A simple fix to D97's levy mistake

Opinion: Columns

July 11th, 2017 4:11 PM

By Kevin Peppard

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District 97 (the Oak Park elementary schools) had a misleading statement on its recent referendum question. How that happened is another story, and it is only partially related to the "Multiplier/Equalization Factor" change on your tax bill. It now turns out that it could collect up to $2.6 million more per year than indicated — about 20% more than advertised. 

Over the 20-year cycle of the associated bond issue, that's another $52 million. To its credit, the district wants to adjust for that, which is not what happened with District 200 (OPRF High School) a while ago on a slightly different matter, which led to its huge, unanticipated surplus. That surplus is now distorting the decisions of that other district.

Two of D97's proposals (send checks back or pay off bonds early) won't solve the underlying problem. Those are only one-year fixes, and the problem is that the mistake will get built into the "Tax Cap Extension Base," which grows with the Consumer Price Index (CPI) every year, and will be with us forever. There would have to be refund checks forever. Those are impractical, as I will describe below.

The solution is to reduce the levy made this next December (to be collected next year in two installments) by the overcharge. The year after that, things would go back to where they would have been, with a CPI adjustment to boot. That is allowed with an exception under the tax cap law. That is exactly what the High School did recently, but it requires careful understanding. At the time that happened, Jeff Weissglass (then OPRF High School board VP) and I were the only two people in this community who knew how to do that. It works.

You wouldn't get your money back until this time next year (it's about $150 on average for the first year), but at least the problem would not go on year after year. If you wanted a refund check now, to whom would it be issued? What if the house has been sold? The new owner could say, "I paid part of those taxes at the closing." Or your joint owner wants to cash the check in his/her name. And then the bank refuses to cash it without legal documentation that you are the new owner. 

Or the mail ends up at your neighbor's house, as happens to me a few days a year. This involves 19,000 checks, so that is a guaranteed problem. In any case, those checks will likely be taxable income, since the initial taxes were itemizable as deductions. That means the district must issue IRS Form 1099s, but they don't understand what the Social Security numbers and other IDs are (as with trusts). It's not even clear that it's legal to issue such checks. 

The solution is to lower the next levy, in a calibrated fashion. The district has plenty of time to do this the right way.

Kevin Peppard is treasurer of Pragmatic Solutions, and has presented free public workshops on school finance at the Dole Library since 2013.