Illinois lawmakers are dogpiling on a situation that seems paradoxical: property taxes going up when home values are down. As a result, they have introduced five different pieces of legislation calling for property tax freezes.
Although not identical, the different measures—House Bills 89, 95, 1499, and 1521 and Senate Bill 1308—all have roughly the same goal: to prohibit school districts, park boards, municipalities, and other taxing bodies from increasing tax levies when home values are dropping.
“We’re taxing people out of their homes,” Representative John Cabello told me Monday, noting that Illinois has one of the country’s highest property tax rates. The freshman Republican legislator (and sponsor of HB 1521) said that the disconnect between home values and property taxes was one of the most common complaints he heard when campaigning for office last fall. “I don’t feel it’s right that your property taxes keep going up when home values are going downward,” said Cabello, a former Rockford police detective.
The spur for so many pieces of legislation is obvious, explained Joe McCoy, the legislative director for the Illinois Municipal League. “We’ve been seeing declines in property values since 2008, and [legislators] are hearing about it from constituents,” he said.
Questions about the intersection of home values and property taxes have dogged local taxing agencies since the early days of the housing bust. Representative Jack Franks, a Woodstock Democrat, proposed freezing property taxes in 2011, but that bill was defeated last year. Now he’s back sponsoring HB 89.
Franks’s bill and some of the others are essentially upside-down versions of the state’s 1994 tax-cap law. Known as PTEL (for Property Tax Extension Limitation Law), it aimed to stop taxing bodies from jacking up their rates in lockstep with fast-rising home values. Now Franks and others want tax bills to reflect the home-value decreases of the last few years.
There is another point of view. “Just because property values have declined doesn’t meant the cost for local governments to provide services has gone down,” said Larry Bury, policy director of the Northwest Municipal Conference, which represents 43 suburban communities. “In fact, they have escalated,” due to increasing costs from contractual wage hikes, rising pension burdens, and other expenses. “A tax freeze really hurts the taxpayer, in terms of the services the community can provide,” particularly when it comes on the heels of cuts already implemented during the recession.
The Illinois Municipal League’s McCoy added that plans to shift part of the state’s crippling pension burden to municipalities would compound already existing threats to towns’ financial well-being. “We oppose a property tax freeze coming at the same time,” he said.
Cabello countered that the primary reason property tax rates go up was that “governments need to keep growing. They know they need to spend all the money [that] they are appropriated or they won’t get as much the next year. There are obviously savings that can be had, and we need to identify them.”
Franks’s bill provides for a permanent change in the state’s tax codes. In any year when a taxing body’s Equalized Assessed Value (the total taxable value of all property within the taxer’s boundaries) is less than the year prior, taxes can’t go up without voter approval. If passed, Cabello’s bill would be temporary, expiring in fiscal year 2017, when he thought home values would be rising consistently across the state.
But is it too late to freeze property taxes now that home values seem to be thawing? In the Rockford area, which Cabello represents, home prices at the end of 2012 were 3.4 percent above where they had been a year earlier, according to the Rockford Register Star (the increase was due in part to the record sale of one 33-room house). And on Tuesday, new Case-Shiller data showed that Chicago-area prices finished 2012 at 2.2 percent above where they had been at the end of 2011.
Nonetheless, Cabello said one of the proposed bills is needed. “I think prices might still go down next year,” he said. “We need this tax freeze.”