RISE OF PROPERTY TAX RATES IN REAL TERMS
NOT SUBSTANTIAL ACCORDING TO IIRA DIRECTOR

MACOMB, IL — Property tax reform in Illinois continues as a hot legislative issue; however, the director of the Illinois Institute for Rural Affairs (IIRA) at Western Illinois University reports that property tax increases in constant dollars were not prevalent in all cities throughout Illinois during the 1980s.

"With the current discussion of limits on property tax increases, much attention is paid to the rate at which property taxes have changed," said Walzer. "In real dollars when accounting for inflation, the increases are not very dramatic, especially in downstate cities, and, in some cases, have declined."

For example, Chicago suburbs collected an average of $66.58 per resident from property taxes in 1977, compared with an average of $144.02 twelve years later. This increase of 116.3 percent represents an overall increase of 10.5 percent when the effects of inflation have been removed. The $144.02 per resident collected from property taxes in 1989 purchased $73.59 per capita in 1977 dollars.

The trends in downstate cities are much different. In 1977, independent cities collected an average of $66.18 per resident from property taxes, slightly less than the Chicago suburbs. By 1989, however, downstate cities collected substantially less per capita than the suburbs. In fact, when price increases are removed, downstate cities collected 20.5 percent less from property taxes than they had 12 years earlier.

This net loss in downstate cities is indicative of the economic problems faced by many cities and counties, according to Walzer.

"The decrease in constant dollars can be explained by several factors," he said. "Certainly not the least is the relatively high unemployment and poor performance of the economies during the national recession in the early 1980s. Peoria, Rockford, Danville and Decatur are examples of Illinois cities hit particularly hard by the recession. Cities in DuPage and surrounding collar counties have fared much better."

This data and analysis is part of a recent article by Walzer and Carol Rachus, research associate at IIRA, published in the "Illinois Municipal Review." Each year, Walzer and his colleagues examine municipal revenues sources to spot trends that can help officials formulate short- and long-term budgetary policy for their cities.

"It might surprise many residents to know that property taxes have declined in relative importance as a city revenue source, especially in downstate cities," said Walzer. "In the Chicago suburbs, property taxes represented 32.6 percent of general revenue in 1977 and decreased to 28.3 percent twelve years later. In independent cities, property taxes declined from 27.4 percent of revenues in 1977 to 19.4 percent in 1989."

According to Walzer, the decreased reliance on the property tax base and federal funding has led to substantial increases in user charges.

"Statewide attempts to limit property taxes, must, in some manner, recognize differences among cities in revenue-raising potential and past revenue growth," said Walzer. "A revenue shortfall from such limitations usually is replaced with other revenue sources in order to maintain services and rebuild infrastructure." •

April 1992 / Illinois Municipal Review / Page 7