Question of the Day: What the Truth in Taxation Act Notice Really Means

Yesterday, the Library's Truth in Taxation Act (TITA) notice was published in the Plainfield Enterprise newspaper. This notice is required by law to  be published within a very specific time frame prior to a Truth in Taxation hearing and containing specific wording and calculations. I received my first question in years from a taxpayer regarding this notice following its publication, about how the Library can increase taxes by this amount.

The short answer is, it can't. Regardless of what is levied, the maximum amount of taxes that the Library can collect is set by law and by voters in the district.

The long answer is more complicated.

What the TITA notice does not reflect is the Property Tax Extension Limitation Law (PTELL aka "the tax cap") and the way in which new or newly improved property is included in the tax extension calculations. The tax cap limits the dollar amount of taxes that can be collected by the Library (or any other taxing body) at what was collected the previous year, plus 5% OR the Consumer Price Index (CPI) for the previous year, whichever is less. Generally CPI is the lesser number, as you can see here. Last year, CPI was 3.0%, making the total dollar amount the Library can collect 1.03%.

New property annexed to the district and newly improved property being added to the tax rolls are not included in the base for the tax cap calculation, only in the first year they are on the tax rolls. The Will County Tax Extension Office will reduce the levy amount to that allowed under the tax cap, but they cannot increase it to capture the full amount for new or improved property coming onto the tax rolls. Here's the kicker: it generally takes 12-18 months for a new property to be added to the tax rolls for a taxing district and the levy has to be done far enough in advance that new property figures are estimates. If the Library fails to levy high enough to capture the full value of new property coming onto the tax rolls, the opportunity to increase the tax base amount for subsequent years is lost. The Library is annexing additional property into the district this year, under an intergovernmental agreement with the Village of Plainfield. There are properties being improved and coming onto the tax rolls. Levying high ensures that the full value of these properties are captured in their first year on the tax rolls, which in future years will spread that total dollar amount under the tax cap over a larger tax base.

In addition to all of that, the voters of the district and the law set the maximum tax rate for the district. Under the tax cap, the district's tax rate can fluctuate up and down, according to CPI and the total value of property in the district. But the voter-approved tax rate is an additional limit on the amount that can be collected.

Below is the text of the notice published yesterday. Note that new property is not referenced in the mandated text, only the total dollar amount.

NOTICE OF PROPOSED PROPERTY TAX INCREASE

                          FOR PLAINFIELD PUBLIC LIBRARY DISTRICT,

                             WILL AND KENDALL COUNTIES, ILLINOIS

I.        A public hearing to approve a proposed property tax levy increase for Plainfield Public Library District, Will and Kendall Counties, Illinois, for 2011 will be held on September 19, 2012 at 6:00 p.m. at the Plainfield Public Library at 15025 South Illinois Street, Plainfield, Illinois.

          Any person desiring to appear at the public hearing and present testimony to the taxing District may contact Julie Milavec, Library Administrator, at the Plainfield Public Library at 15025 South Illinois Street, Plainfield, Illinois, phone (815) 436-6639.

II.       The corporate and special purpose property taxes extended or abated for 2011 were $ 3,340,000.

          The proposed corporate and special purpose property taxes to be levied for 2012 are $3,880,000.  This represents a 16.16% increase over the previous year.

III.      The property taxes extended for debt service and public building commission leases for 2011 were $ -0-.

          The estimated property taxes to be levied for debt service and public building commission leases for 2012 are $ -0-.  This represents a zero % increase/decrease over the previous year.

IV.     The total property taxes extended or abated for 2011 were $3,340,000.

          The estimated total property taxes to be levied for 2012 are $3,880,000. 

This represents a 16.16% increase over the previous year.         

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