So, the board must continue with 2012’s reduced $157.4M tax extension in 2013, even allowing for the current 1.7% CPI, to ensure that the 58-cent tax rate is permanently returned to the taxpayers in 2014 and thereafter.

RSD205’s Board of Education and the administration have kept the promises they made last year to district taxpayers and should be commended. I trust that they will leave the Aggregate Extension base at $157.4M, including bonds and interest, adding only this year’s CPI and not revert to the 2011 Aggregate Extension base of $170M for 2013.

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13 Comments

  1. The tax man can just re-allocate it to the Airport Authority. I hear they are giving out fat raises and big titles out there.

  2. Curtis Newport

    It’s good that the RSD205 Board is recognized for keeping its word and easing the tax burden, and they deserve to be recognized for that!

    One correction – Their tax base (aggregate extension base) is not instantly lowered to $157.4M. The aggregate extension base is the highest of the previous three years, so it’s still at $170M. For the next two years they will have the ability to collect that much, plus inflation, if they so choose.

    • Ted Biondo

      Thanks Curtis for the heads up on the aggregate extension base for future years under the PTELL law. As you say, at least the year following the Aggregate Extension base reduction, the school district could go back to the highest level of $170M next year for the levy years of 2010, 2011, and 2012 aggregate tax extensions and the taxpayers need to be vigilant for at least one more year to ensure that the 58 cents is permanently returned to the taxpayers.

      If the district does return the aggregate tax extension to its highest level of $170M, that would be the new base for future calculations and district taxpayers would have had only a one year reprieve from the 58-cent tax rate.

      I will certainly include this in my post for completeness and to study the options that are available to the board so that they can actually accomplish what they intended to do with the 58-cent reduction.

  3. Brian Opsahl

    Ted,and his old buddy’s chased me and most of my neighbors away from 205 several years back,and to this day I am dam glad they did it. My kids will not go through what I did. To me it doesn’t matter what the tax rate is now. That school system is bad..very bad

  4. truth hurts

    To quote an old bugs bunny line ” dont you believe it”.

    While I hope its true for my friends still in the 205 taxing district but I am not optimistic.

    With all due respect how many times have we heard this song and dance about cutting budgets for taxes, property values down, ect.

    Only for the taxing bodies to use the legal (abit underhanded) adjustment system to still collect the same if not more taxes.

    Thus resulting in the common situation we ALL KNOW where our property values goes down but we still pay more in taxes (be it a dollar, 10 dollars, 100 dollars, or 1000 dollars) than last year.

    I don’t think anybody should be giving praises untill the tax bill comes and the ACTUAL amount you are paying goes down.

    As Ronald regan used to say “trust but verify”.

    I hope I am wrong, I really do….but if past any indicator don’t hold your breath

    • Ted Biondo

      Truth Hurts – you have a right to be skeptical about tax increases and everybody except the Winnebago County, RVC and RSD205 will be raising their taxes. But we should give credit where credit is due. I have seen the RSD205 levy and it is as I have stated, lower by $17.7M dollars and you will see it on your tax bill – thats why I gave you the areas to look at on the bill. The county should be the same and RVC should actually be lower than last year – everyone else will be up while our home values are decreasing!

  5. truth hurts

    I hope you are right ted.

    But I will wait to see if it becomes so.

    • Ted Biondo

      truth hurts – the RSD205 post is true. I’ve already seen the data on the tax bills that are going out this month. The district will collect $17.7M less than the could have with the tax cap law. They didn’t even have to ask the voters, they just could have raised the taxes. So we should give credit where credit is due. My column is supposed to be printed in the paper this Sunday.

  6. Ogle County

    The tax cap law is proving to be a disservice to taxpayers. In Ogle County, we do not have tax caps and many of the taxing bodies are levying at their statutory limits so as our assessments have gone down our bills have gone down.

    Since Ogle County never voted on tax caps isn’t that helping to keep RVC’s rate steady since they are not subject to the PTELL?

    • Ted Biondo

      You are absolutely correct, Ogle County. The rate has been about the same = $0.45 +/- $0.01 for the last nine years I was on the RVC board. Last night was my final meeting. The reason for this is indeed because Ogle County didn’t even put the tax cap law on the ballot. If they had and it was defeated, I believe the mere fact it was on the ballot would have given RVC tax caps even if your county defeated it.

      The Tax Caps are working in reverse as property decreases in value. As home prices drop, taxing bodies follow the tax cap law, which allows them to increase the rate until they return to the tax levy the previous year, plus they can increase the rate more to cover the rate of inflation.

      Numerous attempts at the state level has been tried to reverse this quirck in the law, but the municipal league and others who benefit from the law have successfully stopped efforts to freeze the levy in years with decreasing markets! The municipalities consider this payback for all the times they couldn’t levt the maximum amount as home values were appreciating!

  7. Curtis Newport

    Actually the RVC rate has stayed fairly steady because the RVC Board has budged and levied in accordance with the downward trend in EAV. It is fiscal discipline at the local level, not any law at the state level, that has kept the RVC taxes in check.

    The factors that make government expensive have nothing to do with PTELL or statutory rate limits. Schools and local governments face an ever-growing list of unfunded mandates – services that they are REQUIRED to provide according to state law. We have protected unions and a ridiculous prevailing wage law that limit a local government’s ability to control costs.

    It’s time to get past the silly notion that the cost of schools and government can or should be connected to the real estate market! Taxing property ad valorum is simply a way to divide up those costs. If we don’t remove the barriers to cost control from Springfield that shackle us at the local level, then those costs will continue to rise whether you’re in a PTELL county or not.

  8. Curtis Newport

    Meant to write “budgeted,” not “budged.”

    • Ted Biondo

      No problem Curtis, I do it all the time. Have to go back and correct many typos.

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