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The following fictional conversation, we hope, will help taxpayers make sense of the property tax bills they're about to receive:
Joan Taxpayer: I usually dread opening my local property tax bill because it's expensive and it always seems to go up. But thanks to the $10 million tax reduction from Oak Park and River Forest High School, I'm finally looking forward to a little tax relief when I get my next tax bill at the end of January.
Ali Assessor: Er … I hate to break this to you … but you're not going to see any tax relief on the bill you get in late January. In fact, your next tax bill will be higher than the one you got last January.
But don't panic! Your tax bill will go down … but it won't happen until the second installment bill that comes out in late June.
Joan T.: You mean my taxes will go up before they go down? What in blazes is going on?
Ali: Cook County is so big and its property tax system is so complicated that total property tax bills for the year cannot be calculated until summer, when second installment bills are mailed. This means that the first installment tax bill is always an estimate. Under state law, the first installment is 55% of the total taxes on a property from the previous year. Accordingly, this year's first installment bill will be higher than last year's.
The high school's $10 million reduction will be accounted for in the second installment tax bill. When the second bill is calculated, I estimate the annual tax bills of most Oak Park taxpayers will fall by about 2%, and the tax bills of most River Forest taxpayers will decline by about 3.3%. The $10 million reduction will have a larger impact in River Forest because the high school levy constitutes a larger percentage of River Forest tax bills compared to Oak Park. (See accompanying sidebar)
Joan T.: Given the $10 million levy reduction, a 2-3% reduction in my bill seems kind of low. And you make me nervous when you say that these tax breaks are "estimated" for "most" taxpayers.
Ali: I don't mean to make you nervous, but understand that the $10 million in savings is spread across two communities, with Oak Park saving $7.35 million and River Forest saving $2.65 million (River Forest having a significantly smaller population). In addition, the reduction in the high school levy will be partially offset by the other taxing districts, most of which will be increasing their tax levies this year. Finally, the local impact of levy increases from countywide taxing districts is impossible to calculate at this time. This uncertainty forces me to make estimates regarding the total taxes our communities will be paying.
My estimates assume that everyone's assessments and exemptions will be the same as they were last year. This will be true for most local property owners, but some will see assessment changes due to appeals or other factors, and others may see changes in the value of their homeowner or senior citizen exemptions. Such property owners will experience changes in their tax bills of more or less than the 2-3% reduction I'm estimating.
Joan T.: It sounds complicated. But as long as I know I'm getting a tax reduction in the long run, I'll be happy.
Ali: Be wary of long-run plans! The high school has reduced its levy for this year, and has discussed doing the same next year. But the current school board has stated that it expects its levy reductions to be in effect for at most two years, in order to reduce the school's reserves to a level the board believes is appropriate. Once the reserves are reduced, the District 200 school board will have the right (though it may not exercise that right) to increase its levy by the $10 million that it cut this year.
Joan T.: But I thought taxing districts could only increase their tax levies by the rate of inflation. How can a future school board get a $10 million levy increase?
Ali: In general, taxing districts like the high school set the current year's tax levy by taking the prior year's levy and increasing it by no more than the rate of inflation. But an exception to this rule allows a taxing district to give a temporary tax break to property owners for as long as two years. In the third year, the district can reinstate tax levies based on the level in effect before the tax break.
Joan T.: So you're saying that in two years, I will again experience dread when I open my tax bill?
Ali: Think of the high school tax reduction as a partial tax holiday. Enjoy the holiday, but remember that all holidays come to an end. The high school's partial tax holiday will likely come to an end in 2015 or 2016.
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