What are the Effects of Skokie’s Property-tax freeze and Tax Increment Financing Districts (TIFs)? (They’re not what you may think.)

By Brian Novak

Independent Candidate for Village Trustee

The Village of Skokie often touts its freeze of the Village’s share of the Cook County property-tax levy. This fact is often mentioned in public statements by Village officials – and the Skokie Caucus Party, which has run Village government for the last 40 years, serves up constant reminders – especially in election season. Callers to Village Hall and the Skokie Police Department who are put on hold will often hear a recorded message reminding them that the Village of Skokie has not raised its property-tax levy since 1990.

In its official communications to Skokie residents and business owners, the Village of Skokie has referred to its property-tax freeze in the context of “prudent budgeting and pro-active economic development” and the use of Tax Increment Financing (TIF) districts as a “diverse and progressive economic development approach.”

However, it is important to remember that in order for Village government to function, new revenue – especially in times of national financial crisis and recovery – has to come from somewhere.

It is also important to understand the impact of Skokie’s property-tax freeze in context, because it does not stand alone. It is related to two factors: 

• In recent years the Village has imposed new taxes and raised existing fees.
• The Village has created TIF districts for the purpose of economic development. However, the creation of TIFs has negatively affected the community by taking money from schools and other taxing bodies, some of which in turn have raised their levies to compensate for the shortfall.

In other words, the Village has offset the benefit of the property-tax freeze using methods that burden Skokie residents and businesses with other costs.  In effect, the Village has used the freeze to cloak creative taxing that Skokie residents and business owners end up paying for.

To its credit, the Village of Skokie has maintained its AAA bond rating during a period of federal and state fiscal crisis. As Trustee I will work to ensure that this continues.  However, I will also work to change the misleading perception and costly effects of the property-tax freeze.

Taxes and fees

As a result of the freeze, property-tax revenues contribute increasingly smaller percentages of the total Village of Skokie budget. In FY 2007, the Village budget was approximately $85 million; by FY 2012 it had increased to $109.7 million.

With expenditures increasing and a new Board approved police station to pay for during this same six-year period ('07-'12), the Village of Skokie imposed several new taxes, raised existing fees and created new fines:

• The new Municipal Utility Tax, which the Village has imposed since FY 2011, constituted 4.98% ($5,650,000) of the total FY2012 Village budget.
• The Village Board approved an increase to the Telecommunications Tax on January 1, 2008, to pay for the new police station, which accounted for 3.27% ($3,706,418) of the FY 2012 budget.
• In FY 2009 the Village also added a local fuel tax; at $.03 a gallon, creating additionally revenue of $1,091,240 in FY 2012.
• New fines have included an automated red-light camera at the intersection of Dempster and McCormick, which generated $20,280 in FY 2012.
• Existing fees have also been raised. A decade ago, a residential fence permit cost Skokie homeowners $7.50; today they pay $50.

In FY 2012 these new and increased taxes and fines total more than $10 million.  As discussed below, the TIF districts had budgeted revenue in FY2012 of almost $15,000,000, which represents an exponential increase in revenue from just under $2,000,000 in FY2007.  To compare, the Village calculated a cost savings from its property tax freeze at $11,941,488 in FY2012, yet it has realized almost $25,000,000 more from these additional/new taxes and TIF revenue.

TIFs

Our property-tax bills include line items for the Skokie library, park district, school districts and the Village of Skokie.  But not included on those bills are the Village TIF districts – which in FY 2012 were budgeted  to generate $14,756,308 in revenue, compared with $1,922,000 in FY 2007.  Skokie currently has 3 active TIF districts: the Downtown TIF (established in 1990); the Downtown Science and Technology TIF (established in 2005); and the West Dempster Street TIF (established in 2010).  The creation of TIF districts enables the Village to collect and use the tax revenue generated by increases in the assessed value of properties in the districts for a fixed amount of time to fund redevelopment in the districts during the life of the TIF.

During the TIF’s lifespan, all affected taxing bodies receive only their share of taxes based on the assessed valuation of the district at the time of the TIF’s inception. Furthermore, while TIF funds can be used only for purposes of economic development, this definition has proven to be extremely ambiguous and may include property acquisition, site preparation, utility connections, building rehabilitation, infrastructure improvements and environmental cleanup. In fact, the Village of Skokie has stretched the definition of TIF-related economic development to support many other initiatives including consulting fees and the proposed skateboard park.

The pool of TIF money diverted to economic development that would otherwise be going to the taxing bodies – the schools, library and park district – burdens all Skokie taxpayers. This is because everyone ends up subsidizing and shouldering more of the increased financial need of those taxing bodies – especially in School District 69, where currently all three Skokie TIF districts are located.  As school budgets increase, the revenue needed to cover the increases must come from those residents/businesses outside the TIF districts.

Generally, the ultimate goal of a TIF is to improve blighted areas with an infusion of revenue that will bring about increased business activity and eventually will offset the loss of property-tax revenues that were frozen and diverted for redevelopment.  However, has the TIF for downtown Skokie, which began in 1990 and expires this year, been successful? Has the area been revived? Is the occupancy rate of the technology park (currently approximately 1,200 employees vs. the ) – part of that success? How have District 69 schools been impacted?  Do the TIFs work as planned at all or is our use of TIF districting merely reallocating development to new locations while causing non-TIF areas to grow more slowly as other studies have shown?

Conclusion

These are all questions in need of public scrutiny, led by Village government officials who have the capacity and the courage to address them.

We all know that nobody likes paying taxes, and our constantly rising property-tax bite twice a year is always tough to swallow.  It is important, though, to understand that Skokie’s property-tax freeze has resulted in additional Village-imposed taxes; and its creation of TIF districts has shifted revenue burdens from one taxing body to another.

As an independent running for Skokie Trustee, I pledge that if elected, I will lead a Village review of the effect of the property-tax freeze in relationship to new taxes, increased fees and the net effect that the TIF districts have on other local taxing districts that run the schools, the parks, the library and residents’ pocketbooks.

The people of Skokie deserve leaders who understand the impact of these policies on the overall budget. The leaders elected on April 9^th need to have honest conversations with the public they represent about the real impacts and implications of the property-tax freeze. Residents deserve leaders who understand the complexity of budgeting and have the courage and respect to be honest with the community. These are prerequisites for leading our community successfully – now and in the years to come. 

In four years as an elected member of the District 73.5 School Board, I have gained experience and skills related to analyzing and managing budgetary resources that come from tax dollars. As Trustee, I will put this and other experience and skills to work for the people of Skokie.

I am asking for your support so that I can address these issues as your Village Trustee. Vote Brian Novak, independent candidate for Village Trustee, on Election Day, April 9. To learn more about my candidacy, please visit my website at www.novakforskokie.com. 

Please join me at the the Panera on Golf/Skokie Blvd Wednesday, March 13^th at 10:30am to discuss this and other issues facing our community.