Village of Spring Grove Dear Residents I would like to address an issue that we are currently experiencing in our Village. Over the last six years the Village has seen a large drop in revenue growth and a large increase in expenses. Prior to the recession the Village was a growing community with housing starts between 70 and 100 per year along with a strong manufacturing base that included Intermatic and Actown. The recession forced these businesses to shut down or outsource their manufacturing which resulted in the loss of hundreds of jobs and utility tax revenue. The housing market has also been hit very hard with new housing starts of less than five per year since 2008. The Village has one of the lowest municipal property tax rates in McHenry County. Spring Grove has a tax rate of 0.413, and receives $250 from a home with an assessed value of $200,000. As a comparison, the Village of Richmond has a rate of 1.01 and the Village of Johnsburg s rate is 0.584. This same home would pay $607 and $354 respectively to each Village. These property taxes, along with utility taxes, building permit fees and other revenue sources cover our police protection, snowplowing, road resurfacing and maintenance, parks maintenance, recreation program, and the building and administration departments. We have recently seen a very large increase in expenses with respect to police pensions, road resurfacing and employee health insurance. These expenses have more than doubled and the Village lacks the revenue to maintain our roads as we would like and to pay the required police pension cost. With one acre zoning there is not enough revenue produced from each household to maintain the current infrastructure costs. Our police pension contribution has more than tripled since the voters approved it back in 1997 with over 45% of the property taxes collected going toward the police pension, leaving less money for other projects. Some may ask what the Village has done to combat the loss of revenue. Over the past few years the Village has applied for and received over $1,000,000 in grants to enhance our roads and parks. It has controlled costs with relatively flat budgets, increasing employee health insurance contributions, and the elimination and consolidation of employee positions. Money normally spent on infrastructure and other programs has been decreased and roads that should be resurfaced are only being crack sealed and patched. We continue to enhance economic growth with the addition of Jewel, Walgreens, McDonald s and a new strip mall and we have worked with Scot Forge, one of the largest manufacturing employers in McHenry County, and All-Rite Spring Company to help them each grow their businesses with major expansions that added more jobs and also increased our utility tax revenue. The economic expansion and grants have helped us balance our budget but they are not enough to sustain the increasing costs. This leads me to the major problem facing the Village - how do we pay for these increasing costs? After much consideration and a desire to maintain the quality of life in Spring Grove, the Village Board determined that in order to meet its financial obligations, it would place a referendum on the April 7 ballot asking to increase the Village s tax rate to.627 which would provide an additional $338,000 in funding that is anticipated to be used towards the police pension requirements. Please take the time to read the attached information which explains our obligations, goals and the impact an approved referendum will have on our community. Sincerely, Mark R. Eisenberg Village President
IMPORTANT REFERENDUM INFORMATION Introduction & Background Police officers perform a valuable service keeping our community safe. Their efforts are greatly appreciated. For their service, we recognize that our community has an obligation to help provide for their retirement. The Village is required by state law to provide a pension system sustainable to ensure affordability for taxpayers. Municipalities throughout Illinois, including Spring Grove, are having their budgets strained by unfundable pension contributions. To compound the issue, a state law passed in 2010 requires municipalities to put public safety pension funds on a schedule to be 90% funded by the end of 2040. As a result of this law, the police pension funding level dropped from 47% to 38%. Beginning in 2016, municipalities are required by the law passed by the state legislature to make employer contributions to police pensions in an amount that is determined by one of three actuarial calculations. Any difference between what is recommended by an actuary and what a municipality actually contributes can be diverted from the municipality s state-shared revenue to the pension fund. In other words, if the Village Board exercises its discretion to direct Village tax funds to other priority areas such as road maintenance, the state can automatically divert the sales tax the Village is to receive to the pension fund. The goal of every pension fund is to have sufficient funding available to meet current and future obligations. The Village s police pension fund is currently 38% funded even though the Village has contributed its required amount since its inception in 1997 and the Pension Fund Board has adequately managed the fund by making solid investments. In 2011, the Village s contribution was $163,000 but by 2013, it was $296,000, an increase of over 80%. The estimated contribution in 2016 is $332,000, a 204% increase since 2011. Despite increasing pension contributions from the Village, the pension liability continues to increase. Why? Lower interest rates, people living longer, and investment constraints dictated by state statute. This trend is impacting not only Spring Grove but municipalities statewide. The increasing pension costs have cut into critical programs and services. What Referendum Question Will Voters See On The Ballot? The wording of the question is determined by state statute. The question will appear on the ballot as follows: Shall the limiting rate under the Property Tax Extension Limitation Law for the Village of Spring Grove, McHenry County, Illinois, be increased by an additional amount equal to 0.2140% above the limiting rate for corporate purposes for levy year 2013 and be equal to 0.627% of the equalized assessed value of the taxable property therein for levy year 2015? (1) The approximate amount of taxes extendable at the most recently extended limiting rate is $653,234.74, and the approximate amount of taxes extendable if the proposition is approved is $991,755.55. (2) For the 2015 levy year the approximate amount of the additional tax extendable against property containing a single family residence and having a fair market value at the time of the referendum of $100,000 is estimated to be $71.33. (3) If the proposition is approved, the aggregate extension for 2015 will be determined by the limiting rate set forth in the proposition, rather than the otherwise applicable limiting rate calculated under the provisions of the Property Tax Extension Limitation Law (commonly known as the Property Tax Cap Law).
Can You Explain The Referendum Question? The Referendum ballot asks the Village of Spring Grove electors to vote Yes or No on the Referendum question above. A Yes vote on the question is a vote in favor of authorizing the Village to increase its limiting rate by an additional $338,000. In the event a majority of electors vote Yes to the question, it is anticipated that the Village will use the additional $338,000 for the police pension fund. This will free up a substantial amount of other money to resurface roads and continue and maintain services. A No vote on the question is a vote against authorizing the Village to increase its limiting rate by an additional $338,000. If the referendum fails, the Village will continue to use its limited current funding sources to pay towards police pensions and have insufficient funds to make necessary road repairs and maintenance. It s unclear how the Village will continue to repair and maintain them which will likely result in deteriorating roadways and decrease in services. What Impact Can An Approved Referendum Have On The Village s Tax Levy And Tax Rates? Without a successful referendum, the Village is limited to increasing its tax levy by the Consumer Price Index, which over the last several years has been less than 2%, while the cost to fund the police pension fund has increased over 80%. Currently, 45% of the tax levy goes toward the police pension fund. A property assessed at $200,000 pays a total of $250.53 to the Village in property taxes. An approved referendum could result in a total tax levy of $991,755.55 that would be levied in 2015 but collected in 2016. The additional $338,000 would satisfy the Village s obligation to contribute to the police pension fund and allow the Village to continue improvements through the road program. If the referendum is approved, a property assessed at $200,000 would pay an estimated total of $380.34 to the Village in property taxes. The following table depicts the estimated difference in total taxes paid to the Village with and without an approved referendum. Property Value Without Referendum $4.13/$1,000 With Referendum $6.27/$1,000 Difference $175,000 $216.11 $328.09 $111.98 $200,000 $250.53 $380.34 $129.81 $250,000 $319.35 $484.83 $165.48 $300,000 $388.18 $589.32 $201.14
Where Do My Taxes Go? Your tax bill is distributed to nine (9) taxing jurisdictions. Your tax bill breakdown depends on what township you reside in. See the chart below to see where you tax dollars go: Jurisdiction Richmond Township Burton Township Nippersink School District 2 36.03% 36.62% RBCHS School District 157 31.79% 32.31% McHenry County 9.99% 10.17% Spring Grove Fire Protection District 6.20% 6.31% McHenry County College 3.93% 3.99% Township & Cemetery 3.86% 2.28% Village of Spring Grove 3.77% 3.82% McHenry County Conservation District 2.51% 2.55% Nippersink Library 1.91% 1.94% As you can see the Village only receives a very small portion of your property tax bill. In fact, the Village receives a lower percentage of your property tax bill than McHenry County College and Richmond Township. Over the years we have operated under very tight budgets with a minimum amount of staffing. The cost of having zoning with a minimum lot size of one acre results in very expensive infrastructure costs when compared to the amount of tax revenue collected from the Village s subdivisions. How Much Of My Property Taxes Goes Towards Village Operations? Less than 4% of your tax bill goes to fund Village operations. Property taxes only make up 21% of the Village s revenues, with 10% of it going towards the Village s police pension contribution. A majority of the Village s revenue is collected in state income and sales tax along with the utility tax. The revenues from these taxes make up 59% of the Village s revenues. Licenses, Permits, Fines and Other Fees make up 14% and Other Revenues makes up 5%. Use & Replacement Taxes 3% State Sales Tax 17% Utility Tax 22% Revenues State Income Tax 17% Other Revenues 5% Property Tax 11% License/Permits/ Fees/Fines 15% Police Pension Property Tax 10%
How Does the Village Spend My Tax Dollars? The Village currently operates with a total General Fund budget of $3,100,000. A home with an assess value f $200,000 pays the Village $250 in property taxes for Village operations. The chart below depicts how the Village money is allocated. Police 35% Expenses Recreation 2% Parks 3% Police Pension 10% Roads 13% Administration & Building 21% Public Works 16% The Police Department, including the pension fund obligations comprises 45% of the Village s budget. As the Village s pension obligation continues to increase, we are required to use more revenue from other sources to pay towards the police pension fund. As a result, the money which was anticipated to be spent on repaving the roads has decreased. Speaking of roads, the Roads budgets comprises 13% of the Village s budget. The majority of this budget goes towards the maintenance and repair of roads, snowplowing and street lighting. Each mile of road costs $145,000 to repave. With 78 miles of roads to maintain, the current revenue stream is no longer sufficient for the Village to maintain the roads, while providing snow plowing, street lighting and police protection. If you have any questions please don t hesitate to call the Village Hall or send us an email at info@springgrovevillage.com.