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Limiting tax increases with caps and creativity

Opinion: Columns

June 12th, 2018 12:12 PM

By Ali ElSaffar

Oak Park Township Assessor

Most Oak Park property owners have seen tax increases of 20% over the last two years. For the average single-family homeowner, this corresponds to an increase of $1,875. At a time when inflation has been less than 2%, these double-digit tax increases have given rise to great community concern.

Under Illinois' tax cap law, tax increases by local governments are not supposed to exceed the rate of inflation. But Oak Park governments have raised additional revenue over the years through voter-approved tax referendums and various other exceptions and loopholes in the tax cap law. The cumulative result of these efforts is that local tax levies have increased by more than three times the rate of inflation since the year 2000. For a community that aspires to be open to people of diverse backgrounds and income levels, this is not a sustainable path. 

Large tax increases are especially problematic under a property tax system that makes few distinctions between those who can afford higher taxes and those who cannot. Some Oak Park residents have seen 20% tax increases even if they have retired, lost a job, or gotten sick over the last two years; many more have seen large tax increases without equivalent increases in their incomes. If we made greater efforts to limit tax increases to the rate of inflation, we could reduce the harm caused by these regressive elements of the property tax system. 

Conventional wisdom in Oak Park, however, suggests that top-notch public services require periodic tax increases that are well above inflation. This point of view has led Oak Park's largest local governments to increase their tax levies by more than 20% over the last two years. 

But the financial record of Oak Park's smallest government raises doubts about the conventional wisdom. Oak Park Township provides high-quality public services, yet its tax increases were just 2.4% in the last two years, and have been significantly lower than any other Oak Park government to this point in the 21st century (See chart). In addition, the township has no debt, and its pensions are 93% funded, the highest of any local government in Oak Park.

Notwithstanding the township's positive financial record, some have suggested that local taxes could be reduced by consolidating the township with the village. But there are reasons to doubt this. Research indicates that when governments with two pay scales consolidate, salaries at the lower-paying government (the township) tend to rise to the level of the higher-paying government (the village). This is one of several reasons that I am skeptical that consolidation would result in any meaningful savings for taxpayers. 

Rather than trying to eliminate the township, we should instead seek to emulate it, as the township's financial record points to a sustainable path for community taxes. The township has not pursued a tax referendum in four decades, which has forced it to operate under the restrictions of the tax cap law. This has sometimes been difficult, as government expenses can increase by more than inflation. But the township has overcome the difficulties, using the tax cap's exception for newly-built properties to raise some extra revenue, while containing costs with creative, cost-effective policies. 

Employee compensation is the largest expense at the township and most other local governments. Prompted by the tax cap, the township has adopted an overall limit on salary increases that closely tracks the rate of inflation. My salary of $34,217 falls under this policy. Last year the pay for my part-time job rose by $238, matching the applicable rate of inflation. Although I could probably earn more working elsewhere, I and many of my colleagues have chosen to work at the township because its culture of public service provides rewards that aren't reflected in our paychecks. 

The limitations of the tax cap have also encouraged the township to collaborate with other local governments. For example, the shared missions of Oak Park and River Forest townships have led them to join forces to provide high-quality services for at-risk youth and senior citizens. By working together, both townships have achieved money-saving economies of scale. 

Finally, with ever-increasing taxes, the Township Assessor's Office has seen significant increases in requests for help with tax appeals. Instead of hiring more salaried staffers to do the extra work, however, we have found well-qualified people willing to work on a temporary, part-time basis during appeal seasons. Since such employees only work as needed, this is an efficient way of providing services. 

Oak Park is a big-hearted town that uses local government to promote a vision of a better community and a better world. The challenge is to find a way to achieve this vision without raising taxes by so much that Oak Park becomes prohibitively expensive for large segments of the population. But if we embrace the tax cap as a catalyst for finding new, cost-effective ways of providing services, I believe we can meet this challenge.

 

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