The Race Begins:Understanding the Annual

Levy Process

PMA Financial Network, Inc.Warrenville, IL

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Presenters

Steve Miller

Senior Financial Advisor

PMA Financial Network, Inc.

630-393-9494 x6413

smiller@pmanetwork.com

Scott Smith

Senior Financial Advisor

PMA Financial Network, Inc.

630-393-9494 x6412

ssmith@pmanetwork.com

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Local Property Taxes Assessment Process Review Process Equalization Process Levy Process Truth in Taxation Tax Extension Property Tax Extension Limitation Law (“Tax Caps”) Collection and Distribution Tax Rate Referendums Assessment Appeals & Other Issues

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Assessment Process At the Township level, assessors identify real property,

appraise and place value on it. You should double check that properties are on the books.

BEST PRACTICE: Know your assessor(s) Market value determined by Real Estate Transfer

Declaration (Green sheet) for similar properties. Business properties also include capitalized income flow.

Illinois statute states assessed value should represent 33.3% of market value except for farm land. Farms in Cook County are $250 per acre for example.

A few counties have special classification systems. Manage your real properties – new growth, TIFs

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Cook County Classification System Vacant Land 22% Actual ~ 11.7% Residential 16% Actual ~ 10.1% Apartments 33% Actual ~ 18.9% Not-for-Profit 30% Commercial 38% Actual ~ 24.6% Industrial 36% Actual ~ 25.3%

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Cook County Classification System 2004 - SB2112 (“Houlihan Bill”)

Increased Homeowner ($5,000) and Senior Citizen ($3,500) Exemptions State-wide

Effective for tax year 2003, imposed a 7% cap on residential reassessment increases in Cook County (other counties could (but haven’t) adopted the cap)

7% cap expires after 2005 tax year unless extended by legislation

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Review Process Purpose - For system to correct under,

over, and non-uniform assessments by local assessor.

Assessor sends changes to property owners. Publishes.

Property owners can go to the assessor and then the Board of Review to challenge their assessment.

BEST PRACTICE: attempt to resolve all assessment adjustments pre-extension

Next level of challenge - Property Tax Appeals Board (PTAB) or Circuit Court

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Equalization Process Purpose - To bring all township

assessments to the state mandate of 33.3%.

Multiplier is applied to township and county assessments (except Cook).

Cook County multiplier is determined by the Illinois Department of Revenue.

EAV = Multiplier x Assessed value Cook County Warning – Your EAV

may go down the year of Chicago’s reassessment (2006 tax year).

Cook County

Multipliers

2005 2.7320

2004 2.5757

2003 2.4598

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Levy Process Before 9/30 school district passes budget Determine levy amount (see example) How

much do you ask for? Are you under the Tax Cap?

If required: Publish in Newspaper Hold public hearing

Board adopts Levy File Certificate of Tax Levy with County

Clerk prior to last Tuesday in December. BEST PRACTICE: Double-check the bond

amounts (County clerk offices can make mistakes!)

File Abatements, Certificate of Compliance, PTELL resolution

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Truth in Taxation Effective January 1, 2003 Cook County has same

requirements as other counties. If current year’s levy request (excluding bond and

interest) is more than 5% greater than prior year’s extension (again excluding B&I): A notice must be published in a newspaper A public hearing must be held

The determination of the applicability is usually established through the adoption of a tentative levy Determination can be no less than 20 days before the

adoption of the levy ordinance.

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Truth in Taxation (Continued) If Truth in Taxation notice is required

Publication must be no more than 14 and no less than 7 days before the date of the public hearing

Same rules apply as for other notices regarding “newspaper of general circulation” etc.

Public Hearing District has an opportunity to explain the reasons for the

levy and any increases District must grant anyone from the public wishing to

speak the opportunity Can be part of a regular Board of Education meeting (no

longer by first Tuesday in December)

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Tax Extension County may add loss/cost amount to District’s levy Calculate Property Tax Extension Limitation if applicable Make reductions to stay within PTELL limit Calculate final tax rates for each fund and total for the taxing

district BEST PRACTICE: Recompute County calculations Combine taxing bodies into total tax rate and extend taxes on

Equalized Assessed Value and enter in county Collector’s books

Deliver Collector’s books to county Treasurer for preparation of bills

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Property Tax Extension Limitation Law(“Tax Caps”) Enacted in Collar Counties in 1991, Cook County in 1995.

Limits the increases in property tax extension to 5% or the increase in the “Consumer Price Index-All Urban Consumers” (CPI-U), whichever is less.

BEST PRACTICE: Monitor CPI throughout the year to anticipate final percentage - ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

Allows for issuance of limited tax bonds where bond debt cannot exceed 1994 tax levy for bond debt. Enacted in 1995

1996 Amendments. PTELL enacted for remaining Illinois counties if approved at county-wide referendum. If law is approved in referendum, then it becomes effective in the next levy year.

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Tax Capped Counties

http://www.isbe.net/sfms/FAAS01/taxcaps.htm

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Property Tax Extension Limitation Calculations

Limiting rate = (Aggregate Extension Base x (1+ CPI)) / (Equalized Assessed Valuation - New Property)

Aggregate Extension Base - Prior year extension for all funds excluding the debt service fund. (i.e.: for 2006 tax year, 2005 total tax levy extended less taxes extended for debt service)

CPI - All Urban Consumers for December 31st. CPI for December 2006 – 2.5%, to be used for 2007 Levy.

New Property - New improvements or additions to existing property on any parcel of real property that increased the assessed value of that real property.

Debt Service Extension Base: The tax levy for debt service levied in tax year when the Law was enacted.

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Collection & Distribution Two mailings of tax bills Taxes due one month after

billing date Distribution : Cook County

March & Fall; Collar Counties 1/2 in June and 1/2 in September; Downstate often July and September

Non-payment triggers preparation of delinquent tax list and notices of Application for Judgment on Real Estate

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Tax Rate Referendums – SB 1682 Not Tax Capped – Changes ballot information only Tax Capped

No more rate increase factors No more individual fund rate increase questions New ballot question asks for an increase in the total limiting rate for

1 to 4 years Even if you haven’t passed a referendum, it allows you to extend up

to the statutory maximum rates in individual funds. No new money, just increased flexibility between funds.

BEST PRACTICE: Have your legal counsel and county clerk(s) check your referendum question(s) as well as calculations for subsequent years.

BEST PRACTICE: Model the impact of a successful referendum on your General State Aid.

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Assessment Appeals

Township Assessor

Board of Review

Circuit Court Property Tax Appeal Board (PTAB)

Circuit Court (Complaint for Administrative Review

Only)

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Time Frames for Filing Appeals Township Assessor – after receipt of proposed

assessment. Board of Review – by township closing date. PTAB – within 30 days of date of final decision

from Board of Review. (Mostly commercial and industrial assessment appeals go beyond the Board of Review)

Circuit Court – within 120 days of second property tax installment due date

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Typical Issues for

Commercial/Industrial Appeals Fair cash value – this is determined by a proper

appraisal Uniformity Vacancy/Occupancy Recent sales Legal arguments (open space, conservation

easement, historic property, etc.) Exempt status

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Your Rights at the Board of

Review (BOR) Right to notice of over $100,000 EAV Change Right to Intervene (submit letter within 14 days) May submit evidence and defend current assessment Attend the hearings to 1) make sure the appellant

knows that the taxing bodies have knowledge of what is going on and will be actively involved, 2) look at the evidence submitted by the appellant (if presented) and the township assessor, 3) to encourage the parties involved to come to a settlement.

All settlements at the BOR are pre-tax extension.

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Your Rights at the Property Tax Appeal Board (PTAB) Right to notice - submit within 30 days Only legal counsel can represent taxing bodies The appeals process at PTAB may take up to two years to resolve.

The volume of PTAB Appeals State Wide: 1997 – 3,072; 1999 – 6,176; 2002 – 9,918; 2006 – 25,426

Manage your legal counsel- legal counsel will hire an independent appraiser to review the appellant and the township’s appraisal. If appraiser believes the appellant’s assessment is closer to the fair market value, do nothing. If the appraiser believes the township assessor’s numbers are closer to the fair market value then submit that to PTAB. If the appraiser believes that both assessments are low, then get a full appraisal of the property and submit that to PTAB and request an assessment increase.

BEST PRACTICE: Form consortiums with other taxing bodies to share the cost of challenging the assessment appeals.

All settlements come out of current year’s tax collections

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Your Rights at the Circuit Court You are not notified of cases presented to the court

Some legal firms have begun monitoring the filings and can notify you if a relevant case is filed.

The Illinois State’s attorney and the county assessor represent the taxing bodies.

All settlements come out of current year’s tax collections

Keep an eye on this as this is a growing issue, especially in Cook County

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The End

Thank You,

Any Questions?