RealEstateConsumerInfo.com: Schaumburg say it ain't so - imposing property taxes?

Schaumburg say it ain't so - imposing property taxes?

One of the last village hold outs for communities with no property taxes in the area include Schaumburg.  But recently in this down turned economy, the revenue to keep the village moving forward might have to come from possible property taxes.

Daily Herald on November 15th, 2009 states:

"The health of today's retail economy affects more than just the entrepreneurs and workers who earn their livings by the sale of merchandise.  Also closely watching the rise and fall of consumer behavior are municipalities like Schaumburg, which have tied their own fortunes to those of the marketplace. With the luxury of being Illinois' second largest economy after Chicago, the village has foregone such typical revenue generators as a property tax to rely almost exclusively on sales taxes and other consumer-generated income.

But what seemed like the most resident-friendly policy in better times is now causing a budget crunch for Schaumburg that's putting some difficult decisions on the horizon. Schaumburg Finance Director Doug Ellsworth said the village has seen a significant drop in sales taxes, averaging about 3 percent per year or 15 percent overall since 2006. This comes despite store occupancy and shopper traffic being relatively good for an economy like this. "Foot traffic at the malls is only part of the story," Ellsworth said. "Retailers are discounting things so much." Community Development Director Christopher Huff agreed that's the heart of the problem. Other than car dealerships, which truly are selling less product than they did - the Cash for Clunkers program notwithstanding - most other retailers are simply charging less for what they manage to sell, he said.

So far, the village has been able to avoid laying off workers, but has had to cut some services (see my notes below) considered noncritical like brush pickup and community education programs. And if the economy continues to sputter, the village will have to look at further service cuts, new revenue sources or both, Village Manager Ken Fritz said. Fritz believes it's not a question of Schaumburg having painted itself into a corner. He said the village has more untapped options, ones that other cash-strapped suburbs have already exhausted."

Village of Schaumburg Press Release November 17th, 2009 states:

"The Village of Schaumburg has a history of providing quality comprehensive municipal services while relying primarily on revenue from visitor's to pay for these services. This strategy has worked extremely well and provided the foundation for the development of the second largest retail area in the State of Illinois and at the same time given residents a superior standard of living at a relatively small cost. As the village has matured the ability to rely solely on income from visitors has diminished. Retail development to the west and internet competition has eroded new growth causing revenues to stagnate. In addition to this trend the worse recession since the great depression has tapped reserves and threatened to reverse progress made over the last 30 years. Major revenue sources of the General fund have declined at a rate of 1.92% a year for the last five years."


Daily Herald on November 17th, 2009 states:

"One of the largest holdouts against a municipal property tax in the Chicago area is finally caving to new financial pressures. Schaumburg trustees began discussions Tuesday of imposing a property tax for the first time in village history.  Officials say they need a new funding source to make up for a $17.6 million deficit created by dwindling sales tax revenues.

The village is among only a few Chicago-area communities that do not levy a real estates tax on local property owners. Most - including Schaumburg, Gurnee, Deer Park and Oak Brook - have large shopping malls and retail bases that have generated enough sales taxes to fund most municipal services like police and fire protection, roadwork and snow plowing. Others non-property-tax towns include Carol Stream, Prospect Heights, Campton Hills and several smaller communities in Kane County including Kaneville, Big Rock and Lily Lake.

Schaumburg's financial woes suggest they won't be the last to weigh the potential of considerable political fallout against the prospect of massive service and job cuts. Carol Stream has also recently considered imposing a new property tax, and Prospect Heights has made deep cuts at city hall and closed its police station to the public in the face of dwindling revenues. Schaumburg officials say their options are similarly dire: raise a property tax or make severe cuts in services, including widespread municipal layoffs. That would include the elimination of many capital improvements, almost all public transportation funding and 123 employees, or 24 percent of the work force, Village Manager Ken Fritz said.

The village's proposed tax would generate $23.7 million next year, or about a quarter of this year's general fund revenues. According to village calculations, that would mean the owner of a home worth $250,000 would pay about $250 to the village, or roughly 8 percent of the property taxes paid to all taxing bodies including the county, library, park and school districts.  In exchange, the village would absorb the cost of garbage pickup and eliminate its $20 vehicle stickers.

Fritz said the elimination of these fees should make the new property tax a wash for the owner of a $250,000 home who owns two cars. Garbage pickup currently costs such a homeowner $170 per year. He also noted that the estimated tax rate in Schaumburg would remain lower than in most surrounding communities, with the exception of Elk Grove Village. Officials said sales tax receipts alone - which along with the food and beverage and telecommunications taxes make up nearly three-quarters of village revenues - have fallen by $7 million in the past five years. The village's general fund cash reserves have dropped to about $9 million today from $25 million in 2006. Officials say at that rate, the village will run out of cash sometime in 2010 or 2011."

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     Lyn Sims (847)230-7324

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Resources:  Daily Herald, Village of Schaumburg.

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