Pension costs force suburban Illinois village to weigh new property tax

Rising pension costs could force suburban Carol Stream to impose a property tax for the first time in five decades.

The suburban village of Carol Stream is one of only a handful of Illinois communities that does not impose a local property tax. But that may change soon, thanks to the village’s rising pension costs.

Carol Stream levied a property tax only temporarily in the 1970s, but local officials say the village needs a new property tax to make up for declining local sales tax revenue, which has fallen 2.4% between 2017 and 2018, according to the Daily Herald. The village last raised its sales tax in 2018 to 8%, where it stands now.

But sales tax revenue would need to increase by 1.9% to pay for rising pension costs. The village’s required police pension contribution will be $2.8 million for fiscal year 2021, a $224,850 increase from fiscal year 2020.

Those increased pension costs, coupled with the decline in sales tax revenue, are placing pressure on Carol Stream’s budget. At this rate, officials project, the village would run out of capital funds during the third year of a five-year infrastructure plan without new revenue. The village used to transfer surpluses from the general fund into the capital fund to finance those projects – but it hasn’t generated a surplus in two years. Carol Stream started charging drivers a local gas tax in 2018, which also funds road improvements.

The village estimates Carol Stream homeowners with a median property value of $231,400 would owe $61 annually in property taxes, according to the Herald. Residents across DuPage County – where Carol Stream is located – pay some of the highest property taxes in the nation.

Across the state, local communities are seeing pension costs eat into spending on public services. Only 14% of property tax dollars received by local police departments in DuPage County went to public safety services in 2016 – the rest when to police pensions.

Carol Stream is not the only municipality searching for additional revenue as pensions strain local budgets. In 2018, the southern Illinois city of Carterville hiked its property tax levy by over 30% – the largest in its history – while north suburban Highland Park raised their levy by nearly $1 million to pay for pensions.

Illinois spends nearly double the national average on pensions, measured as a percentage of all state and local government spending – more than any other state in the nation. Without meaningful reform, local governments in Illinois will continue to ask taxpayers to foot the bill for rising pension costs.

Lawmakers must amend the constitution to address this problem, and to protect taxpayers as well as the retirement security of those enrolled in the pension systems.

Carol Stream will host a forum Sept. 30 for residents to ask questions about the property tax proposal.