McHenry County property taxes: Taxing entities strategize as maxed-out tax funds see revenue loss

Note to readers: This is part three of our series Property Taxes: Follow the Money. 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.

When Robert Bradbury joined Marengo's Fire Department 32 years ago, the members of the town's fire department and rescue squad barely even spoke to each other. For the past five years, that lack of communication hasn't been an option.

The Marengo Rescue Squad is one of many taxing entities in McHenry County that has seen its revenue from real estate taxes drop over the past several years because of plummeting property values.

Since 2008, it has lost more than a third of its real estate tax revenue, which has fallen from more than $961,000 at its peak to about $607,000 this year.

That’s led the department to implement several cost-saving measures, including cross-training all the members of the fire department and rescue squad to ensure both departments are able to respond to calls efficiently.

Bradbury, who has been the fire chief in Marengo for 11 years, became chief of the rescue squad five and a half years ago. He said he has a hard time keeping staff members from leaving for other jobs because of a lack of benefits and insurance.

After the rescue squad opened a third station in Union, it began renting out storage space within the buildings so it could afford to pay its utilities and tax bills.

Property taxes are expected to rise slightly this year, but that isn’t likely to bring much relief to the department and others in its predicament.

“We won’t get ahead any, but, hopefully, we won’t take any more cuts. We’re kind of scraping bare bottom,” Bradbury said. “If worst comes to worst, we have to take one of the ambulances out of service. That’s the last thing we want to do or expect to do right now, but if we take another $100,000 hit, we don’t have any other choice.”

How much money most taxing entities receive each year is governed by two tax caps.

One limits the overall amount governments – those that don't have home-rule authority like McHenry and Crystal Lake do — can raise their property tax levy to inflation plus new growth.

Another limits the maximum tax rate of individual funds within a levy – like police protection, road and bridge, and even the main corporate or education funds – tying the maximum amount the entity can levy to a certain percentage of property values.

In 2014, 34 of McHenry County’s 117 taxing bodies reached the maximum tax rate in one or more of their funds.

Fifteen entities hit the maximum in one or more funds this year for the first time, including four school districts.

Most of those districts have lost tax income over the past several years because property values dropped, creating budgeting dilemmas that require strategy and creativity to solve.

Fox River Grove School District 3's education fund was maxed out in 2014, and its building, working cash and special education funds came close to the limit. Each fund lost about 5 percent of its revenue from the year before.

Because of that, the district has taken advantage of a stipulation in the Illinois School Code that allows districts with a population below 500,000 to transfer money between their educational, operating and transportation funds.

Superintendent Tim Mahaffy said the district has been able to use the uncapped transportation fund to compensate for the maxed out funds and avoid major cuts in daily operations.

The city of Woodstock hit caps in its parks, bands and library building funds in 2013, and while the funds dipped slightly below maximums in 2014, they still saw drops in income. In the past, the city has been able to transfer money from the general fund to those funds to cover the difference.

That means a potential loss of funding, however, for other departments that rely on the general fund. City Manager Roscoe Stelford noted road maintenance, often a problem because of the freeze-thaw cycle, has become a bigger challenge for Woodstock as the city spreads the funding around.

“It’s a whole bunch of variables that are coming into play,” Stelford said. “How much growth are you seeing in other revenue sources? Can that compensate? There’s a lot of moving pieces that go into it.”

The Woodstock Fire/Rescue Department, which is a separate taxing body, came close to maxing out its corporate fund this year. Although it did not hit its limit, the fund still saw a 7.54 percent drop.

Woodstock Fire Chief Ralph Webster said the department has been tightening its belt for years as its revenues stalled because of property values.

The department has worked to extend the life of its equipment rather than replacing it, moved training in house, reduced overtime usage and increased its employees’ contributions to insurance costs. Everyone, Webster said, has taken on more responsibility.

“We look at the work and re-divide it,” Webster said. “If we can’t afford to have a position, we’ll eliminate it. The public needs to realize, at the end of the day, there is a basic level of service needed in the community and you don’t want to cut below that.”

A slight anticipated increase in equalized assessed value around the county will likely do little to boost revenues, but it may cause the individual rates of homeowners to drop slightly, a change that local officials embrace.

“Everybody wants to see EAV growth for a number of reasons,” Stelford said. “It does, I think, hit morale as far as seeing your home’s seeing less and less each year. There’s no doubt [the growth is] a positive.”