City faces future money problems
The Charleston city government’s constrained use of property tax revenue during the next several years is not tied to typical effects from the economic recession.
While many municipalities have lost revenue from foreclosures and abandoned homes, City Comptroller Heather Kuykendall said pension laws are handicapping the city’s use of property tax.
“It’s not that our property tax revenue is going down,” Kuykendall said. “It’s . how we have to spend it.”
She said pension laws require a minimum amount of funds for fire and police pensions, which the recession has hindered during the past year. Because of this, the $3.25 million Charleston is estimated to receive from the property tax will almost all go toward pension costs.
Kuykendall estimates that 20 percent of the levy covered pension costs in 2003. In 2010, 60 percent of the levy is projected to cover pensions. The increase in pensions will cut almost $1 million in property tax usage for the city during the next five years.
City Council opted for more time to review the 2010 property tax levy at its Dec. 1 meeting. The council is expected to vote on the levy, which taxes 2009 values, at its Dec. 15 meeting.
Kuykendall said the Illinois Property Tax Extension Limitation Law also limits the city’s ability to increase property taxes. She said the law reduces the amount of revenue a city receives, if that city chooses to tax properties more than 5 percent.
She said city officials decided to tax just under the 5 percent mark in hopes to use more revenue for pension costs.
“We are asking for less, but we expect to get more,” Kuykendall said.
The limitation law also sets a consumer price index that caps how much a taxing body can tax values in excess.
Kuykendall said this year’s index dropped dramatically from years past. The 2009 index was 4.10. The 2010 index is 0.1.
“(The) CPI is lower than it’s ever, ever close to being, which is why we are having so much of a struggle,” she said.
Kuykendall said the limitation laws makes new construction even more valuable because it provides another source of revenue that did not exist in prior years.
She said Charleston did not experience as much new construction as it did the past two years.
The development of the Melrose on Fourth apartments, located at Fourth Street and Polk Avenue, is the biggest new source of revenue from the property tax, Kuykendall said.
She said the constraint in property tax, which amounts to 17 percent in revenue for the city, means the city has to rely on other sources of revenue to help stabilize a murky financial future for the city.
The city is anticipating subtle deficits for the next five years, which is alarming for a city that typically ends each year with a balanced budget.
Kuykendall said the city could not fret about boosting income tax, which covers 16 percent of the city’s revenue, because that is a state issue.
She said sales tax, which covers 25 percent of the city’s revenue, is vitally important to the future state of the city’s finances.
Kuykendall said a good Christmas season could bolster sales tax revenue and provide good momentum as the city prepares a budget for the new fiscal year, which begins May 1.
“It wouldn’t be a savior . but it certainly would help us because we already are so tight,” Kuykendall said.
Stephen Di Benedetto can be reached at 581-7942 or at sdibenedetto@eiu.edu.