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 Homeowners in the Lake County city of Highland Park may soon be
looking at a second year of higher property tax bills thanks to pension costs.
The coming increase is nearly double the hike the average city homeowner saw on
this year’s tax bill.
On Nov. 26, Highland Park’s City Council adopted a $79.7 million budget for
2019, which anticipates a $972,000 hike to the city’s total property tax levy to
pay for pensions.
In explaining the levy increase, city manager Ghida Neukirch highlighted that
rising pension costs were crowding out spending on public services. “Continued
pressure to fund public safety pensions is draining resources away from support
of city services and capital investment,” Neukirch stated in a letter to the
mayor and city council members.
The addition of $972,000 to the city and library property tax levy represents a
5.5 percent increase from the adopted 2018 levy, going from nearly $17.6 million
to $18.5 million. Highland Park is required in 2019 to contribute $5.7 million
to pensions, but the city plans to direct $2.4 million extra to the plans to
curb future cost increases.
The city’s levy accounts for 7 percent of a resident’s property tax bill. The
Finance Department estimates the levy increase will cost the average homeowner
about $235 on next year’s property tax bills. That follows an increase of $123
for the average household in 2018, which was dedicated to public safety
pensions. The total two-year increase will average $358 for city and library tax
collections on a $500,000 house, which is just shy of the city’s median home
value.
Highland Park’s pensions account for the largest slice of city and library
property tax levy: 36 percent. Pensions take up a larger portion of property
taxes than do operating the city or library.
Because the proposed property tax levy hike is greater than 5 percent, Highland
Park is required to hold a public hearing before voting on the increase. The
hearing and levy vote are Dec. 10.
Between 2006 and 2016, Highland’s Park annual contribution to its police and
fire pension funds quadrupled, from $1.7 million to $7 million. Despite a
substantial boost in funding, the fiscal health of both funds continued to
deteriorate.
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As of 2016, Highland Park had 48 and 52 cents of
every dollar needed to fund its police and fire pensions,
respectively, according to a 2017 report from the Illinois
Department of Insurance. Municipal pension funds are required to be
90 percent funded by 2040 under a state law that went into effect in
January, adding increased pressure on municipalities to raise
property taxes.
Across Lake County, property taxes have grown 161 percent faster
than home values between 1996 and 2016, and face the highest
property tax rates in the state. Unfortunately, Highland Park’s
pension woes extend beyond just public safety pensions. Some former
city employees see generous pension payouts, with 11 city and two
park district retirees accumulating more than $1 million in total
pension benefits. Four former employees of the Park District of
Highland Park receive annual pensions that exceed $100,000.
Highland Park is another example of an increasingly common pattern of hiking
property taxes to pay for pensions. Norridge recently hiked its property tax
levy by more than 35 percent to pay for police pensions. Likewise, Carterville
in southern Illinois recently adopted an increase of 30 percent, also for public
safety pensions, and Geneseo approved a 10 percent increase. Peoria, Rockford
and Chicago face worsening pension crises.
Defined-benefit pensions are imperiling government workers’ retirement security
and jeopardizing today’s public services to pay yesterday’s pensioners, all
while leaving taxpayers on the hook for ballooning costs.
Lawmakers in Springfield must move to protect the retirement security of
government workers and taxpayer interests. They should amend the Illinois
Constitution to allow for changes to the growth in future, not-yet-earned
pension benefits while protecting benefits already earned.
Without a constitutional amendment, continual growth in unfunded pension
liabilities will lead to further uncertainty for taxpayers, leaving
municipalities hamstrung to fund public services.
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