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Can’t offer Crundwell rebate to taxpayers? Change the law

If Dixon city officials really wanted to rebate some of the recovered Crundwell cash to taxpayers, they could push the Legislature to amend the law governing tax caps. We’d like to see them, and their legislators, give it a try.

Published: Thursday, Nov. 14, 2013 1:15 a.m. CDT

Because the city of Dixon operates under tax caps, the city government can’t temporarily lower its tax levy – to give Dixonites a financial break by sharing the Rita Crundwell windfall – without severely hampering its future finances.

That announcement came this week from Paula Meyer, the city’s finance director, in response to various suggestions of what the city should do with nearly $40 million ($38.9 million, to be precise) that it will recover from the massive theft by its former comptroller.

Back in 1996, Lee County voters approved a referendum to impose tax caps, also known as the Property Tax Extension Limitation law, on governmental units. The law limits the growth of overall real estate tax revenue to the lesser of two figures: the rate of inflation (measured by the Consumer Price Index), or 5 percent.

The idea behind the law was to protect property owners from soaring tax bills when property values themselves soared. 

But the proponents of the law, and the people who voted for it, never foresaw Dixon’s situation. The city soon will receive $38.9 million, some of which could be rebated to taxpayers, if the law did not penalize such largesse.

The problem is that if the city’s tax rate were to be temporarily lowered, in order to grant the rebate, then the rate could not quickly rise to the previous level because of tax cap limitations on increases.

Meyer gave various examples to illustrate her point that lowering the city’s tax rates, because the tax cap law, could put the city in long-term financial peril, because it would take many years of incremental increases to return to the former rate. 

The city has already taken one important step to assist taxpayers. With the generous cooperation of Midland States Bank, the city will pay off $12.3 million in bonds early, which will save taxpayers $3.87 million in interest.

Why not take an additional step and explore a change in the tax cap law?

Certainly an amendment to allow units of government, operating under tax caps, to temporarily reduce tax rates for 1 or 2 years in order to rebate money to taxpayers, and then return rates to their former levels, ought to be looked upon favorably by members of the Illinois General Assembly.

Dixon is fortunate to have two lawmakers – state Sen. Tim Bivins and state Rep. Tom Demmer – who could team up to research and sponsor this legislation.

Improving existing laws is nothing new. Legislators frequently tinker with them.

And frankly, who could be against such an amendment?

Tax caps were designed to protect taxpayers from huge increases, not to prevent them from receiving a tax reprieve because of a huge infusion of cash received by a taxing body.

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