Tax Levies versus Tax Rates

A helpful explanation on tax levies versus tax rates on an issue coming up on the County Board this week.

From the News-Gazette: Tom's #Mailbag, Oct. 13, 2017

Property tax increase"Noted in last week's News Gazette of an upcoming Oct. 19, 2017 public hearing to approve a proposed Champaign County property tax levy increase for 2018. Total property tax levy increase was documented at 7.74 percent. Have searched online for info on reason(s) for this large property tax increase. Please advise where I might access this info in advance of the Oct. 19 public hearing." 

The public hearing on the county's proposed tax levy increase will be at 6 p.m. Thursday, just before the county board meeting at 6:30 p.m. State law requires the notice you saw in the paper and dictates its form and content, said County Administrator Rick Snider. 

The important thing to remember is that an increase in the tax levy doesn't mean there will be an increase in the county's tax rate. 

The 7.74 percent increase in the levy — the amount the county government is seeking in property taxes next year — "is a result of the continuing legal matters surrounding the hospital property tax exemption case," said Snider. 

He is referring to the legal case, which went all the way to the Illinois Supreme Court and is now back before the circuit court, regarding the tax-exemption status of the two Urbana hospitals. 

"We learned that there is still a possibility that a ruling may come before the Board of Review closes its books in March," Snider said. That's on a second case that the Supreme Court agreed to hear — Oswald V. Hamer — on Sept. 27. 

"We are overlevying to capture the new growth attributable to the hospital properties returning to the rolls. If this does not happen then the county clerk will automatically reduce the levies to their proper levels under the (Property Tax Extension Limitation Law)." 

In other words if there is a court ruling favorable to taxing districts in the next few months the levy will increase up to 7.74 percent. If there isn't a favorable ruling it won't. 

"This does not increase the rate on other taxpayers," Snider said. "If we didn't act and the properties went back on the rolls, the opportunity to capture the growth is permanently lost and in future years the tax burden would increase for everyone else."

Of course seeing the announcement on the County Board website, had me do a double take even after reading the NG's explanation:

Notice of Proposed Property Tax Increase for Champaign County, Illinois 

A public hearing to approve a proposed property tax levy increase for Champaign County for 2018 will be held on October 19, 2017, at 6:00 p.m. at the Lyle Shields Meeting Room, Brookens Administrative Center, 1776 E. Washington, Urbana, IL. 

Any person desiring to appear at the public hearing and present testimony to the taxing district may contact Tami Ogden, Deputy County Administrator/Finance, 1776 E. Washington, Urbana, IL 61802, (217) 384-3776, togden@co.champaign.il.us. 

The corporate and special purpose property taxes extended or abated for 2017 were $30,802,598.95. 

The proposed corporate and special purpose property taxes to be levied for 2018 are $33,302,118. This represents an 8.11% increase over the previous year. 

The property taxes extended for debt service and public building commission leases for 2017 were $1,442,772.56. 

The estimated property taxes to be levied for debt service and public building commission leases for 2018 are $1,440,463. This represents a 0.16% decrease over the previous year. 

The total property taxes extended or abated for 2017 were $32,245,371.51. 

The estimated total property taxes to be levied for 2018 are $34,742,581. This represents a 7.74% increase over the previous year.

Which of course made me ask, "wait... are my property taxes being increased or not." And then I had to re-read Tom Kacich's explanation again. And no, tax rates are not going up, just the levy, which is what the board *seeks* in property taxes next year. If I'm understanding it correctly it's more like setting an income goal on your next year's budget (even if you don't know how many hours, bonuses, side jobs, or raises may happen) to plan your spending goals accordingly. If you set that levy higher, it doesn't automatically get you more money for your budget.

For accountants and wonks that have dealt with budgets outside of my napkin doodles, it seems they toss around the term "levy" as a budget term for an assessed amount *that doesn't* always have the negative connotations it does with tax payers. I'll rely on their far better understanding of it than my previous understanding of it being synonymous with "taking my money."

Now the real question is how will a higher tax levy affect future tax rates? That is a good question and one I hope to have an answer to in a future post. UPDATE: Yes, it can. Additional information follows:

Here's a great generic explanation of Tax Levies versus Tax Rates someone pointed out to me. It is available at this pdf. It's from a school board elsewhere, but the ideas are the same and probably beats my attempt to explain it as best I could muster at the end. Y'know, from people who know what they're talking about. Here's an excerpt:

I wanted to make sure that I was still understanding this right, so I got in touch with the County Treasurer's office and asked:

I had a quick question that perhaps you or your staff could answer. I think I understand a tax levy, like the one being voted on this week, as being a bit like a budget goal. We hope to get that much for the budget from tax revenue.
Are the tax rates calculated from that then? Or are tax rates voted on separately?
Thank you for your time and help.

And got a reply that made sense:

The levy is the document we use to determine the tax revenue to be collected. The levy applied to the taxing district’s taxable value is how we calculate tax rates.

So levies are important and an increase that outpaces the rise in the district's taxable value could cause your tax rates to be higher than last year.

Hopefully that helps. If you already knew this and just like to watch slow people struggle to grasp basic government concepts for entertainment? You're welcome!

Addendum 10/20/2017:

Local yokel and someone who has been following this issue with a far better understanding than I, Laura Sandefur, explained tax levies and also the hospital issue that was at issue with them this week. She gave me the thumbs up to quote her, and I think you'll find her explanations as helpful as I did:

A tax levy is the taxing district asking for the money to keep their people paid, the lights on, and the doors open--money to pay all the stuff they do and services they provide. By law, they have to hold a public hearing about that. Think of it as a kid asking for an allowance. (not being demeaning here, so please don't yell at me!)

The tax rate is what you have after all the various taxing districts submit their levy each year. Once ALL those taxing districts have sent in those levy amounts in, they are then split out across ALL the real estate present in that district, and that is a tax rate. Add all the percentages for each of the taxing districts on the tax bill, and that is the aggregate tax rate for that property Think of that as mom and dad deciding how much they each are paying of that kid's allowance.

Property taxes are calculated based on the ASSESSED value (approx 1/3 of market value according to Illinois law, unless you live in Cook County) for the property. Think of that as mom paying $20. of the allowance and Dad paying $30.

Clear as mud? I spent over a decade trying to explain Illinois property taxes to property owners. Sorry I didn't spot this discussion earlier... Will try to get back later to explain the whole tax exemption portion. Gotta go pick up my mom.

Okay, that last part wasn't necessary to quote, but it helps to remember that in politics we're dealing with real live human beings with real loved ones doing real life things trying to get by in this crazy rock hurling about the cosmos sometimes. She got back to me on the the hospital taxes thusly:

The issue with the tax exemption question the the paper says is outstanding is in regard to the hospitals. They were not paying property taxes on hospital property for a very long time. They were given exemption from property taxes just like churches and publicly owned property like parks and schools. Without getting bogged down in all the details (if you really want those, one day we can all sit down with beverages and talk like folks!) the hospitals were put back on the tax rolls and they became liable for taxes.

Court battles ensued with all kinds of lawyers going back and forth, until, ultimately, the Illinois Supreme Court handed down a ruling saying the hospitals owed property taxes. More court battles came. Then, the Illinois legislature passed a new law that opened the door to the hospitals possibly being exempt again. Even MORE court cases followed after that new law was passed because there is a question about the ability of the legislature to even PASS that new law.

Last I heard, I think I saw, the **original** question was remanded back to the local courts for determination...

You may be tempted to ask how ANY of this relates to you. Can't blame you for asking. Here's the deal, any time a property is given tax exemption that means the rest of the property owners have to pay the share of taxes that should/would have been paid on those exempted properties. When you start talking about "a few" million dollars of property that is exempted, that can add up pretty quick. It increases the tax liability for the rest of the property owners. You pay more so they don't have to.

Levy bodies (taxing districts) are gonna get their money. The question of who is gonna pay it is what's hanging out there right now.

If you feel like you actually understand this after all that, congratulations! You are one step closer to the wonk side!