Naperville favors tax hike as buffer against budget shortfall

Naperville city councilmen gave preliminary approval Monday to increasing the city's property tax rate but are adamant it will be back to even before tax bills reach mailboxes.

Councilmen agreed on a 3-cent rate hike saying it would be used as a buffer only if there is a major unexpected revenue shortfall.

The increase means the rate would be 74.66 cents per $100 of equalized assessed value, up from 71.66 cents last year.

"When it's all said and done we expect we will use none of that," said Doug Krieger, director of finance. "This council has been very clear with the expectation for 71.66 (cents), and we have every intention that will be the ultimate rate."

The three-cent rate increase alone - not counting the expected increase in property value - translates to an extra $40 for a taxpayer with a home valued at $400,000 in the spring.

For more than a month, the city has been working out a plan to cut its expenditures to address a $5.1 million hole in this year's budget that was predicted to grow to $11 million next year.

The shortfall is due in large part to lower sales tax and real estate transfer tax revenue than anticipated. City staff have also listed increased costs such as road salt and $1.2 million for the city to fight Councilman Richard Furstenau's civil lawsuit.

Furstenau defended himself Monday and said rising pension and salary costs have also contributed to the hole.

To address the shortfall, the city has identified millions of dollars in cost savings from every department as well as outside agencies including the libraries and Naper Settlement. The city has reduced its nonpersonnel-related costs by $3.2 million and plans to shore up another $3 million by cutting about 40 jobs. Of these, 22 already are vacant.

The 3-cent tax rate increase would provide a $2.1 million buffer in case the economy gets drastically worse.

Councilman Doug Krause said he doesn't want residents to think the city is raising taxes.

"We have always abated the taxes in all the years I can recall," Krause said. "We're not raising your taxes; we're just establishing a ceiling."

But Councilman Robert Fieseler pointed out that regardless of the rate, property values are expected to go up 6 percent based on preliminary figures from township assessors.

"We can't congratulate ourselves for even keeping the tax (rate) flat because there's a 6 percent increase that's going to be passed along to taxpayers," Fieseler said.

Despite the downturn in the real estate market, properties are assessed based on the past three years, so assessment values may be higher this spring than some people expected.

Those voting in favor of the 3-cent rate increase were Krause, James Boyajian, Darlene Senger, John Rosanova, Kenn Miller and Mayor George Pradel. Those voting against it were Fieseler, Furstenau and Grant Wehrli.

A public hearing will take place at the Nov. 18 city council meeting, and the council will take another vote on the levy Dec. 2. The city will establish its final rate in April 2009.