Marlin Testifies Before Illinois House Against Property Tax Freeze
TESTIMONY of Diane Wolfe Marlin before the Committee of the Whole, House of Representatives, Illinois General Assembly June 23, 2017
Good afternoon. My name is Diane Wolfe Marlin, Mayor, City of Urbana, Illinois. I would like to thank Representative Carol Ammons for offering me this opportunity to speak with you about the impacts of a proposed property tax freeze and other state budget proposals on our city.
I would like to provide some context for my remarks. Urbana is a community of approximately 42,500 people, home of the University of Illinois, two regional medical centers, and the County Seat of Champaign County. As a result of these and other major public service functions, approximately 30% of our land area is exempt from property taxes. Our two largest employers are the University of Illinois and the health care sector.
Here is additional context. I am a Democrat. I was sworn in as Mayor of Urbana on May 1, 2017. In the past seven weeks, we have put together an Executive team, passed a budget for FY18 and passed a small increase in the local food and beverage tax. Our budget included very few increases in expenditures and these were more than offset by many decreases. We are starting on a path to rebuild our reserves, which had fallen to unacceptably low levels under the previous administration. We also are reversing a relatively recent practice of short-changing city funding for Police and Fire Pensions. We’ve budgeted no raises for non-bargaining unit employees and we will roll out a Voluntary Separation Incentive Program next month to further reduce expenditures in our General Fund and to address its structural deficit.
All of the above actions represent sacrifice and fiscal discipline, with an eye on preserving core services and programs and improving the long-term financial health of our city. Our goal is to build a foundation for the future. However, two years without a state budget and the prospect of yet another year of uncertainty and failure in governance makes our jobs as Mayors much more difficult. Our state, cities, and our citizens already are terribly hurt by the budget impasse.
Freezing property taxes will not help solve the State’s budget problems but it WILL cause tremendous new problems for cities already reeling from the budget crisis.
I’ll speak in general terms about the impact of the property tax freeze because we don’t have a specific proposal in front of us. As I mentioned earlier, the City of Urbana has had a self-imposed cap on property tax rates for the past few years. This was due to legislation passed by the Illinois General Assembly in 2012 which gave property tax exemptions to non-profit hospitals. We were hit harder by this legislation than any other community in the state because we are a small city with two regional medical centers. Overnight, about 11% of our EAV was removed from our tax base (remember, nearly 30% of our land area is tax-exempt) and individual tax bills increased by 10-11% from one year to the next. Our tax rate is set at 1.3550.
A multi-year freeze on the extension means that we will receive no additional revenue from property taxes. This may be a politically popular stance but one that will have serious local consequences. We rely on property tax revenue to fund Police and Fire Pensions and the Urbana library. As you know, pension costs have increased substantially due to benefit increases approved by the General Assembly over the years. Those costs will continue to rise each year. If our pension costs increase by 6.5% annually, which is a conservative estimate, and our library levy increases consistent with inflation, we expect that by 2021, property taxes available for the General Fund will have decreased from $2.3 million to $1.4 million, a decrease of almost a million dollars. This is a million dollars that is no longer available for essential City services such as public safety and public infrastructure.
Furthermore, Township government provides General Assistance to poor, childless adults who don’t qualify for federal assistance programs. Township government is almost entirely funded by property taxes. The poorest among us already are suffering due to cuts in social service funding; this would be another blow. Finally, I am particularly concerned for our local school district, which depends heavily on state funding and local property taxes.
You’ve created enough problems over here without adding another one. A property tax freeze will not help solve the budget crisis.
I also am entering in the hearing record a joint open letter to State Legislators from myself and Mayor Deb Feinen of Champaign dated June 21, 2017. I will summarize some of our concerns:
We were notified by the Illinois Department of Transportation that transfers to transit agencies and local government will be cut off on June 30 unless a budget is passed. This will have a devastating impact on local projects, the largest of which is the $42 million Multimodal Corridor Enhancement (MCORE) project now underway on the University of Illinois campus. MCORE was made possible thanks to a $15.7 million federal TIGER grant, with the University of Illinois, Champaign, Urbana, and the C-U Mass Transit District picking up the remaining $27 million cost. This project is on a very tight timeline, Green St. is torn up and closed through the heart of campus, and a shut-down in state funding will impact the safety of thousands of students, faculty, and staff as they try to navigate the construction zone.
We are concerned that you will seek to change revenue-sharing allocations by diverting long-standing revenues from local public entities to the state. In particular, we use income tax revenue received through the Local Government Distributive Fund to help pay for daily operating expenses and core services. And most importantly, our social service providers have been devastated by the failure of this state to meet its obligations. At a time when people need food, shelter, mental health services, addiction treatment, assistance with day care expenses so they can work and go to school, agencies are closing their doors.
In summary, pass a budget. Citizens recognize that you must make difficult decisions that will require political courage, sacrifice, and fiscal discipline. As Mayor of Urbana, I understand that cities must help bear the burden and that it will take years to restore financial health to the State of Illinois. But, I ask you once again, please do not cripple the cities where your constituents live by passing short-sighted measures such as a property tax freeze. Focus on the measures that will actually help fix the problem. Thank you for your service.