2022 Final Budget and Levy

 

The county board held its Truth-In-Taxation meeting at the courthouse at 6 p.m. on December 9th. State law requires the county to hold this meeting prior to setting its final budget and levy. The purpose of the meeting is to allow the public to express its opinions and ask questions regarding the county budget. Four taxpayers attended the meeting, which was held in the commissioner’s room, and it was live streamed for those not able to be there in person.

The county had approved a proposed levy increase of 4.5 percent on September 14. The increase was partially offset by a 1 percent increase in the county’s 2021 tax capacity. This means the impact on a property with no change in value or class would be closer to 2 percent because the levy increase was being spread across more value.

The concerns expressed at the meeting centered on fairness and equitable treatment for taxpayers. Two written comments read aloud at the meeting expressed similar concerns. Although the purpose of truth in taxation meetings is the county’s budget, it was clear that valuation and classification were impacting the fairness concerns. State laws and rules governing classification and valuation are designed to broadly create equal treatment across the state, but they can sometimes lead to large tax variability. This occurs every year to some degree despite the best efforts of the Assessor’s Office to accurately classify and value property.

This year however was unusual in that an entire class of properties was affected and many commercial properties saw double digit tax increases on their TNT statements. The cause was the combination of a complex law called Fiscal Disparities, and a sharp drop in commercial value.

A brief background on the Fiscal Disparity law: Fiscal Disparity only applies to commercial/ industrial properties. The tax was enacted by the legislature in 1995. It applies to seven northeastern counties, including Cook County. It is patterned on a 1970’s law in the Twin Cities metro counties. The purpose is to share the growth in commercial value among the seven counties. The law requires that each year 40 percent of the commercial growth, since the base year 1995, is put into a ‘pool’ and taxed at the ‘areawide rate’ of the seven-county area. Counties then receive a share back from this ‘pool’ based on their fiscal capacity. Fiscal capacity is defined as countywide value per full time resident. (Cook county has a low tax rate and a high fiscal capacity so we have a large net loss each year, but that’s a story for another time).

The sharp drop in commercial value: A recent law caused a change in the classification of vacation rental properties across the state from commercial to non-homestead residential. In tourism counties like Cook and Lake this had a huge impact. In Cook County, for example, commercial value dropped by half from 2020 to 2021.

Fiscal Disparity Calculation: In practice, the 40 percent of commercial growth captured for the fiscal disparity ‘pool’ is requires another step. The 40 percent is then divided by the following year’s total commercial value. Cook county commercial dropped by half overall and by more than half in some areas. In the areas hit hardest by the drop, commercial properties had 100 percent of their growth taxed at the high fiscal disparity rate. This caused the double-digit increases. The good news is that this is an anomaly and is self-correcting. The calculation of fiscal disparity will return to normal in 2023. The bad news is that this can happen again under the unusual circumstances and only a change in the law can prevent that.

At the next board meeting, on December 14, the commissioners discussed some possible changes to the budget, including increased cyber insurance, meal reimbursement rates and commissioner salaries.

The board tabled the final budget approval until December 21 pending further information on those costs.

On December 21 the board adopted the General Services Administration meal reimbursement rates. This a federal program that sets meal rates that vary for different areas of the state and the nation based actual costs. The county has used a single rate schedule and has not adjusted that rate for many years. The advantage of the GSA program is that reimbursement rates much more closely match actual costs in metropolitan areas. The cost of moving to GSA rates is estimated at $7,500 for 2022, assuming in-person meetings return to pre-pandemic levels.

The board also approved a one-year cost-of-living increase for commissioner salaries. Commissioner salaries have not changed since 2003 and some increase is overdue. The total cost of this increase, including taxes, is estimated at $3,012 for 2022. The largest changes in the budget since September, however, were a $134,000 federal grant awarded to Public Health and Human Services and the allocation of $116,000 from the American Rescue Plan to Public Health and Human Services. These revenues led to a 12 percent drop in PHHS’s 2022 levy request. The board also discussed the 9.3 percent decrease in 2022 health insurance rates and likelihood of higher rates for 2023. The decrease, believed to be partially a result of the deferral of elective surgery and other health care due to COVID-19, is not likely to be repeated.

With these and other changes, the county levy increase would have been 2.21 percent, significantly below the average levy increase of 4.36 percent over the past 22 years. The board then engaged in a lengthy discussion of the desire to keep the levy low to recognize current economic conditions facing taxpayers and the desire to keep the levy steady to avoid painful future increases. It was a well-reasoned, thoughtful discussion that led to a final compromise and approval of a 3 percent levy increase for 2022.

County Connections is a column on timely topics and service information from your Cook County government. Cook County – Supporting Community Through Quality Public Service.