A primer on park district finances

Part 4 — The levy and Truth-In-Taxation.

Editor's Note: This is the final article in a four-part series dealing with park district finances.

By Robert A. Porter

The tax levy process is one of the most confusing topics for some people. Many think the levy is the appropriation.

The levy is, very simply, the act which creates the money derived from taxes. The appropriation is the act to authorize expenditures from taxes and other money sources. It is the authority source that tells the county to collect tax revenue to finance park district expenses. The levy should only be concerned with tax dollar revenue.

Levy ordinance

The levy ordinance is adopted and filed in September of each year, and generally the taxes are not collected until the subsequent year. Park districts in those counties which have adopted early tax distribution procedures (i.e., Cook County) will begin to receive the tax revenue as early as February of the year following the adoption of the levy ordinance. Your district's receipt of taxes may differ since county tax disbursement procedures vary from county to county.

The determination of the tax amounts actually extended and collected is generally uniform. A park district does not always get what it levies. The County Clerk will only extend (distribute within legal limits) the funds that are legally permitted. The key elements in the process are:

• Equalized Assessed Valuation (EAV),

• the amount levied for each fund and

• maximum statutory tax rates.

Tax funds

The County Clerk extends the amount requested in the park district levy ordinance for billing and collection subject to statutory limits. There are ceiling limitations on most tax funds utilized by a park district's levy. (The most common use tax funds are listed in Article V of The Park District Code.)

Common concern

The most commonly asked question in the levy process is, How much does an agency request? There is no black and white answer, as that answer rests on the premises of board philosophy, goals and objectives, need, political pressure and other sources of revenue.

It is difficult to accurately project 12-18 months in the future as to what expenses are going to be. It is difficult to accurately guess what the EAV is going to be in the next year.

The levy process is only one of three components that affect real estate taxes. The total picture involves the following three issues:

• local taxing body levies.

• the assessment process.

• the State multiplier.

Illinois Parks and Recreation 16 July/August 1987

Chart 1
1.	EAV..............................	$105,000,000
2.	Statutory Limit .....................	X .10
3.	Maximum Corporate Tax ............	$ 105,000
4.	Corporate Levy .....................	$ 100,000
5.	Maximum to be extended ............	$ 100,000
Chart 2
1.	EAV ..............................	$105,000,000
2.	Tax Rate ..........................	.09524
3.	Tax to be extended .................	$ 100,000
Chart 3
1.	EAV ..............................	$105,000,000
2.	Limit .............................	.10
3.	Maximum Corporate Tax ............	$ 105,000
4.	Corporate Levy .....................	$ 125,000
5.	Maximum Extension ................	$ 105,000

So depending on who is speaking, tax increases or decreases are the result of the local government, the assessor or the State Department of Revenue. All three factors affect the tax structure.

Levy amounts

A great many park districts levy the maximum amount of tax available in some funds. The park district seeking the highest return in the levy process will do what is referred to by the press as balloon levying. This simply means asking for an amount of money above statutory limits.

The County Clerk will reduce the fund if it is above the limit. He (or she) will never add to a fund request. Thus, the agency is assured 100 percent levy rate amount.

For example, the tax levy ordinance establishes $100,000 as the amount to be levied for Corporate Fund purposes. The statutory limit is .10 per hundred dollars of EAV. If the EAV should be established at an amount greater than $100,000,000 ($100 million), the rate will be extended at less than the statutory limit. (See Chart 1.)

The tax rate would be extended at an amount which would produce the levied amount at the established EAV or .09524. (See Chart 2.)

The park district in this instance would not maximize tax revenue opportunities. If the EAV was known prior to the adoption of the levy, the problem would not exist. Few, if any, park districts can afford to pass the opportunity to maximize tax revenue, since statutory tax rates have remained constant while inflation has weakened the park district budgetary process. Using the same facts as previously stated, maximization would be accomplished by establishing growth in EAV. The County Clerk would then multiply the EAV by the rate limit and extend the maximum tax. (See Chart 3.)

Drafting the ordinance

There are some important considerations in drafting the levy ordinance. The first is to remember that the levy is the document that tax protests are filed against. The levy ordinance must contain sufficient information to prevent protest, but not too much information to encourage protests. The line items should be singular in nature. For example, gasoline should not be listed with tires and oil.

The second factor is to only deal with tax revenue, and to exclude bonds and other revenues. The tax levy is what is says — tax. The additional listing of other revenues can cause further protests.

Remember, the levy is not supported by or have any relation to the budget or the appropriation ordinance (Ch. 104, par. 4-4, Ill. Rev. Statutes, 1985).

Finally, don't forget Truth-In-Taxation process. It is required if a park district desires to levy more than 105 percent of its previous year's extension. There are specific guidelines about publications, public hearings and procedures. (See accompanying article.)

Other reminders

The levy ordinance should also:

• have a certification page attached to it.

• be drafted with simplistic language, including just enough data to reduce tax protests.

• estimate your district's tax revenue needs with the thought of 12 to 18 months of future expenses.

• include only tax revenue.

• be filed on time. A late filing means no revenue for the next year.

• project high enough to not lose any revenue opportunity with

Illinois Parks and Recreation 17 July/August 1987

a rising EAV.

• observe Truth-In-Taxation procedures if your district wants anything above a 105 percent increase.

• have the Truth-In-Taxation statement and publication verification attached to it.

Keep in mind that the levy ordinance is not related to any appropriation, and that the park district tax represents five to six percent of the entire tax bill. Be sure to contact legal counsel about technical questions if the staff or the board is unsure of any issue.

ABOUT THE AUTHOR:
Robert A. Porter is the director of the Lemont Township Park District.

New board member information about The Truth-In-Taxation Act By Robert A. Porter The Truth-In-Taxation Act is a procedure that was signed into law by Gov. Jim Thompson in 1981. The purpose of the Act is to require taxing districts (including park districts) to disclose by publication and to hold a public hearing on their intention to adopt an "aggregate levy" in amounts more than 105 percent of the amount of property taxes extended or estimated to be extended upon the levy of the preceding year. The Act also requires the park district to determine the amount to be levied not less than 20 days prior to the adoption of such levy. The costs for conducting an election and the debt service funds are to be excluded in this process. Required procedures The First step in the process is to formally determine (excluding bonds) the dollar amount of taxes to be created in the upcoming levy. The second step is to determine the total dollar amount of taxes (excluding bonds) extended for the park district in the preceding year. Note that is not the levy for the preceding year, but rather the actual tax extended by the County Clerk. If the estimate to increase taxes is more than 105 percent of the amount extended upon the levy of the preceding year, the park board shall give public notice of, and hold a public hearing on, its intent to adopt the levy. Public hearing A notice shall be published in a newspaper of general circulation, no more than 14 days nor less than seven days prior to the public hearing date. The notice has specific requirements of size, border width, location in the paper and print size. The notice shall state: • the amount of property tax extended by the park district for the preceding year. • the amount of the proposed levy for the current year. • the percentage increase. • the date, time and place of the public hearing. The public hearing must be open to the public. The park board shall explain the reasons for the proposed increase and shall permit an opportunity for persons in attendance to present testimony. When the hearing is completed, the board may adopt the levy. After compliance with all the foregoing, the certificate of tax levy that is filed with the County Clerk must be accompanied by a certification executed by a presiding officer of the district certifying compliance with the provisions of the law. The absence of this certification will cause the County Clerk to not extend in excess of 105 percent of the amount for the previous year. The Truth-In-Taxation Act caused a large amount of confusion in its first year or two. There are still some park districts that have never levied more than 105 percent and, thus, have never had to go through the procedures. Failure to comply has cost some districts major dollars. You should refer to your attorney, County Clerk or the Illinois Association of Park Districts with specific questions.

Illinois Parks and Recreation 18 July/August 1987