Tag Archives: taxes

One front in zoning and development battles: school districts do not necessarily want more students

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The words of a suburban school district superintendent regarding a possible Bears stadium and adjacent development highlight one of the current fronts in battles over development:

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Palatine Township Elementary District 15 Superintendent Laurie Heinz said that if the special taxing mechanism is implemented — where property taxes above a certain level would be diverted away from schools, as well as other taxing bodies, and into the Bears’ proposed mixed-use project — the district would need financial assistance to add classroom space to schools in nearby Rolling Meadows, or potentially even build a new school within the 326-acre site…

The Bears’ preliminary site plan suggests a significant residential component, from higher-density, multifamily properties of four to eight stories closer to the Metra train station, to lower-density townhouses and multifamily units of two to four stories further south and east through the site.

Heinz said the housing could generate hundreds or even thousands of students.

“We want a seat at the table,” Heinz said at a recent community meeting. “We’re going to fight against it all being TIF’ed because we will need money.

The superintendent is saying that the school district will need money to serve the influx of students that would come through new residential units. Other school districts, residents, or leaders have gone further when considering other suburban projects: they do not necessarily want school students to live in new residential units. Fewer school-age children would save money for school districts and communities in the long run due to not having to provide educational services.

In some ways, this is an odd stance for suburban leaders and residents to take. Much of the suburban sprawl in the United States involved providing spaces and success for children. Property values and a sense of community status are often tied to the performance of local school districts.

But, this focus on children comes with costs. Particularly for mature suburbs, they can struggle to fund schools or residents and leaders push back against the costs of schooling compared to other preferred priorities (such as taxes not going up).

For this particular project, who will adjust: the city not provide a TIF? The developer change the residential units in ways that appeal to certain kinds of residents and not others? The school district finding ways to fit this into particular confines? Stay tuned.

Too many taxing bodies in Illinois to easily count them

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How many taxing bodies are in Illinois?

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Anyone who gazes at a property tax bill realizes Illinois is awash in local government: townships, school and park districts, road and bridge agencies, community colleges, police and fire departments, and a collection of water, housing, cultural, cemetery, and even mosquito abatement districts. The Cook County treasurer’s website lists eight taxing districts for Chicago, 11 for Winnetka, and 10 each for Norridge and Hodgkins.

There are so many entities that even the experts differ on their number. The Civic Federation, which charts government spending and claims to have done the most exhaustive search, says Illinois has 8,923. That’s higher than the 6,032 tally from the Illinois Policy Institute and the 6,918 listed in a 2017 U.S. Census Bureau report — 2,000 more than second-place Pennsylvania.

Americans like local government. Do they like local government this much? Perhaps the presence of this many taxing bodies in Illinois, Pennsylvania, and other states is the answer: “yes they do.”

However, it seems like it should be easier to count the number in Illinois. The state government itself does not keep track? How could the Civic Federation and the Census Bureau differ by roughly 2,000 taxing bodies? While the rest of the article goes on to detail how difficult it is to consolidate these governmental bodies or to eliminate them, having an accurate count might be an important start.

Property massively misvalued by accident, consequences to come

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Correctly entering property values into tax databases is an important task. When it goes wrong, lots of people might have to pay:

The 1,570-square-foot house built in 1978 on 2 acres in an unincorporated area of the county was recorded in 2019 tax rolls with a market rate value of more than $987 million and an overestimate of about $543 million in taxable value. In reality, the property should have only had a 2019 taxable value of $302,000, according to county property records.

That error — which the Wasatch County assessor explained possibly occurred when a staff member may have dropped their phone on their keyboard — has resulted in a countywide overvaluation of more than $6 million and revenue shortfalls in five different Wasatch County taxing entities.

The biggest impact was on the Wasatch County School District, unable to collect nearly $4.4 million already budgeted.

Wasatch County officials say they “deeply regret” the error and are reviewing policies and procedures to ensure it never happens again. But they’re also warning Wasatch County taxpayers they will likely see an increased tax rate over perhaps the next three years to make up for the lower amount collected in 2019.

Communities rely on correct property assessments to lead to paid taxes which then generate monies for local governments and services. If something goes wrong in that pipeline – here it was a wrong value which was not caught for months – then essential services may not be provided. This all happens in the background, making it essential infrastructure that like other public works do not often get recognized unless it goes really wrong.

One thought: could the software or databases have a built-in checker that would flag significant year-to-year changes? In this case, a significantly higher assessment one year could trigger a warning to check the numbers again.

A second thought: do we know anything about the correctness of entries in such databases? Are they 99% accurate, 99.9% accurate, 99.99% correct? Even at these high rates of accuracy, a few incorrect values could make a difference.

Will the public be willing to pay more money so police and prosecutors can go through all the new video evidence they have?

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The uptick in evidence from devices like video doorbells and police body cameras means more work for public servants:

But State’s Attorney Joe McMahon said prosecutors in some ways are busier than ever with new types of evidence, such as surveillance from Wifi-enabled doorbells, police body cameras and home and business surveillance, compared to several years ago.

“We’re now seeing video come in from Ring doorbells,” McMahon said this week during his monthly media briefing. “We’re now getting actual video, audio and digital information that must be reviewed and analyzed and ultimately stored.”

In recent months, video from doorbell cameras helped police arrest a burglary suspect, and data from a Ring doorbell was used to confirm the identity of a suspect in a Sleepy Hollow home invasion, attempted murder and sex assault. Both court cases are pending.

McMahon said reviewing body camera video from multiple officers responding to a violent crime or even a DUI arrest has increased the workload for prosecutors compared to several years ago.

If there is demonstrable proof that crime rates are going down or more crimes are solved because of this additional evidence, I would guess the public would provide more funds – likely through taxes – to help go through all of the evidence. But, if the evidence does not lead to much or it somehow slips through the cracks or is hacked, it might be very hard to find the public resources.

This also seems ripe for algorithms/machine learning tools to help county and municipal officials scan quickly through all these video feeds. All of this could be very expensive to do in the short-term but could help handle the increasing video streams of the future.

The finding that Chicago suburbs pay more than get from the state feeds which narrative?

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A new study looks at how much Illinois counties contribute to the state versus how much they receive. The results are lopsided:

For every dollar DuPage County taxpayers send to Springfield, the state returns 31 cents…

Cook County receives 80 cents for every dollar contributed, Lake County gets back 39 cents, Kane County sees 76 cents come back for every dollar, McHenry County sees 42 cents returned and Will County receives 68 cents for every dollar sent to Springfield.

“We have in this state a long-standing legend that downstate is supporting Cook County and Chicago. The farther south you drive, the more virulent that narrative becomes,” said John Jackson, one of the report’s two authors. “The biggest theme of this whole paper is that we make the case that facts are better than fiction in terms of public discourse on this topic.”…

“It’s just because geographic politics are powerful, so it’s in the interest of people running for office downstate to say we’re exporting money to fat cats in Chicago and the suburbs,” Martire said.

Finding evidence that counters one common narrative can be powerful. Narratives develop over time and take on a life of their own. The downstate versus Chicago narrative – probably more accurately given the realities of metropolitan economies, downstate versus the large Chicago region – has existed for a long time. Arguably, this goes back to the opening decades of the state where much of the population and power existed in the southern and central regions before the opening of the northern part of Illinois to settlement in the 1830s and 1840s.

At the same time, this data could be used to promote a different narrative: the Chicago counties are unfairly treated by the state. These counties generate a lot of wealth and are penalized by the state. Why are the good, hard-working taxpayers of these counties penalized for their success? Why can’t the state keep the money generated there to help address the numerous issues present in the Chicago region? Just based on the data, the situation looks pretty unequal. In the long run, this narrative (with evidence) with the sides switched better for Illinois?

More broadly, these kinds of analyses of geographic disparities in funding present some really thorny issues for larger governmental bodies such as states and the United States as a whole. Balancing urban versus rural interests also goes back to the founding of our country resulting in key ideas like the Senate being the more powerful chamber with two votes per state regardless of population and the electoral college as opposed to a popular vote.

Would new local taxes on large tech firms really cause them to leave Silicon Valley?

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Several communities in Silicon Valley are considering levying special taxes on large companies, possibly affecting some of the biggest tech companies:

Cupertino, Mountain View and East Palo Alto have begun to ponder new taxes based on employer headcounts — levies that could jolt Apple and Google — and if voters endorse the plans, a fresh wave of such measures may roll toward other corporate coffers.

Alarmed by traffic and other issues brought on by massive expansion projects, the three Silicon Valley cities are pushing forward with separate plans to impose new taxes that could be used to make transit and other improvements…

A lot of factors point to this being a prime time for efforts such as these. San Francisco ranked fifth worst for traffic congestion in the world — and third worst in the U.S. — last year, according to INRIX Global Congestion Ranking. Record housing prices in 2018 boosted the median price of a single family home in the Bay Area to a record $893,000 in April, according to a CoreLogic report.

Federal tax cuts also have improved the balance sheets on an array of U.S. companies, large and small. Silicon Valley’s largest tech companies have contributed to the gridlock on freeways and soaring housing costs as they’ve grown rapidly in recent years, with brisk hiring and expansion in unexpected areas and mega-leases that gobble up huge swaths of office space.

If this works the way that some would argue it does, then the local taxes will be viewed by the tech companies as an unnecessary burden for their operations. They should then consider moving elsewhere where they are not subject to such local taxes. Indeed, if they wanted to move sizable operations, they could probably get numerous communities to offer them tax breaks.

However, this assumes that the local taxes are the primary factor that determines where companies and organizations locate. Instead, there are a variety of factors that both support and work against staying in their current location. I assume these are important reasons for why Apple, Facebook, Google, and others are in this location: the construction and maintenance of large headquarters, proximity to other like-minded organizations, an talented employee pool nearby, and the proximity to major cities like San Jose and San Francisco. Are local tax issues more important than these other concerns? Probably not. And even if they are, it would take some time before a large organization could significantly alter their operations in response.

Ongoing Illinois debates about abolishing townships

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Illinois is known as the state with the most taxing bodies and one way to reduce that figure would be to eliminate townships:

It’s prompted dueling Republican proposals for new state laws, one to make it easier to get rid of townships, the other to require a study to show financial savings before any township unit could be dissolved.

Illinois has 1,428 townships, helping to account for more units of government than any other state. It’s a layer of bureaucracy formed primarily to serve rural communities, but most states do without them…

“The real issue, and the reason property taxes are so high in Illinois, is because we have 7,000 units of government,” said state Rep. David McSweeney, a Barrington Hills Republican who’s sponsoring the bill to make it easier to mount township abolition campaigns in McHenry County. “The only way we’re going to reduce property taxes is to consolidate local governments. Townships are just a start.”…

Townships have three basic functions: maintaining roads that aren’t handled by other units of government, assessing property for real estate taxes, and helping the poor through food banks and emergency aid. Townships also often provide transportation for people with disabilities, as well as programs for senior citizens and youths….

Advocates of townships argue that they provide the most local, responsive service for the lowest price. In addition, several studies have found that expected expense reductions from government consolidation never materialized. A Rutgers University study concluded that “cost savings are not assured,” and that “most consolidations fail.”

Americans tend to prefer lower levels of government that they feel is more responsive to their daily needs. Taking the duties that townships do and pushing them up to a larger and more abstract county or state government can feel like ceding control to officials who do not know local conditions.

The article also makes it sound as if the research findings do not support claims that fewer bodies of local government would lead to cost savings. If that is not guaranteed, could a successful effort to abolish townships provide hope to some that government can be rolled back or reduced to some degree?

All said, efforts in Illinois in recent years to eliminate or consolidate units of government has been slow. The state legislature banned the formation of new government bodies and DuPage County slowly is reducing the number.

“[T]he federal government has backed away from subsidizing homeownership as a pathway to the “American Dream.”

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The recent changes to the American tax code signal a shift toward homeownership:

It may be a few years before experts can accurately assess how the new tax reform law will affect each city’s individual housing market, but one thing is clear: For the first time in a century, the federal government has backed away from subsidizing homeownership as a pathway to the “American Dream.”…

“It’s very hard to come up with how this is helpful to housing,” said Jonathan Miller, President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm “It’s either neutral or negative; there’s no positive, at least that we’re aware of at the moment. All this does is make everything more expensive, at least in high-cost housing markets.”

As a result of the bill, Moody’s Analytics estimates that housing prices will drop about 4 percent nationwide relative to projections in which the law doesn’t exist, and those drops are more pronounced in high-cost housing markets.

A lower sale price is good news, though, right? Not necessarily. Average home prices will drop because of the lowered cap on the MID (from $1 million to $750,000), and a new cap on SALT deductions. These two tax deductions were baked into the price of homes-for-sale, so without them, prices will seem lower. But homeowners and buyers could end up with less mortgage interest to deduct, and a potentially astronomical property tax bill. Previously, there was no cap at all on property tax deductions.

Several things to keep in mind:

  1. The context – the specific address of the residence – matters a lot for this bill. And, local communities and states can respond uniquely to how the changes affect local homeowners.
  2. A lot of urbanists have criticized the subsidies from the federal government for single-family homes and suburbanization. Might these tax code changes help encourage more density in certain locales (and these high-price/high-tax locations are also ones where affordable housing is sorely needed)? Of course, since context matters here, some of those who prefer more sprawl could move to cheaper states where the disappearing SALT deductions matter less. But, isn’t this good for limiting Americans deducting mortgage interest?
  3. Could this help some communities move away from such reliance on property taxes? As one example, some have argued for decades that school funding needs to be more equitable and this is directly tied to property values and taxes: wealthier communities can draw in more tax revenue. (I would argue this is a red herring to as there are bigger issues at work.) Could these federal tax changes encourage more revenue sharing within counties, regions, and states?

Perhaps the best thing to keep in mind is the first sentence of the article quoted above: it could take years to see how this all plays out.

Cities ready to offer tax monies for new soccer stadiums

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Cities continue to see sports stadiums as good uses for tax dollars. This time, it involves soccer stadiums:

Officials from Cincinnati, Detroit, Nashville, and Sacramento appeared in New York on Wednesday to place their bids with Major League Soccer for an expansion team. Slots for two teams are now up for grabs in the league’s plans to expand, so cities are lining up to lob promises of tax incentives for stadium construction at the MLS. Picture the mayors of each of these cities lined up for a free kick on goal.

Cincinnati, for example, has secured $200 million in private funds to build a stadium for FC Cincinnati, and the city has pledged up to $75 million in public money to pay for the infrastructure associated with a stadium. Nashville promises $25 million in tax dollars toward build-out costs for a $275 million Nashville Soccer Club stadium, which would be paid for through a public-private financing deal. Representatives for Sacramento Republic FC argued for a plan that would cost the city $46 million to realize a privately financed $226 million stadium.

Meanwhile, the Detroit Express would play on Ford Field, the home of the National Football League’s Detroit Lions, meaning that the proposed soccer team’s owners—who also own the Lions, the Detroit Pistons, and the Cleveland Cavaliers—would merely have to pony up the $150 million franchise fee plus some smaller costs in adjusting the existing stadium.

Perhaps in their favor, the cities and taxpayers would not be investing so much as is required for a top-four sport stadium.

At the same time, this approach is likely a bad idea. The research is pretty clear: the winners of taxpayer funded stadiums are the team owners who tend to already be wealthy people. Cities desperately want to boost their status and look trendy and acquiring a new sports team, particularly one in a sport that is thriving and looks like it is on the rise (just see the number of new teams in MLS in recent years). But, research shows that if do not build these stadiums and acquire teams, residents and visitors will just spend their money elsewhere.

Another interesting piece of the MLS expansion is that it is involving some medium-size big cities. Think Sacramento: they have a NBA franchise and nothing else. Orlando had a NBA franchise, nothing else. Cincinnati has the NFL and MLB. Austin has no major team. MLS expansion offers some new places a chance to get in the sports game and signal that they are major players.

Could the loss of SALT deductions lead to cheaper and denser housing?

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Perhaps a solution to the affordable housing issue affecting many major American cities and their surrounding regions is in the contentious current tax cut debates: removing the SALT (state and local taxes) deductions. The consistent commentary on this is that it will hurt residents and homeowners in blue states where local property taxes and sales taxes tend to be higher. But, could this drive people, developers and builders, and local officials toward cheaper and denser housing?

The reasoning could work like this: larger homes and lots mean more taxes that cannot be deducted from federal taxes. To avoid this, people might prefer smaller and cheaper houses. Communities could balance out the reduction in property tax value per housing unit by building more units. (This leads to another issue many communities do not want to face: providing more services for more residents, particularly schools.) Or, communities could pursue other kinds of development that could pay those higher property taxes – businesses, for example – or pursue creative solutions (merging public services? revenue sharing?) to address funding issues.

Could this help break the affordable housing logjam in places like New Jersey or the Bay Area? Wealthier neighborhoods and suburbs would still resist.

(Perhaps this should be part of a series of creative ways to address affordable housing issues. It reminds me of an earlier post where I suggested the lack of affordable housing could lead to population growth in less desirable locations.)