Will Carol Stream finally have to levy a property tax? Forums to be held
Carol Stream's distinction as one of the few suburbs without a municipal property tax has been a point of pride in village government for most of its 60-year history.
But that soon may come to an end.
At the end of the month, officials will hold forums on imposing a local property tax. The village's financial planners say the tax would provide a stable funding source to make up for declining sales tax revenue and other losses caused by the state.
"We've been talking about this almost every year for the past decade it seems and primarily due to the uncertainty of our revenue sources," Village Manager Bob Mellor said. "A lot of our current revenue, such as sales tax, rely on the economy."
A town of about 40,000, Carol Stream managed to avoid a property tax even when another outlier, Schaumburg -- a village with a much larger retail base -- took the leap during the Great Recession.
But officials say Carol Stream is facing significant budget pressures from rising pension costs. If it maintains the status quo, projections also show the village would exhaust capital reserves during the third year of a five-year plan for roadwork and infrastructure projects.
The village traditionally has transferred general fund surpluses to help pay for capital improvements, but it wasn't able to make such a transfer in the last two years, Finance Director Jon Batek said.
"The dynamic has changed since the sales tax started to slump," he said. "That has kind of prevented us from generating the surpluses we've needed in the general fund to transfer to capital. For decades, that has really been the framework of how we've been able to keep roads and all of the public infrastructure in such good shape."
Last year, the village started a gasoline tax as the first dedicated funding source for its road program, expecting to generate $960,000 a year. The village also receives roughly $1.5 million in its share of motor fuel taxes from the state.
"But in order to sustain our full capital plan for the long term, for that five-year term, we're probably in the $5 million to $6 million range in terms of required funding," Batek said.
In Oak Brook, another town that doesn't charge a property tax, candidates in the last mayoral race took stock of the financial challenges from flat sales tax revenues. Carol Stream also saw a 2.4% drop in sales tax dollars -- the village's largest revenue source -- from calendar years 2017 to 2018.
Sales tax dollars account for 44% of Carol Stream's revenues, but in peer communities, property taxes on average amount to 25% of all government revenues, according to Batek and a village study.
The village has increased its sales tax rate twice, in July 2010 and 2018. The total sales tax rate in Carol Stream now stands at 8%.
As for pensions, an actuary has determined that the village's funding contribution for police pensions in fiscal year 2021 (starting May 2020) will cost $2.8 million, an increase of $224,850.
"Sales tax revenues would have to be budgeted to increase by 1.9% just to make that $224,000 additional contribution," Batek said. "And at this point, I'd be reluctant to raise sales taxes 1.9% from a forecasting standpoint just because they've been sliding over the past couple years."
It's still unclear how much a village property tax would cost homeowners because officials have not yet pinpointed a proposed levy amount.
But for every $1 million levied, the owner of a $231,400 home, the median in Carol Stream, would pay roughly $61 annually to the village, according to estimates.
Officials plan to hold a Q-and-A session on the proposal at 9 a.m. and 6 p.m. Sept. 30. Trustees could make a decision at one of their October meetings in order for the municipal property tax to show up on bills starting next spring.
Over its history, the village has charged a property tax, but only on a short-term basis: back in the 1970s for pensions and one year for water reclamation center renovations, Mellor said.
"But those were during our growth years when we got a lot of developer donations and a lot of developer fees, which we don't have anymore because we're pretty much built out," he said. "And the boards were able to abate those property taxes."