A deal state lawmakers approved almost two years ago that extended tax breaks for Sears could mean major tax increases next year for Community Unit District 300 taxpayers if district officials don’t act to cushion the blow.
School board members discussed a course of action Monday that would restructure existing debt, extending payments but avoiding a big jump on next year’s tax bill. Property owners still should expect a tax increase on those bills, but of 1.8 percent, not 4.5 percent, according to projections discussed Monday.
The typical owner of a $200,000 home paid about $500 in property taxes this year just because of the district’s debt. If school officials do nothing, the amount could increase to $853 to cover the district’s debt in 2021.
“Restructuring would stabilize the payment at around $500,” said Elizabeth Hennessy, from financial services firm William Blair & Company LLC, in a presentation to board members Monday.
When the Carpentersville-based district borrowed money in 2006, officials structured their payments to increase in 2014, when they expected more money with the Hoffman Estates Sears property going on the tax rolls. Portions of that property fall in District 300 boundaries.
If all had gone according to plan, the district could have seen $24 million in taxes per year starting in 2014. That won’t be happening because in December 2011 legislators extended Sears’ tax break for up to 15 more years.
Extensive lobbying, though, by District 300 parents, teachers, administrators and allies helped soften the incentive deal. Local governments will get double the property taxes they got from the initial Economic Development Area deal, or EDA, which was approved in 1989.
Chief Financial Officer Susan Harkin said the district expects slightly less than $6 million next year. But the “extra” revenue was more than allocated in 2006 when the district structured its debt payments.
“What happened with the extension of the Sears EDA, it diverts that back to the rest of our taxpayers so everybody else is kind of making up the difference,” board member Chris Stanton said at Monday’s meeting.
The option Hennessy presented to board members will save taxpayers from a balloon payment next year.
By extending the debt payments through 2031 from 2026, homeowners in Dist. 300 could save hundreds of dollars in the next few years by avoiding a 21 percent increase in the debt service portion of the total 2013 levy.
“None of this, though, comes without a cost,” Hennessy said.
Pushing off the debt will mean payments for longer and higher total costs because of the extra interest.
But school board members said Monday stabilizing the tax bills will be worth the long-term cost.
And because the borrowed money funded construction projects at almost all the district’s schools — the benefits of which will be felt beyond 2031 — school officials say it makes sense to spread the pain into the future. The people paying off the debt in 15 years will be benefiting from the buildings it funded even if they weren’t around to approve the 2006 referendum.
School board members are expected to approve resolutions about the debt restructuring next month, and, depending on market rates, they could take action in September.Copyright © 2013 Paddock Publications, Inc. All rights reserved.