TRUTH IN TAXATION ACT

By JAY R. HEDGES, Director
Department of Commerce and Community Affairs

Since the municipal tax levy must be filed with the county clerk no later than the second Tuesday of September (September 9, 1986), this is a reminder of the procedures that all municipalities must follow to comply with the Truth In Taxation Act. (Illinois Revised Statutes Ch. 120, par. 861 et seq.) It is always advisable that the tax levy be planned well in advance to assure meeting the publishing and hearing requirements of the Act.

It is particularly important that municipal officials pay close attention to the requirements of the Act this year. Many governments may have to increase their liability insurance levy to meet the rising cost of liability insurance premiums. Also, some communities are considering increasing other property taxes anticipating a possible loss of the Federal Revenue Sharing program. If all of the requirements of the Truth In Taxation Act are not met, the municipality may not be able to receive all the property taxes it needs to operate.

The Truth In Taxation Act became effective in 1981. The General Assembly passed the act to require any taxing body to hold a public hearing and publish a notice of the hearing in a newspaper, if it intends to adopt an aggregate tax levy which is more than 105 percent of the amount of property taxes extended ("billed") for it in the prior year.

The Act requires the governing body of the municipality to determine the amount of money estimated to be necessary to be raised by taxation. This must be done at least 20 days before the adoption of the tax levy. The estimated amount of the proposed aggregate levy is compared with the amount of property taxes extended for the government in the prior year. If the proposed levy is greater than 105 percent of the previous year's extension, then the municipality must hold a public hearing and publish a notice of the hearing in a newspaper.

There are certain property tax levies which should not be included in the comparison of the annual aggregate tax levy with the previous year's extension. These include: election costs, debt service levies (for the payment of principal and interest on bonds), and levies for the payment of lease rentals to a public building commission. Based upon rulings of the Illinois Supreme Court and the Attorney General, it appears that any levy which is not part of the annual aggregate levy should be excluded from the comparison. However, check with your own attorney for his interpretation on this point.

If a hearing is necessary, a notice of the hearing must be published in a newspaper. The notice may have to be printed in more than one newspaper depending upon whether your municipality is located in more than one county. Ch. 120, par. 866 prescribes the specific publishing requirements for the various situations and also those applicable to all municipalities.

The published notice must meet the following requirements:

1. It must be published no more than 14 days nor less than 7 days before the date of the public hearing.

2. It must be at least one eighth page in size, enclosed in a 4 inch black border, and printed in not less than twelve point type.

3. It may not be placed in the portion of the newspaper where legal notices and classified advertisements appear.

4. It must contain in simple and plain language the following information:

a. The legal name of the taxing district.

b. The commonly known name of the taxing district.

c. The amount of property taxes extended or estimated to be extended for the taxing district the preceding year (less exclusions).

d. The amount of the proposed aggregate levy for the current year (less exclusions).

e. The percentage increase.

f. The date, time and place of the public hearing

Be careful not to include any information in the notice that is not required by law, or the notice could be invalid.

At the hearing, the governing body must explain why the proposed tax levy is necessary and must permit members of the public to present testimony. Although strong opposition to the proposed levy may be expressed at the hearing, it is completely up to the governing body to make the final decision.

The levy is then filed with the county clerk. It must be accompanied with a certification by the mayor or village president that the levy was adopted in compliance with all requirements of the Truth In Taxation Act. Without this certificate, the municipality cannot receive more than 105 percent of the taxes extended in the prior year.

If you have questions about the Truth In Taxation Act, or wish to receive a sample of the hearing notice or certificate of compliance, simply call our Office of Local Government Management Services on our toll-free hotline 1-800-562-4688. •

Page 12 / Illinois Municipal Review / August 1986