If there’s an upside to the story about District 428 taxpayers potentially facing expensive increases in their property tax bills, it’s that school board members are talking about it years ahead of time.
The problem is due to two factors: The years-long decline in property values brought about by the Great Recession, and the way that school officials structured debt repayment plans after voters authorized borrowing $108 million to build new schools.
When the referendum was approved in 2007, officials assumed – as most people did – that property values would continue to grow. They set a 20-year repayment schedule and planned for payments on the bond debt to be flat for nine years, then begin to increase in the next 11 years.
The net result is that beginning in 2018, the owner of a home that was valued at $200,000 in 2008 would face three years of property tax increases unless changes are made. Estimates from a district financial consultant say the annual tax bill for such a homeowner, whose home is now valued well below $200,000, would grow by about $600 from 2018 to 2021.
That’s not an outcome anyone wants. There are possible solutions for the problem that could lessen the burden, or delay the increase for years. Although school board members might not like the idea, they also have about $10 million leftover state grant funds – funds that initially were intended for the school building project – that they could put toward the problem as well.
So which is the best path to take? School officials have a couple of years to analyze the situation, and they should do so in consultation with the community. After all, it is their tax bills that will be affected by the decision.
The idea of delaying the reckoning – school officials have said they could refinance the bonds in 2017 and potentially delay the increase in repayment costs until 2025. That would leave more time for some rebound in the housing market, and potentially some major business or industrial growth that could give a boost to the local tax base.
If that doesn’t materialize, though, school officials will simply be passing the problem along to their successors.
School officials also will have to seriously consider whether it is fair to hold onto the excess grant funds. The argument for holding the money in reserve is that a healthy reserve will help compensate for any future pension obligations or decreased funding from the state of Illinois.
Those are prudent arguments, but school board members nonetheless will have a difficult time sitting on public grant funds while residents are smacked with property tax hikes.
The preferred scenario for resolving this problem would be for property values to rebound and new industrial and commercial development to take root in DeKalb. A contingency plan is needed just in case that doesn’t happen. School officials have the luxury of time in putting one together, in concert with their constituents.