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Last night, the Champaign City Council tentatively approved a property tax hike. I favor keeping Champaign’s property tax steady at the same $1.2659 per hundred dollars of valuation used last year. I won’t bother to discuss the affordability of property taxes or how property values (and therefore taxes) have been increasing more rapidly than inflation; those arguments are well-documented. Instead, let’s concentrate on what property tax revenues mean to the city.
During the staff presentation, Richard Schnuer, Champaign’s Finance Director, showed a line graph of the major components of the property tax levy: library, pensions, capital improvements, and the General Fund. These lines were stacked on top of each other, and each increased over time due to the expected growing obligations of the city. He added a blue line, which was called "additional." This represented the amount left over, or in some years, the amount that we were short.
Even at the same $1.2659 tax rate as last year, the blue line was above zero. Next year, over $800,000 would be left over after fulfilling our obligations. The following year, the city would have even more "additional" funds available. In fact, the line remained positive, implying that we would have excess available, until 2014. Some have suggested that, if you don’t want to increase the property tax rate, then you must suggest which services you would be willing to cut to meet the shortfall. The truth is that the shortfall doesn’t exist. Additional funds are available at the current rate.
Now, the city will have some extra needs in the future, which include repairing arterial streets, catching up on pension obligations, improving the Public Works facility, and moving/adding fire stations. We should use the extra money to fund items like these-true long-term investments. And, who knows what will happen in a few years, or by 2014 when the blue line finally crosses and becomes a shortfall? It’s just as likely that we’ll be better off than we are projecting and that we will be able to afford some of these projects with existing revenues at current rates.
Some have suggested that those extra funding needs are new, that we didn’t know about them last year, and that we need a property tax hike to pay for them. This is nonsense. We knew about every single one of those items last year when we voted on the tax levy. In fact, I remember learning about the needs for the Public Works facility all the way back six years ago when I was receiving my City Council orientation. Each project is necessary, but they may not need to be as costly as is being predicted, and they certainly aren’t required to be funded by property taxes anyway. Property tax is often a bad choice, because it is one of the most expensive and regressive types of tax. We have other options.
So, last night, I initially voted for the $1.2659 rate, which I favor maintaining. Unfortunately, the only other Council Member to agree with me was Karen Foster. After a series of polls on specific tax rates, no rate received the five necessary votes. Karen and I eventually voted for a compromise rate of $1.2942. This was obviously our second choice, but it became clear that the other Council Members were intent on increasing our tax rate. I think the compromise was necessary to avoid the even worse alternative of $1.312 that was proposed by staff and could have passed.
Property taxes are going up. But, it could have been worse.
