We live in a society with two generally distinct sectors–the public and the private.
The private sector is non-monopolistic, with monopolies actually being illegal in most instances. Because there is so much competition in the private sector, decisions are based almost exclusively on economics rather than popularity. Popular decisions that produce bad economic results usually lead to drops in stock prices, the firing of management (albeit with golden, or at least silver, parachutes), and even bankruptcy.
The public sector, on the other hand, is monopolistic. Government services tend to come from only one source of supply: e.g., only one fire department, one police department, one system of public education. That’s because those are customarily considered “essential services” which usually cannot be efficiently or economically provided by the competitive free market – although the consistent increases in the costs of such public services has created the outsourcing/privatizing movement.
Public sector decisions are always political decisions, with popularity rather than economic soundness tending to be the more important consideration. Witness the City’s “investment” in the Uptown TIF, a politically popular project (at least with our then-elected officials – the taxpayers never got a vote on it) that was economically unsound from the start due to an over-commitment of City funds and debt with no commensurate economic upside in return.
Those costs to the City were soft-peddled and even concealed from public view by the Uptown TIF perpetrators and their successors. For several years the City ran deficits and processed the Uptown TIF costs through the General Fund to paper over those costs. Only recently did the City, under Mayor Dave Schmidt’s administration, start coming clean with the taxpayers, as politically painful as that has proven to be.
Once again this year, Council Finance Chairman Dan Knight has prepared an essay on the new tax levy that has been sent to the local newspapers and was published in last week’s Park Ridge Journal. It is reprinted here with Ald. Knight’s permission.
By now most Park Ridge residents have either read or at least heard about our City Manager’s presentation of a preliminary December 2014 (for payment in 2015) tax levy to the City Council that is some 23% higher than the prior year’s levy. In actual dollars that 23% represents a $4.1 million increase over the prior levy, and your 2015 tax bills should reflect that increase.
There’s no doubt that on the face of it, both in real dollars and as a percentage, this is a stunningly large increase. Bearing in mind that the City’s portion of the total typical tax levy is roughly 12%, a 23% increase in the City’s share equates to about a 2.75% increase in the total tax bill. On a fairly typical $12,000 tax bill this equates to a $330 increase.
A $330 increase is not to be taken lightly, especially by those on fixed incomes. But you deserve an explanation of the rationale behind that increase, and why it is almost unavoidable.
Here it is.
The first factor is the back-end loaded nature of the Uptown TIF debt the City remains obligated to pay, which hits this levy with a vengeance because the total required debt service payments for the TIF bonds and the required payments of the TIF-related intergovernmental agreement obligations (with both local school districts and the park district) far exceed the tax revenue the TIF brings in. Those TIF expenses will require an additional $2.1 million in payments this coming year, as previously-deferred principal payments kick in; and as the prior abatement of those TIF-related taxes has ceased. Just the TIF alone represents 50% of the total increase.
Next, the success of the recent Park Ridge Library tax increase referendum has enabled the Library Director and Board to levy over $1 million more than last year’s approximately $3.7 million, for a total of $4.7 million. That accounts for another 24% of the total levy increase.
Finally, escalating police and fire pensions have the boards of both pension funds asking for an additional levy of $300,000, which amounts to 8% of the increase.
Just those three elements of the City’s total tax levy consume 83% of the total increase sought. Worse yet, the City has almost no flexibility to reduce those requests because there is absolutely no flexibility as to the TIF or the library increases; and there is very little flexibility, if any, in the pension fund levy requests due to state pension funding mandates.
Over the past few years City tax levy increases were deliberately held to a far more modest level: in the 2% to 4% per annum range. But the demands imposed on the City as described above give the City Council no reasonable hope of achieving such a small increase this year. That said, the Council will work as usual to be sure the balance of the levy is rationalized and any additional increases sought are modest and absolutely necessary.
The fact that this year’s total Uptown TIF debt of $3.4 million will comprise nearly 16% of the City’s total tax levy teaches us a painful lesson: taxpayers and other stakeholders must pay attention to what their elected officials are doing when they are doing it, not years later after the damage has been irreversibly done. It is in the present, rather than in the distant future, that public officials can best be held accountable for their actions on our behalf.
In the case of the Uptown TIF, irrespective of one’s tastes and opinions about the appearance and functionality of both the residences and the retail components, the financial components that were locked in 10 years ago and still have another 13 years to run have been a disaster – and will continue to be so for the foreseeable future, according to the City’s outside TIF consultants.
Like you, as a resident and a taxpayer I look forward to the day we are out from under the crushing pressures of the TIF. And I hope and trust that, as badly as we taxpayers have been burned collectively by this “gift” from a decade ago, we have learned enough from the experience that we will never let something like it happen again.
The City Council will discuss this new tax levy at each Council meeting leading up to the levy’s adoption at the Council’s December 15th meeting. I heartily encourage you to attend those meetings and provide your input to those of us – the mayor, your aldermen, the city manager and senior city staff – who owe you a completely transparent process and accountability insofar as how we address this challenging situation.
5th Ward Alderman, Park Ridge
Had we had this type of transparency, candor and accountability from the City administration(s) back in 2002-06 when the Uptown TIF was cooked up and jammed down the taxpayers’ throats without a referendum, the current Council might not be stuck grappling with such long-term intractable problems, or having to propose unpopular tax increases.
But we didn’t.
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