East Dundee residents could see their first property tax hike in several years if village officials decide to more aggressively fund rising pension costs.
The village levied $566,396 in property taxes for 2016 -- an amount that has remained relatively flat since 2011, documents show. Increased police pension obligations have eaten up more of that money over time, leaving less to be allotted for operational costs, Village Administrator Jennifer Johnsen said.
So as not to fall short of their pension liabilities in the future, trustees on Monday began discussing whether to boost property taxes -- and by how much.
Johnsen recommended raising the levy by about 13 percent -- a more than $70,000 increase -- for 2017 in order to fund a higher annual pension contribution and start earning more interest on those investments. With that option, she said, the owner of a home with a $185,000 value would pay about $48 more per year in property taxes.
State law requires municipalities to fund 90 percent of pension costs by 2040. The village has been contributing the statutory minimum for the last several years, Johnsen said, noting the police pension fund is about 52 percent funded.
"In my opinion, it's a lower funding rate than I would like to see for the village because I know they're going to have to pay it at some point," she said. "Ultimately, the village is responsible for that contribution down the road, even if it spikes."
Trustee Jeff Lynam expressed frustration over the increased pension obligations, calling it a "constant drain" on residents. But with little control over the situation, Village President Lael Miller said the village needs to start evaluating solutions that will be the least burdensome for taxpayers.
"This is a conversation we should've been having for years," Miller said. "We have to start looking more long-term at these things."
Trustees said they will also discuss keeping the tax levy flat another year, or raising the village's annual pension contribution -- and in turn, its tax levy -- even higher than Johnsen's suggestion. The latter option would more closely align with recommendations from an actuary hired by the police pension board.
Additionally, the village board is expected to consider whether to roll garbage collection costs into the tax levy or keep them as a separate fee. East Dundee recently began charging each residence $19.80 per month for refuse services to help bridge a gap in this year's budget.
Trustees will resume discussions at an upcoming committee of the whole meeting, where staff members are expected to bring examples of how each scenario would affect residents' tax bills.
"Seeing real-world examples will help us evaluate different options," Trustee Scott Andresen said. "At the very least, it shows we're working our butts off to make it as good as we can for our residents."