Note to readers: This is one-half of part four of our series, Property Taxes: Follow the Money. Read the intro to part four and the other half on other taxing entities’ cash in the bank. For Illinoisans, property taxes are a sore spot. Illinois has the second highest property taxes in the nation, and McHenry County is in the top 10 for highest property taxes in the state. Illinois also ranks first in the country with nearly 7,000 taxing districts, which makes examining one’s tax bill a confusing exercise. While taxpayers are annoyed by the price tag, property taxes are also a primary source of revenue for local taxing bodies. This series examines some of the issues in Illinois for residents and taxing bodies.
This year, the superintendent of Wonder Lake-based Harrison School District 36 has recommended a decrease in the property tax levy of more than 15 percent below last year’s.
The average cost-savings will be about $505 on the District 36 portion of the tax bill for a home valued at $100,000, Superintendent Sue Wings said, adding that assumes a level equalized assessed value.
If adopted by the school board, it’s a move that should represent an effort to change by spending down reserves instead of raising taxes to operate the district, she said.
She also acknowledged the district’s taxing practices have become a point of concern, so much so District 36 has landed on the defending side of a property tax objection lawsuit.
A Northwest Herald analysis of the 19 McHenry County school districts found District 36 is among four that have more than a year’s worth of cash in the bank. If revenue stopped streaming in, it would have enough saved up to operate for more than a year on reserves alone. Another 11 school districts have more than double the 90-day benchmark, the analysis found.
It’s important to note, these numbers are not perfect and this is one of many metrics that can be used to measure a school district’s financial health. Numbers were drawn from 2014 annual financial reports, which represent a moment in each district’s financial life.
Depending on a district’s accounting system – cash- or accrual-based – the number of days cash on hand will be inflated. Those with a cash-based system count in their fund balances early tax dollars that typically won’t be used until the next school year.
Up there with District 36 is McHenry School District 15, which has just more than a year’s worth of cash on hand.
A savings to last at least that long makes sense to keep the district “safe” in light of potential changes that are outside a district’s control, some school officials said.
“The state’s situation doesn’t make life better,” District 15 Chief Financial Officer Mark Bertolozzi said, describing a potential property tax freeze or a potential pension cost shift. “A lot of people are hesitant to run as lean as they could because they’re fearful of getting some pretty big bills from Springfield.”
In addition, he said a lot of District 15’s reserves have been set aside for a specific purpose, namely an ongoing, multimillion-dollar project to eliminate all the district’s mobile classrooms.
“Our fund balance is higher because we’ve been carrying that cash on the books for the last few years to pay for that construction,” Bertolozzi said.
The project’s year-to-date cost as of mid-November was about $9 million, with a few more schools scheduled to undergo construction.
Riley Community Consolidated School District 18 is contemplating a similar project, Superintendent Jim Davis said when asked about the large savings stockpiled over the years.
Architects have been given the go-ahead to create bid specs for a project to build a new school building, which would replace two long-used mobile classrooms. If ultimately approved, the project could come with a cost upwards of $1 million, Davis has said.
Former District 18 superintendent Jerry Trickett said it’s been a goal in the district’s sights since the mobile units were first put to use. Money for it was put into savings rather than going out for a building referendum, Trickett said.
When asked about the difference between saving tax dollars over time versus asking for taxpayer permission at one time through referendum, Trickett said it depends on how you look at the situation.
“We’re dealing with about 25 percent of the population: the students,” he said, adding getting referendums passed is a difficult and oftentimes unsuccessful process. “We only have them in elementary for nine years and when you have to increase class sizes or drop a program to a limit that’s probably against educational standards, then you lose something in that academic year that you can’t regain.”
While many have called tax rates into question in light of significant savings, on the opposite side of the spectrum are those districts lacking those “rainy day” funds.
According to a Northwest Herald calculation using operating fund balances, Johnsburg School District 12 has a negative number of days worth of cash on hand.
Together, declines in EAV, reductions in aid from the state, and falling enrollment has resulted in hard economic times for the district, Superintendent Dan Johnson said. Last year, the district cut 15 teachers in addition to other noncertified staff members as a way to slash costs.
“This year and last, we’ve been fortunate enough to have slight surpluses to build up our fund balances,” he added. “That’s our goal: to have surpluses.”
In Wonder Lake, District 36 is edging away from excessive savings a year after levying almost $2 million in the noncapped transportation fund to compensate for the other capped funds.
Apart from general maintenance enhancements to keep the building operational, Wings said there are no other major projects planned for this year. Instead, the district’s savings will be spent down to cover what would’ve been captured through tax levy increases, she said.
“We want the rest of our community to know we don’t want to push them out of their homes, but we do want to make sure our students still have quality educational program,” she said.