Tag Archives: local government

Funding local services via property taxes or state funds

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What should be the formula by which local governments and the state of Illinois contribute monies for local services? There might be change coming:

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The concern centers on the Local Government Distributive Fund, the long-standing revenue-sharing mechanism that sends a portion of state income tax collections to cities and towns across Illinois.

Illinois mayors are warning that Pritzker’s proposed fiscal year 2027 budget plan reduces the share of state income-tax revenue distributed to local governments, a shift that would force many municipalities to make tough choices.

The proposal would lower the municipal share of income tax revenue distributed through the fund from 6.47% to 6.23%, meaning cities and villages would receive about $60 million less than they would under the current formula. Lawmakers have reduced that share significantly over the years, starting with a substantial cut from the 10% level that persisted prior to 2011 when lawmakers significantly increased the income tax.

While the change would send more money to the state, it would squeeze local governments that rely heavily on property taxes to fund services. Pulling additional dollars from the LGDF risks shifting the burden onto Illinois homeowners, who already face some of the highest property tax bills in the country. Property taxes are set locally, but state decisions about revenue sharing inevitably shape how much local governments must rely on them. 

Several matters appear to be at play:

  1. Local residents and leaders tend to like more local oversight of government and funds. But they are not necessarily opposed to getting funds from elsewhere – like the state – to then spend locally.
  2. Who should be making “tough choices”? Let’s say the formula is reconfigured; what local services are at risk for Illinois communities? Or where is that extra money the state is keeping then being spent? Would that money be spent in ways that helps lot of people?
  3. Property taxes are a hot button issue in many places. People like their property values going up but they do not like their property taxes going up along with that. And property taxes pay for the local services that help support their property values (schools, local amenities, etc.). If people don’t want property taxes to keep going up, what would local communities actually cut or scale back?

Percentage-wise, the formula change seems small but this gets at a fundamental issue in the American political and social system: there are multiple layers of government that provide for residents. Americans tend to like local control but townships, counties, states, and the federal government also provide services. The optimal distribution of funding and services is up for negotiation and the debate grows stronger when there is less money to go around.

Two quotes illustrating negative suburban responses to the idea of the state overriding local zoning

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Some suburban officials expressed concern regarding Illinois Governor J.B. Pritzker’s suggestion that the State of Illinois should be able to override local zoning. Two quotes from a news story provide some of the justification for the suburban argument. Here is the first quote:

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“Zoning is one of the great protectors we have for investment,” he said. “Zoning is not (there) to exclude. Zoning is to protect.”

Suburbanites have invested money into their homes and zoning helps ensure property values increase/do not drop. Suburban residents like single-family homes, in part because of they view them as sources of wealth. They then can see many other land uses near these homes as threats to those values.

The second quote:

“Our local leaders are best positioned to craft solutions tailored to their residents’ needs,” he said.

Suburbanites also like local control. They can create zoning to prompt development that is consistent with what already exists in the community. They can spend local monies on what residents want. They have more control of local spending, rather than letting others further away spend their monies.

At the same time, do the efforts to protect and retain local control mean that suburban communities limit who might live in their community? Zoning for larger lots will tend to drive up housing values. Keeping zoning (and other matters) under local control means local officials can shape local options. If lots of suburban communities follow these logics, this can limit opportunities.

The problem for places trying to hold off on giving tax breaks to corporations: someone else will make an offer

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You are a municipal or state leader who wants to take a stand on not providing tax breaks to corporations regarding land and/or development. You make the case that wealthy firms can pay their own way. You present evidence that tax breaks tend to benefit the companies, not necessarily communities. You say that tax dollars could be used more effectively in other ways.

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This may be a convincing argument to many. But then something happens. Another community or state offers a lot of taxpayer money. They say they will spend tax money to help a company move. They want that company and will pay the money needed to help make it happen. Can a community afford to lose a major actor? Can a local politician be the one who let them get away?

This could happen for a sports team – see what is going on with the Chicago Bears (even before the latest efforts from Indiana). It could happen with the headquarters of a big company – see the offers made for a second Amazon headquarters. It could happen with warehouse facilities or a shopping mall or a residential development.

Unless every body of government refuses to offer tax breaks, someone might jump in. All the places in a region might not offer a break but then someone across state lines offers money or someone in another region jumps in. There is value for organizations staying in place without tax breaks but it is also hard to do so if someone is offering a lot of money and/or savings to locate elsewhere.

This may indeed be the world we live in. Communities and places compete for jobs, resources, and firms. But hopefully the competition does not leave taxpayers paying for decades for minimal local impacts.

Which American communities will give up local services in order to not have any property taxes?

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As multiple states consider having no property taxes, what happens to the local services that property taxes fund? This could include local schools and local services. Many communities value their local services, whether the residents themselves make use of them and/or because they help contribute to local property values.

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So if there is less funding for local services (this assumes county or state funds might not make up the loss of property tax revenues), which ones would people be willing to forgo? Some possibilities:

-Local schools. Lots of complaints about how much schools cost, particularly labor costs. And people who do not have kids in the schools might want to pay less for schools. (Counterargument: the quality of schools helps boost the status of communities and is related to property values.)

-Local police/fire. Do we need this much local coverage?

-The number of local government employees/functions. Are they all needed?

-Thinking about these last two: why not consolidate police or roads or other local services with other communities or within an entire county? (Counterargument: individual communities then have less say over how much the local services interact with their residents.)

I suspect that places that eliminate property taxes may then have some interesting discussions about how to make sure the services that property taxes helped fund continue. How many residents will actually accept a decrease in local services and amenities?

Local control is essential to understanding American suburbs

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The mayor of Naperville thanked the City Council for not supporting a proposal that regional transit authorities could develop land within half a mile of train stations. He explained his opposition this way (via his Scott Wehrli for Naperville Facebook page):

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I’m proud of our City Council for standing together in opposition of this legislation that would give transit agencies the power to control development within a half-mile of our train stations—taking that authority away from the local officials you elected.

In Naperville, development decisions should be made by our community, through our City Council, not by transit agencies in Chicago. Local control has always been the foundation of our city’s success, and we’ll continue to protect it.

This is a good example for why I included local control as one of the seven reasons that Americans love suburbs. Suburban residents and leaders want to be able to make decisions about local land and monies as they see fit. They can resent when decision-making involving their land and money takes place elsewhere, particularly if it goes against what the suburban community wants or is perceived to be a threat to an established way of life.

This particular case involves transportation and land development. A popular idea in numerous cities and suburbs is to construct transit-oriented development which often involves higher residential densities adjacent to mass transit stops and a reduced number of parking spaces required. A number of Chicago suburbs have pursued this in recent decades; trains going in and out of Chicago pass apartments and condos in suburban downtowns.

But the key for many of these suburbs is that they made these decisions regarding development around train stations. These conversations often included debate about the size of new buildings and the number of units involved. How tall is too tall for a suburban downtown? How many units will be erected? What is the target population for these new developments?

Leaders and residents in Naperville and suburbs across the United States might pursue denser development near mass transit but they want to make the decision and steer development in ways they feel is consistent with the existing character and footprint of their community.

(I would also argue that local control is closely linked to the other six reasons Americans love suburbs.)

If population growth in the US slows, this will make competition between cities for people even more intense

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For cities and communities in the United States, growth is good. It signals progress, status, new development. To be flat in population or to lose residents hints at problems or failure.

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Throughout the history of the United States, the growth rate each decade has been over 10% for every decade except for 4 (1930s, 1980s, 2000s, 2010s). The population growth came through births and immigration. This population growth means many communities could grow. Some places might lose people – such as several prominent cities in the second half of the twentieth century – but there was growth in many places.

So if population growth across the United States slows, how can many cities, suburbs, and metropolitan areas also grow? There will be fewer people to go around. This could lead to some different outcomes:

  1. There will be clearer “winners” and “losers” in population.
  2. Communities and commentators could adjust their image of how much growth is needed. They could adjust their expectations down.
  3. Americans could decouple population figures from their ideas about quality of life. Perhaps population change has little relationship with whether communities are doing well.

My guess is that #1 would lead the way as people are used to growth and the perceived benefits that go with it. #2 and #3 could happen but would take time as people adjust to different realities where growth is more limited and fewer communities can expand in population.

And if population growth is harder to attain, what might communities and governments do to try to encourage more of it? Bigger incentives? More advertising? Promoting particular amenities or quality of life concerns?

NIMBY wins by reducing the number of residential units

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One observer discusses how NIMBY efforts reach their goals:

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Sometimes working together, sometimes working separately, NIMBYs have manipulated a web of local laws and requirements—such as exclusionary zoning, minimum lot sizes, and parking minimums—to reduce production of homes. As with any production cap, the result is higher prices for new residents and higher profits for incumbents, and a transfer of wealth and power from buyers and renters to existing owners.

The article places this in the context of antitrust efforts. Local residents and officials are able to operate a monopoly with local land and regulations, thus limiting any competition. Loosen the monopoly’s hold, others can promote and build housing, and housing prices might be more reasonable and more units are available to those who could not otherwise more there.

In the suburban context, one of the reasons Americans tend to like suburbs is because of this local control. They want to buy a home in a community, enjoy the benefits of that community, and then see their property values appreciate as they are there for a while. More housing units is perceived to do multiple things: (1) threaten the amenities of the community – through density, traffic, new residents, etc. and (2) threaten property values.

The author describes efforts in Washington state to counter local NIMBY efforts. It sounds like efforts at the state level changed what local communities could do. It remains to be seen how much local change will now occur and it is not clear how many states would be willing to go as far as Washington. How many local residents would support state-wide efforts that could overrule community interests regarding housing/

Teenagers, e-bikes and scooters, and suburban laws

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Suburban teenagers and others have taken to e-bikes and electric scooters to get around communities which often require a vehicle to get from place to place. But now some suburbs have responded with new rules:

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In passing the new rules, Elk Grove has joined a growing list of Chicago suburbs that have enacted tougher e-bike regulations due to growing safety concerns. Several communities — including Highland Park, Schaumburg, Glen Ellyn and Lombard — have recently imposed age limits on riders, while Burr Ridge has banned e-scooters from its streets.

Illinois law divides e-bikes into three classes based on their maximum assisted speed and whether the motor requires the rider to pedal. No one under 16 is allowed to ride a bike that can reach more than 20 mph under Illinois law.

State regulations also require riders to label their bikes with the motor wattage and classification type. Elk Grove Village officials, however, believe it’s more important for riders to follow the rules of the road, said Scott Eisenmenger, the deputy police chief…

Under the town’s rules, anyone younger than 16 can ride less powerful Class 1 and Class 2 e-bikes without motor assistance, relying on pedal power alone. Like Illinois law, Roselle ordinance prohibits anyone under 16 from riding a Class 3 bike, which reaches up to 28 mph before the motor cuts out. Additionally, no one under 18 can operate a low speed electric scooter.

Suburbs are built around cars and driving. It is part of living in a single-family home, having a suburban lifestyle, and is often necessary from getting from place to place because of the size of communities and limited additional transportation options.

Teenagers are often in a particular predicament. Herbert Gans noted this in his book The Levittowners: in new sprawling suburban communities, what could teenagers do and where could they go? With subdivisions and homes structured around private family life and cars necessary to get places, what could teenagers seeing independence do? Americans see teenagerdom as a life stage of trying out independence but without viable transportation this may be hard to do.

Enter e-bikes and electric scooters. They are now widely available. They are easy to operate. The local infrastructure is set up for cars, not pedestrians, bicyclists, or others. Vehicles are large. Safety can be an issue for anyone else trying to use a roadway.

Perhaps the bigger question is not about e-bikes and scooters; it is about possibilities for transportation options across suburbs. Teenagers may have their own interests but they are not the only ones limited in suburbia if you do not have a car.

When mass transit is or is not for suburbanites

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As Illinois politicians debate what to do about multiple mass transit agencies in the Chicago region, a group of suburban mayors weighed in:

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The Suburban Mayors Coalition for Fair Transit criticizes new taxes proposed in a bill approved by the state Senate to avert a $771 million shortfall facing Metra, Pace and the CTA in 2026.

A $1.50 delivery fee on online orders, excluding groceries and medications, dubbed the “pizza tax” is “regressive, (and) disproportionately burdens low- to moderate-income families,” officials said.

Mayors also panned expanding a real estate transfer tax from Chicago to the suburbs, and allowing the new Northern Illinois Transit Authority to acquire or develop land near train stations for projects such as condos with retail space.

That concept would strip away power over zoning and parking from municipalities and give it to an nonelected board, they argued.

Three major issues seem to be at stake for suburban officials:

  1. Taxes and funding. Will more funds be raised from the suburbs? Will that tax money then be sent in ways that benefit suburban communities and residents?
  2. A loss of local control. More taxes affecting local residents imposed by other government bodies. Not having complete control over local land.
  3. Representation on the board that would oversee a new regional transit agency. How many suburban officials should be there? Should it be evenly balanced between suburban and Chicago interests?

All of this gets at a major reason suburbanites like the suburbs: they like local control. They generally do not like the big city dictating what will happen. They want what they think is best for their suburban community.

Perhaps this is elsewhere in the letter but it strikes me what is missing is a sense of how regional mass transit could be used by suburbanites and improve suburban life. Take the issue of suburban traffic: single communities cannot often address these issues as suburban residents commute from suburb to suburb. Could mass transit help? Or could mass transit help provide suburban residents access to more jobs and housing opportunities?

If the funding and representation issues were worked out, would a majority of suburban communities then want a regional mass transit agency? How many would be interested in more mass transit present in their communities?

For suburbanites who do not like high local taxes, which local services would they reduce or cut?

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In thinking about recently receiving property tax bills in our county, I wondered what suburbanites would be willing to give up in order to lower their taxes. Here are some thoughts about each of the taxing bodies that receive monies:

-the county: how many people could name exactly what the county provides? Some roads, some medical and social services, some other things. Perhaps some people would rather pay a municipality or a state to do the same things?

-Forest Preserve: our county’s Forest Preserve is large and people tend to like green space and nature. Is it worth the cost (and the potential lost to developing more housing to address needs)?

-pension funds: I’m guessing taxpayers have little choice here.

-DuPage Airport Authority: how many average residents see the benefits of having a private airport within the county? Perhaps this helps some businesses?

-water commission: getting water is necessary.

-Milton Township with four lines: does the work the township does be carried out by the county or municipalities?

-City of Wheaton: lots of local services, including roads. What would residents want the city to do less of?

-Park District: not everyone participates and facilities and programs can be costly. But is the alternative all private options?

-mosquito district: who likes mosquitos?

-K-12 school district: the tax costs are high but what suburbanites want lower quality schools (which then they often associate with property values)? Or how many people want less money for the next generation?

-Community College district: with the costs of college these days, would people be willing to have a smaller community college or no community college option?

Consider these all together and the tax money goes towards schools, roads, public health, and more. Perhaps the argument could be made that these same services could be provided more efficiently or at better scales. This might save some money but does not necessarily address the long-term issues of rising costs and the need to update and maintain vital infrastructure. And if voters restrict one source of funding – such as limiting property taxes in California – then governments will seek revenues elsewhere.

Is it possible to consider all of these taxes at once rather than considering them one a time through referendums or each body making decisions that are best for them?