Council Briefing: Normal Raises Property Taxes by 6.44%
December 4th, 2017
On Monday evening, the Normal Town Council held a public hearing on an Ordinance Authorizing the 2017 Property Tax Levy. The council heard from eleven Normal residents who all spoke out against the tax increase, asking the Council to explore other options for funding fire and police pensions.
The Property Tax Levy calls for a 6.44% increase over last year’s levy, adding an additional $783,694. This levy was reviewed on November 6th and approved unanimously at the council meeting on the 4th of December. This increase marks the twelfth consecutive year for property tax hikes in Normal.
Brad Striegle, who was attending his very first Town Council meeting with his two young sons, was among the residents questioning the spending habits of the Council. Other residents such as Jared Ruszkowski urged Council members to consider how the property tax increase would affect the “median taxpayer.”
Ruszkowski said the taxes on his duplex have increased thirty percent over five years, which has negatively affected his quality of life. Ed Nieves, representing the 500-member Bloomington-Normal Association of Realtors, echoed Ruszkowksi’s sentiment as he questioned the council on “how [realtors] could sell a better quality of life in Normal when property taxes are so high.”
Although residents objected to the tax increase for different reasons, they all requested the same outcome: find another way to fund pensions without putting the burden on homeowners. Marc Tiritilli and other residents suggested funding pensions by reallocating funds such as the three million dollars in unallocated sales tax that the Town had at the beginning of the year.
According to the newest Normal Town Council Member, Chemberly Cummings, the decision to raise property taxes was not easy. Cummings said she had considered all other possible options, but feels that a tax increase is the only way to ensure that the pensions stay funded. Cummings cited Illinois Pension Law Article 3-125, which calls for property tax levies to fund police pensions. Cities that are not on target, as determined by the state of Illinois, can face revenue forfeiture.
According to Cummings, “[The Town Council] is left to take the whipping from our constituents” due to restraints put on local governments by the state. Councilman McBride urged constituents to realize that council members are raising their own taxes as well and that the price of everything, including taxes, increases over time. McBride gave partial blame to internet retailers, which hurt the sales tax revenue, and a diminishing workforce for the greater tax burden on property owners. He also mentioned that, while constituents worry about the Council's spending habits, “cuts are coming.”
Some councilmen took a more positive tone, asking Normal residents to celebrate successes such as Rivian and Brandt which are poised to bring a combined total of 1,500 jobs to the area over the next five years. It is worth noting that these job promises are merely predictions at this point and Rivian's expected hirings are a few years out at a minimum.
Fritzen also addressed residents' concerns regarding the efficiency of pension fund investments and the pension portfolio's rate of return. Fritzen, as well as City Manager Mark Peterson, stood firm on the fact that a 5.5% return was rather good, considering the limitations on investments set by the state. Councilman McCarthy shared the same sentiment and urged residents to voice their concerns to the Illinois General Assembly. McCarthy also warned Normal residents that they “may have to put more and more in [to the pension fund]” every year.
The markets are doing fantastic this year. The S&P 500 is up nearly seventeen percent for 2017. The performance of the conservatively invested pension funds are already testing the boundaries of what is possible. Despite the market at all-time-highs, Mark Peterson expressed that the pension funds could do even better.
Town of Normal Mayor Chris Koos also mentioned the 2007 California pension system that took a massive hit due to aggressive investments. He said this is one reason that pension funds invest more conservatively. According to City Manager Peterson, however, other cities of roughly the same size as Normal in surrounding areas are experiencing a much lower return on their investments, some as low as four percent.
If the Council did avoid the tax hike, how would the pensions be funded? Peterson says there were only three possibilities: leave the system underfunded, reduce the police force, or shift funds from other areas of the budget. Clearly, underfunding the system is not a viable option; and while Normal doesn't plan to increase the police force in the next five years, downsizing is not a feasible option either.
When Councilwoman Kathleen Lorenz questioned the reason for not reallocating funds from other sources, Petersen explained that the only part of the budget the Town Council controls is the General Fund and Library Fund. When the Illinois General Assembly approves pension sweeteners, the burden of funding falls on the municipalities and, unfortunately, taxpayers. Petersen also relayed that there are no idle funds to be moved and that the Town will not use reserve funds for this issue.
The State of Illinois sets a high expectation for the performance of their pension fund investments and even after missing these goals year after year, Normal does not set aside extra funds for the pensions. It’s unclear whether the Town can earmark other portions of its General Fund in case of underperformance in the pension funds, but it certainly seems that doing so would be helpful.
The 6.44% tax increase will result in a $40-$50 hike in property tax for the average homeowner in Normal, Illinois. For most citizens, this may be less than one dollar per week. However, property taxes have been steadily rising in Normal for the past twelve years. The property tax rate is already the second highest in the nation, claimed Tiritilli. Many residents agree that the costs add up over the years. Jared Ruszkowski says his property taxes increased by almost $900 in just five years. According to Councilman McCarthy, property tax increases may be a continuing trend in Normal.
The City of Bloomington has had minimal changes to their tax levy over the past seven years, rising only two percent total. The Town of Normal’s tax levy has risen over forty percent during the same period.