A Short Primer On Taxing By Municipal Governments By BILL WALDMEIER, Times columnist Printed with permission of the Pekin Daily/Times

Five important questions always bug the taxpayer!

First, is on efficiency. Is the municipality getting "the biggest bang for the buck." Obviously, it is most desirable to attain the optimum at the least possible cost.

When I was working for the state, the mayor of a small community inquired if our office could assist them in implementing an accounting system to provide better internal control and operational efficiency?

"What kind of accounting procedures are you now using?"

"The double entry system," he replied.

"What's bad about that?"

"Well," he said, "Our double entry system consists of two wire spindles—one for unpaid bills and the other for paid bills!"

Today, efficiency is pursued through budgeting, accounting, and planning practices. Municipalities of all sizes, including Pekin, are using computers to assist in formulating and implementing management decisions. Actual income and expenditures are compared to previous projections. Capital improvements for the infrastructure are planned and scheduled in advance to establish priorities compatible with anticipated requirements and financial resources.

Second, are the services provided really needed?

No municipality in Illinois is required to have a police or fire department. It is an option that is left to the discretion of the municipal authorities. However, once a municipality with a police and fire department reaches a population of 5,000 or over, it is subject to the provisions of the Police and Fire Act which, among other things, require participation in the police and fire pension systems.

The City of Pekin's total tax levy for the year 1988, collected in 1989, amounted to $4,325,200. Of this, $2,361,700 or 54 percent, was for police and fire protections and the required pension funding. When your life, security, well-being, or property is in danger, the cost attached to such protection and assistance rapidly becomes unimportant. Are you willing to do without it?

Third, is the service sufficient?

Sure, the number of people in the fire department could be reduced as well as the amount and quality of the equipment at their disposal. The same holds true for the police department and every other department in the city. As a result, property insurance rates could increase, public safety could deteriorate, public health could be endangered and our streets could go to pot (no pun intended!)

Sure the responsibility for the removal and disposal of garbage and trash could be left to the individual

June 1990 / Illinois Municipal Review / Page 19

citizen and eliminate the annual garbage tax of over $900,000. But, the refuse is picked up every week at every household, as regular as clockwork, and properly disposed. Some of the alternatives to this procedure are less convenient, the results are sometimes less than desirable, and the cost could be greater.

Fourth, from what sources of revenue shall the cost for the services be paid?

When the cost of services are not paid from property tax revenues, other sources of revenue are used. In the State of Illinois, one-twelfth of the state income tax collected is distributed to municipalities on a per capita basis. Additionally, the state income tax increase of one-half percent, passed by the General Assembly last year, contained the provision that only municipalities and education would receive the money specifically generated by the increase.

In 1990, the City of Pekin should receive approximately $1,970,086 from the state income tax. However, if the state income tax increase is not extended in 1991, or if the formula for distribution is changed (the education complex is fighting for all of it), the city's current share could be cut in half.

This year, the state motor fuel tax should provide Pekin with about $747,274 to be used only for street construction and maintenance.

Sales taxes generated $2,798,830 this last fiscal year.

The waste water user fees pay for the operation, maintenance, and debt service for the sewers and sewage treatment system.

If you live in Pekin, approximately one-third of the property taxes you pay goes to the municipality. The remainder goes to the school and community college districts, the county, the township and the park district.

The city has a $21 million budget and approximately 20 percent of that amount is derived from municipal property taxes.

Police and fire protection, sewage treatment, 200 miles of sewers, 170 miles of streets, street lighting, garbage collection and disposal, public library facilities, public transportation, civil defense, code enforcement, facility maintenance, and other amenities that costs money!

The higher the per capita assessed valuation—the lower the tax rate. Therefore, industrial and commercial expansion that increases the assessed valuation and additionally generates other revenue is one of the top priorities of every municipality.

Yes, there are many municipalities with much lower taxes and less revenue. Consequently, they have fewer facilities and services and little or no high quality infrastructure.

The fifth and final question is—what do you want and how much are you willing to pay for it? •

Page 20 / Illinois Municipal Review / June 1990