Police pensions strain E. Dundee budget

East Dundee is feeling the pinch of waning sales taxes and declining property values. And that pinch could soon develop into a strangulation with local officials estimating that in the next three to five years police pension obligations will exceed what the village collects in property taxes.

Currently, about half of the village's property tax levy - or $260,000 of $546,444 - pays for police pensions. The remaining $286,444 covers expenses in the village's general fund, including employee salaries, Social Security contributions and operating expenses.

But a police pension actuarial study completed last year estimated police pension contributions will increase about 11 percent annually. In contrast, the village's tax levy has grown at a fraction of the pace, with the village seeing increases of 2.76 percent, 5.35 percent and 0.07 percent from 2006 to 2009.

Village Finance Director Nick Cinquegrani said property taxes have remained flat because of the village board maintains a policy in line with the property tax extension law limiting property tax increases for non-home rule communities. Although East Dundee is a home-rule community, village officials have vowed to keep property tax increases to the lesser of 5 percent or the consumer price index, which in 2009 was 0.1 percent. The village's property tax levy went from $546,060 in 2008 to $546,444 in 2009.

"I would love for the village to change its policy," Cinquegrani said. "If the board's policy remains unchanged we will need to increase revenues and raise other taxes, like sales taxes, and decrease costs elsewhere."

The police pension contribution in 2016 is estimated to be $570,427 and would eclipse the village's current tax levy if the status quo continues.

Some village trustees say the village may be forced to loosen up on the pledge it made to residents when the village became a home-rule community in 2004.

"Times have changed since we made that promise," Trustee Michael Ruffulo said. "It is scary, because five years from now all of our property taxes will be earmarked for police pensions."

In comparison, West Dundee currently spends about 12 percent of its $3 million tax levy on police pensions.

East Dundee Village Administrator Frank Koehler said the village has the option of funding pensions from sources other than property taxes, namely income and sales taxes.

"It doesn't have to come from property taxes," Koehler said. "The board will have to look at all of the revenue sources and balance all of our funding based on revenue."

The 11 police officers participating in the Downstate Pension Fund contribute 9.91 percent of their salaries to the fund, Cinquegrani said.

Officers are entitled to up to 75 percent of their salary upon retirement. And the average salary is $72,521. The figure nears $100,000 when holiday pay, specialty pay and insurance benefits are included, but that doesn't figure into the pension amount.