How a controversial law allows local governments to recapture refunded property taxes

Hundreds of taxing bodies throughout the suburbs now can reclaim millions of dollars in refunded property taxes thanks to a controversial law passed nearly unanimously by the state legislature two years ago.

In Cook County alone, scores of non-home-rule taxing bodies — including all school districts — are eligible to claw back nearly $204 million combined, according to a recent report issued by County Clerk Karen Yarbrough.

Proponents of the new law argue local governments are entitled to the tax revenue that was forfeited when refunds were issued, but critics complain it amounts to a backdoor tax increase.

“It's an automatic increase with no oversight,” said Cook County Treasurer Maria Pappas. “And it's a bad deal for taxpayers because their taxes go up.”

The reclaimed funds aren't affected by the state's property tax cap law, which annually limits most taxing bodies to increasing property tax collections by 5% or the rate of inflation, whichever is lowest.

The additional revenue is calculated by the amount of property taxes refunded to commercial and residential property owners who received certificates of error from county assessment officials, through a court order or via decisions by the Illinois Property Tax Appeal Board during the previous year.

The amount owed is passed along to taxpayers based on the assessed value of their property. The more valuable the property, the larger the portion of the refunded tax revenue a property owner is responsible to cover.

The bill was drafted by leaders of the Illinois Association of School Business Officials, led at the time by Huntley Community School District 158 Chief Financial Officer Mark Altmayer, who disputes that this tax recapture law is a tax increase.

“This was a technical change bill to ensure that taxing districts were not losing funding,” he said. “This bill does not allow taxing districts (that are subject to the tax cap) to collect anything more than what they were allowed to collect before this bill was passed; rather, districts are simply able to collect what was previously allocated.”

After a lobbying effort by many school district leaders, the new law was ultimately approved by both chambers in the General Assembly, with only a single state representative voting against it on the final day of the 2021 legislative session with almost no discussion. It was signed by Gov. J.B. Pritzker with little fanfare.

“We sent a letter to the governor seeking an amendatory veto,” said Sarah Wetmore, acting president of the Civic Federation, a nonpartisan government research organization. “We wanted to see certain protections for taxpayers and we're also concerned with the financial stability of the taxing bodies.”

The Civic Federation's chief concern was that property owners who received a refund would not be exempt from paying for that lost revenue.

“A recapture levy must not be extended against the properties that received refunds,” the letter said. “Without such an exemption, those property owners who received refunds will essentially be forced to pay back their own refund.”

Wetmore said her group, which generally supports recapture laws, also was concerned about the transparency of taxing bodies reclaiming these funds.

“The way it's been imposed is it's automatic,” she said. “Other proposals would have required these governments to affirmatively levy for it. We believe all parts of the budget process should be open.”

School districts, which rely most heavily on property taxes, are the biggest beneficiaries of the new law.

Chicago Public Schools are eligible to recapture more than $50 million this year alone.

Palatine-Schaumburg High School District 211 and Northwest Suburban High School District 214 are eligible to recapture nearly $4.5 million each this year. That's less than 2% of what both districts receive annually in property taxes.

Officials at District 211 said they are planning to forgo the additional revenue like they did last year through the tax abatement process.

“Our goal in District 211 is always to remain fiscally responsible,” said Lauren Hummel, District 211's chief operating officer. “That means making sure we have the resources needed to continue to deliver an outstanding education and support to students in buildings that are safe, secure and well-equipped to prepare them for the future. At the same time, we recognize our obligation to our taxpayers.”

Meanwhile, District 214 officials said no decision on the additional revenue has been made by the board.

The new law does not affect taxing bodies with home-rule powers — usually villages and cities — because those entities are not beholden to the property tax cap.

Elsewhere in the suburbs, more than $5.9 million is available to eligible DuPage County taxing bodies. Taxpayers in West Chicago Elementary District 33 are on the hook nearly $600,000 in property taxes refunded last year, the highest amount in the county, according to a county clerk's office report.

Wheaton-Warrenville Unit District 200 received nearly $500,000 last year and is eligible to receive nearly $400,000 more this year.

“This additional collection has been deposited into the district's capital projects fund and is expected to be used for future capital projects as determined by the (school) board,” said District 200 Assistant Superintendent Brian O'Keefe. “While a final determination has not been made, it is likely that all recapture collections from the 2022 tax levy will be deposited ... in the same manner as the 2021 tax levy.”

In Kane County, eligible taxing bodies can reclaim a combined $4.3 million. In McHenry County, the combined amount available to the eligible taxing bodies is $2,304,561, according to county officials.

Officials in Lake and Will counties have yet to officially tabulate last year's refunds.