Chicago suburbs without property taxes – but perhaps not for much longer

In a region known for high property taxes, at least a few suburbs outside Chicago have no property taxes:

A town of about 40,000, Carol Stream managed to avoid a property tax even when another outlier, Schaumburg — a village with a much larger retail base — took the leap during the Great Recession.

But officials say Carol Stream is facing significant budget pressures from rising pension costs. If it maintains the status quo, projections also show the village would exhaust capital reserves during the third year of a five-year plan for roadwork and infrastructure projects…

In Oak Brook, another town that doesn’t charge a property tax, candidates in the last mayoral race took stock of the financial challenges from flat sales tax revenues. Carol Stream also saw a 2.4% drop in sales tax dollars — the village’s largest revenue source — from calendar years 2017 to 2018.

Suburbs have multiple ways to reduce or eliminate residential property taxes. Sales tax revenue can come from shopping malls, big box stores, and other retail options. Schaumburg and Oak Brook have sizable shopping malls surrounded by many more retailers. Communities can also seek out industry; Carol Stream founder Jay Stream intentionally set aside much land for industrial parks (which are still there). Some suburbs would not like this as industry could conflict with an ideal of quiet neighborhoods of single-family homes.

The article suggests these suburbs with no property taxes will have to reconsider because of declining sales tax revenues and rising pension costs. Given the fate of shopping malls and the problems facing retailers, even in successful malls in wealthy areas like in Oak Brook and Schaumburg, communities need additional revenue.

Suburbs typically do not have the ability to quickly counter declining sales tax revenues. In order to not have property taxes in the first place, certain decisions had to be made long ago. Then, later decisions build within a framework of no property taxes. Making changes to land use takes time for study, approval, development, and then reaping benefits. A suburb cannot say it wants to bring in more sales tax revenue and line up a set of retailers operating within a year.

The fate of these suburbs will be worth checking in five years to see whether they can hold on against levying property taxes.

(Reminder: this does not mean residents in these communities do not pay any property taxes. Rather, their suburbs do not collect property taxes even as school districts and other taxing bodies do.)

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