Mention the village of Lombard in suburban DuPage County, and many will think of middle-class neighborhoods, low unemployment and plenty of money to support city services.

But that's no longer the case in this burb of 40,000, according to many community leaders. Paramedics from the fire department are so short-staffed they have to rely on help from other communities to respond to local emergencies. Police officers say they'll have to start ignoring some complaints if their ranks aren't increased. And the village has been strapped for cash to pay for much-needed street and sidewalk repairs.

It's the same for the solidly middle-class suburb of Villa Park, which was desperately seeking dollars to improve badly crumbling streets before voters approved a hefty tax increase last year. In upscale Hinsdale, meanwhile, the severely crowded middle school has overflowed into portable trailers. No solution is in sight there, since voters recently turned down a $19 million bond referendum to build a new school.

The culprit for these suburban woes, according to local officials: caps on property tax increases in Chicago's collar counties. These state-imposed limits on local taxes have forced many communities to delay or forego services — or search for ways around the limits.

The tax-cap idea was a cornerstone of Republican Gov. Jim Edgar's bid for election in 1990. At the time, suburban homeowners were screaming for relief from annual double-digit increases in their property tax bills, the result of rapid growth and spiraling real estate values in the counties that ring Chicago.

Property taxes are a key source of local funding for everything from schools to police and fire service to garbage collection. And, while local governments also rely on sales taxes and user fees, the property tax remains the levy Illinoisans most love to hate. That may be because property taxes aren't tied directly to ability to pay or to day-to-day consumption decisions — and because homeowners have reason to believe the quality of the process for determining the taxable value of property varies throughout the state.

By 1991, the Illinois General Assembly approved caps for DuPage, Kane, Lake, McHenry and Will counties, limiting yearly increases in local government collections to 5 percent or the rate of inflation, whichever is less. Since then, tax hikes that used to run 10 percent or higher have been limited in these suburban counties. Last year's average increase in DuPage was 3.9 percent.

Touting the cap as an effective way to keep taxes in check, state lawmakers extended it to suburban Cook County during the last legislative session. Now — despite complaints from municipalities, school boards and park districts in communities such as Lombard — Edgar and Republican Senate President James "Pate" Philip support capping local property taxes throughout the state.

But before legislators extend these limits — say those who live with them now — they would be wise to consider the sometimes creative, nearly always complicated and frustrating machinations municipalities must go through when they need to get around the caps.

Despite their popularity with voters, some local officials say, the caps have become the equivalent of a wrench thrown into a well-run machine.

"I think small government was working before the cap came into effect," Lombard village President William Mueller says. "Municipal government is the most responsive to the people." Mueller maintains that the caps limit the services village officials can provide to his hometown, located in eastern DuPage County. "The tax cap has a way of overlooking a legitimate change and need for services," Mueller says. "It ties our hands in some ways."

For instance, faced with a steadily increasing number of ambulance and nonemergency police calls, Lombard village trustees haven't been able to find the dollars to beef up those staffs as much as they would like. As a result, paramedics from the fire department have had to rely on mutual aid from nearby communities — a dependence that is sure to grow if staffing levels aren't increased each year. But merging services with other communities is only one example of the ways in which local governments are coping with the caps.

30 ¦ May 1996 Illinois Issues

'No person in their right mind would design what Illinois has. It defies any sense of logic.'

The most straightforward way around the limits, of course, is to get voter approval for any additional property tax hikes. But taxpayers are traditionally reluctant to agree to higher bills. In DuPage County, voters approved only two of 10 referendums in the March election.

So, many communities are choosing a historically popular means for getting around the limits: They're creating additional taxing districts to collect for special services, such as building new libraries. The new districts come in under the caps, and voters are less likely to notice the bite.

But the move — which traditionally has been used by local governments in Illinois as a way to get around rate limits on taxing bodies — serves to create more bureaucracy, and probably ends up costing taxpayers more in the long run, according to James M. Banovetz, a political science professor at Northern Illinois University in DeKalb. Banovetz figures Illinois has roughly 6,700 units of government, more than any other state in the country. The next highest is Pennsylvania with about 4,500 government entities.

"We have a huge government structure," Banovetz says. "No person in their right mind would design what Illinois has. It defies any sense of logic." With 297 taxing districts in DuPage, the county comes in second in the state in the number of government entities. Cook County is first.

Most people can't begin to list each taxing district they support, he says, ticking off some of the many types of services covered by special taxing districts, including parks, airports, hospitals and mosquito abatement programs. Banovetz argues that while all taxing districts in the collar counties are limited in the taxes they can collect each year, residents probably would end up paying less if one entity was responsible for more services.

"The taxpayer pays the same amount of money or more and has a less understandable system of government," he says.

DuPage County officeholders also are turning to a temporary taxing district that helps fund specific street or sewer projects that otherwise might be dropped. The small taxing districts charge residents and business owners for repairs made to their neighborhoods. In 1995, DuPage County listed 84 such districts, up from 61 the previous year. Lombard created some districts that tax individual areas for 40 percent of the cost of street and sidewalk improvements, with the village picking up the rest. As each area is taxed, the streets and sidewalks there are fixed.

Banovetz says the extra bureaucracy does little more than create confusion. "How can government be responsive if taxpayers don't even know it exists?" he asks. "In the long run it erodes the integrity of local government and makes it harder to run local government efficiently."

That's why he supports another way around tax caps: laws that give local government more power through home rule status. While most suburban governments are limited under the tax cap, home rule communities such as Chicago are not. Home rule powers were granted to certain local governments under the current state Constitution. Such status gives communities broader taxing powers by allowing them to raise property taxes above the cap and to levy a higher sales tax. Also, the status allows such municipalities to regulate public health, safety, morals and welfare with stricter laws than state officials approve. About 170 municipalities statewide have this authority.

Home rule automatically is granted to towns with more than 25,000 people. Those with smaller populations must ask voters for the privilege. "It is a way to stem the rapid increase of local government," Banovetz says.

But home rule powers aren't an easy solution for local fiscal woes either. Although Lombard has a population of roughly 40,000 people, it does not have home rule status. In 1971 the village achieved the rank, but voters took it away about 10 years later amid concerns that board members had too much power to tax.

Lombard trustees considered asking voters last year to grant them home rule, but the idea was shelved after the spring election. Trustee John Jaugilas won a seat on the board after waging a campaign against home rule. Voters, he says, were afraid their property tax bills would go up.

"Even though our village said property taxes would not go up, there would not be anything to prevent a future board from raising taxes above the cap" if Lombard became a home rule community, Jaugilas says.

Besides, he insists, the village doesn't need more money to run well. "We do an excellent job within these constraints. I don't think the ability to add more taxes particularly gives us a benefit. It forces us to be fiscally responsible. It makes for tougher decisions but for better ones."

Other Lombard officials, including Mueller, say they wanted the power to increase sales taxes to pay for more police and fire personnel. They also were considering using the status to lower property taxes. "The cap really puts us in a tight position compared to other communities," Mueller says. "Since some communities don't have

Illinois Issues May 1996 ¦ 31

If limits are implemented statewide, Lombard could serve as a textbook example of the obstacles many cities would face.

to abide by it, they can provide better services for their towns."

A third possible way to circumvent tax caps is to use a loophole in the property tax cap law approved last year. The change allows local governments under the cap to keep accruing debt as old loans are repaid. That is the equivalent of letting someone who keeps a balance on his or her credit card continue to charge purchases equal to the amount they pay off each month.

While many officials of suburban school districts, park districts and municipalities see this extra bonding authority as a way to stay within the cap without having to ask for further tax increases, Lombard park officials charge the new law is unfair. Because the district paid off the last of its debt last year, it can't take advantage of the loophole. That's like denying credit to a credit card customer who has paid off his or her balance.

Now the park district must ask voters to approve a permanent tax increase to help pay for a new recreation center and capital improvement projects. Instead of being rewarded for sound fiscal practices, says parks director Dean Bostrom, Lombard is being punished.

NIU's Banovetz says the loophole provides an incentive for taxing bodies to continue to accrue debt. "If they don't, they will lose those dollars forever," he says. "There is a built-in incentive to be fiscally irresponsible."

Critics of a statewide cap on property taxes fear they would be faced with these same problems — and more — if limits are expanded throughout Illinois. What's more, downstate taxpayers have not seen the same kind of growth in property values as suburban Chicago, according to Craig Lounsberry, director of research for the Taxpayers' Federation of Illinois.

"Traditionally, downstate communities have had higher rates because of the lower values, but now they are seeing an increase in property values," he says. "They want to take advantage of that."

The federation has not taken an official stance on the issue. But it is unlikely a statewide cap will be approved during this legislative session due to bipartisan opposition from downstate lawmakers. Aides to Sen. Philip and Gov. Edgar agree. "Historically, there has been opposition to it," says Patty Schuh, Philip's spokeswoman. "[Philip] supports a statewide cap, but he's simply not sure if it can pass."

Still, that doesn't rule out a future bid to limit property taxes across the state. "Some of the momentum is now gone because the areas in the state where it was the biggest problem are capped," says Edgar's spokesman Mike Lawrence. "But the governor thinks they ought to be capped."

If the limits are implemented statewide, Lombard could serve as a textbook example of the obstacle course many cities would face as they struggle to continue public services under constrained budgets. That community's experience deserves a look before state politicians leap to expand tax caps in Illinois.

Kristy Kennedy is a local government reporter for the Daily Herald, a newspaper based in Arlington Heights. Previously, she has written about the debate over teacher tenure for Illinois Issues.

A typical tax bill in Lombard The average home near the center of town in 1995 cost $148,586. A 1995 tax bill for a home worth that amount would be $3,097.50. The money would go to:
Taxing body	% Total
School District 44	38.95
High School District 87	32.06
Village of Lombard	8.72
DuPage County	5.64
Lombard Park District	4.09
Lombard Library	3.11
College of DuPage	3.06
DuPage Forest Preserve	2.51
DuPage Airport Authority	0.96
York Township	0.87
$6.7295 is the rate per $100 of assessed valuation. To figure out the typical bill: Take the value of the home and divide by 3 (that's the multiplier) then subtract $3,500 (the homeowners' exemption) 100 to get the amount to multiply the tax rate by.

32 ¦ May 1996 Illinois Issues