What Municipal Officials Should Know About The Tax Levy Cycle By STEVE McCLURE, Director, DCCA

Over the next two months, most municipal officials will be discussing their revenue needs. Passage of the Tax Levy Ordinance, which must be in the hands of county clerks by the second Tuesday in December, requires that municipal governments carefully calculate property tax revenues needed to fund services. This month, I'd like to discuss the tax levy process and statutory requirements for municipalities during the tax levy cycle.

To calculate the tax levy, municipal officials must determine the amount needed to fund services and the amount available from various revenue sources. The difference must be raised through property taxes and this amount is the tax levy. Since most municipalities operate on a May 1 through April 30 fiscal year, levying must be done for the following fiscal year, since most if not all of this revenue is not received until the months of July and October.

Most municipalities find that they must set their appropriation or budget ordinance a bit higher than may actually be needed. This is because the amounts levied are based on the potential expenditure requirements as expressed in the current fiscal year's appropriation ordinance, which may not be sufficient to cover needs in a subsequent year. (For further discussion, see my column in the May, 1990 issue).

The municipal tax levy may consist of several levies. Aside from the widely imposed corporate levy for the general purposes of the municipal government, the monies raised from all other levies are restricted to specifically designated purposes, including audit, emergency services and disaster operations, firefighters' pension, fire protection, Illinois Municipal Retirement Fund, medicare, police officers' pension, police protection, school crossing guards, social security, streets and bridges, street lighting, general and liability insurance, unemployment insurance and workers' compensation. The audit, pension, medicare, social security and insurance levies are not limited by a statutory rate ceiling; the amount levied for these purposes should only be that amount sufficient to pay expenses for the specified purpose. The maximum rate limit set for certain levies may be increased by referendum. Of course, money levied for a specific purpose may only be spent for that purpose.

Knowing what and how much your municipality can legally levy can help ensure adequate funding for

October 1990 / Illinois Municipal Review / Page 19

services. However, to assure receipt of the amount levied, certain filing requirements with the county clerk should be met. Documents and statements that must be submitted to the county clerk during the tax levy cycle are:

— Appropriation or Budget Ordinance.

— Tax Levy Ordinance by the second Tuesday in December accompanied by a Certification of Tax Levy Ordinance with an original signature by the municipal clerk certifying the ordinance is true and correct and a Truth-in-Taxation certificate with an original signature by the presiding officer certifying compliance with or inapplicability of the Act.

If your municipality has annexed property, the Annexation Ordinance along with a map or plat of the annexed property must be filed with the county clerk on or before the date the Tax Levy Ordinance is filed. This will allow the municipality to receive the tax revenue from the property owners in the annexed area in the next year rather than in two years hence. When an annexation causes a municipality's boundaries to extend into another county, the municipality should provide any bond ordinances to the county clerk's office into which the municipality annexed. The amount extended in taxes to pay the debt service on bonds is based on the bond schedule in the ordinance; not the levied amount.

One additional filing requirement concerns the creation of a special service area. Effective January 1, 1990, Ch. 120, par. 1306.1, an ordinance establishing a special service area shall not take effect until a certified copy of the ordinance, containing a description of the territory of the area, is filed with the County Clerk's Office or the Recorder of Deeds.

As well as the importance of complying with the filing requirements, a municipality should be aware that it will not receive the tax revenue levied, if any one of the following possible errors should occur when preparing the Tax Levy Ordinance.

— the Truth-in-Taxation hearing was not held (can occur when the calculation to determine applicability is based on the prior year's levy rather than the extension for last year);

— a specific levy produces a rate in excess of the legal maximum rate;

— the municipality levies for the amount it assumes to be its share of the Township's or Road District's road and bridge tax levy; or,

— if an amount is included for debt service on bonds in the levy which does not match what is required by the bond ordinance schedule.

Concerning the above problem with computing applicability with the Truth-in-Taxation Act, municipal officials should also be aware that election costs, debt service, and public building commission lease levies are not part of the calculation to determine applicability with the Act. (The Act is applicable when the corporate and special purpose levies together exceed 105 percent of the extension for the preceding year.)

And, for further information on authorized property tax levies, the Department of Commerce and Community Affairs has available a publication entitled the Illinois Tax Rate and Levy Manual. The manual lists 73 levies which non-home rule municipalities are authorized to impose to meet operating or capital outlay expenses and another 26 levies which are authorized to cover debt service costs for general obligation debt. •

Page 20 / Illinois Municipal Review / October 1990