Debt debate in DeKalb: How your property tax bill might look in 2022 based on City, library tax levies

DeKALB - As DeKalb municipal leaders look to set how much homeowners will have to pay on their 2021 property tax bills next year, some aldermen are questioning who’s responsible for debt attached to the DeKalb Public Library’s 2013 expansion.

In response, library officials say the debt repayment plan was established years ago, and follows a precedent set in 2013: That the City of DeKalb earmark $495,000 annually to pay off a 20-year loan. The debt was taken out by the former city council in 2013 to help pay for the $25.3 million library expansion.

“At the time the council thought it was important to help with the construction of the [library] addition,” said City Manager Bill Nicklas, who was not with the City of DeKalb in 2013. “We’re obligated to pay that. Practically speaking...the City has more sources of general revenue [than the library].”

The topic came up during a recent DeKalb City Council meeting, when council members discussed plans for the city’s 2022 tax levy. The levy is how the City collects revenue when DeKalb homeowners pay their 2021 property tax bills. The city budget will be discussed again Monday night, Nov. 15, during a joint city council meeting with the city’s Finance Advisory Committee at 6 p.m. at the DeKalb Public Library.

City officials said the numbers offer a stark contrast between city government and public library. The City plans to levy an amount which will save DeKalb homeowners about $65 on the city portion of a 2021 property tax bill. The library’s amount could see a homeowner increase of between $3 to $4.

DeKalb Mayor Cohen Barnes said he’s pleased that new development on the city’s south side, namely Ferrara Candy Company, led to savings for DeKalb residents.

“The City was able to lower our tax rate,” Barnes said. “From an individual taxpayers’s perceptive, it’s less money out of their pocket.”

Barnes questioned the library’s levy plans, however.

The DeKalb area is expected to see a significant increase in property tax revenue on next year’s property tax bills: $74 million in new development, $59.1 million in tax increment finance money from the closing of the Central Area TIF, known as TIF 1, a 30-plus-year pool of money which has been growing and will return to the tax rolls this year, and an increase of $86.2 million in home values in the area.

Under the Illinois TIF Act, governments can create a TIF district over a specified geographic area, an economic tool used to collect revenue and develop land. Over time, as development occurs and property values rise, the amount of property tax revenue increases. But the set rate for taxes on that property value remains as it was at the start. At the end of the life of a TIF district, the collected amount, known as increment, is returned to the tax roll as revenue for participating governments.

Library response

Emily Faulkner, executive director of the DeKalb Public Library since 2017, said she understands the proposed library levy numbers “can look shocking.” However, the rate the library plans to levy for hasn’t changed since last year. She said the library board held four public meetings on the topic in recent months.

According to library documents, the library plans to collect $2,700,708 in property tax revenue for 2022, at a rate of 0.38%. That’s an increase of 14.13% in dollars collected over last year, though the rate is the same.

Since the pool of property tax revenue for local governments to collect from is larger, if entities such as the library keep rates the same, more money can be collected.

That does come at the expense of the taxpayer, Faulkner confirmed, about $4 more for the average DeKalb homeowner on their library portion of their bill.

“The main thing to keep in mind is the library is keeping the same rate,” Faulkner said. “I know it looks alarming when you see a huge increase on the dollar amount, but the rate is the same and the affect on the average taxpayer should be minimal to nonexistent.”

Other governing bodies, such as the City of DeKalb, say the increased revenue pool is a chance to save DeKalb homeowners some money.

The City of DeKalb plans to collect about $6.8 million in property tax revenue in 2022, through the levy which will be paid on homeowner’s 2021 tax bill next year. Because of the increase in development and other factors, the City will gain an estimated 4.95% in revenue. The rate at 0.98% is expected to be about 8% lower than 2020, which was 1.06%.

That could save DeKalb homeowners about $65 on the DeKalb city portion of their property tax bill next year, according to city documents.

Growing pains from expansion

Not all council members were pleased with the proposed levies headed into budget crunch time.

Ward 6 Alderman Mike Verbic, who was the sole vote against the levy in its first-round vote Nov. 8, called into question the amount the DeKalb Public Library is levying. The library levy is tied into the vote for the City of DeKalb’s levy.

“I just can’t justify this level of increase,” Verbic said of the library plan. “I’m accountable to the taxpayers of Ward 6 and I’ve heard nothing but not support of this so that’s where I stand. That’s one of the reasons people are giving why they’re moving away, because the taxes are high.”

Ward 1 Alderman Carolyn Morris said she “wanted to put a good word in for the library.”

“My experience as a parent in this community is the library’s the only place that you can go with young kids that has an indoor play space period,” Morris said. “I don’t know what their budget is currently, but the things they do in this community is irreplaceable and not something any other entity is providing.”

Barnes also questioned the library’s plans.

“I know this comes off as snarky and I don’t mean it to be,” Barnes said. “I don’t know what’s going on there [library]. For us to continue to go back to the taxpayers for more and more dollars out of pocket right now, I can’t understand it.”

City council members also called into question the City’s ongoing debt repayment plan, a 20-year loan approved by the city council seven years ago to help pay for the library expansion.

“Shouldn’t the library pay debt with library general funds versus the debt being paid with city general funds or am I missing something?” Verbic said.

City attorney John Donahue said the City has always levied on behalf of the library, since the library isn’t its own taxing body and can’t do it alone, calling it “one of those oddities in the law.”

Faulkner said there’s a reason for the annual city payouts for library debt: the expansion project.

In 2013, the library was set to undergo the expansion, paid for with $11.6 million in state grants, $900,000 in library reserve funds, $1.5 million in library operating funds and $2.6 million in charitable donations.

The library board was then tasked with coming up with the remaining money, so they turned to the City. In March 2013, the then DeKalb City Council approved a $2 million TIF incentive to the library, and agreed to take out a $6.8 million bond. The bond repayment plan was a 20-year contract, which the City has since paid for through property tax revenue, taking out just under half a million dollars each year to pay off the debt and interest.

No existing members of the 2013 DeKalb City Council remain in office presently.

Beginning in 2020, city staff proposed a new way to pay for the library loan: Take it out of the City’s operating budget through general funds instead of levying for it on property tax bills. That began in 2020 and will continue into the next year pending final council approval.

The City’s debt for the library expansion is expected to be paid yearly through 2033. Meanwhile, Faulkner said the library paid off its final payment for its own expansion loan last year.

Faulkner said the library’s operating budget is about $2.7 million, made up of about $65,000 in state grants, $20,000 in other revenue and then all of the rest, about 96%, left to property tax revenue. The library currently has a staff of about 50 people, including 30 full-time and relies heavily on property tax collection as its dominant means of revenue.

“So that’s one of the things that’s difficult for us,” Faulkner said.

She said although the building expansion is only five years old, the Haish Building portion of the library will turn 100 in 2030. And according to library documents, there are plans for pay increases for staff, including raising the minimum wage to $15 and increasing salaries over a two to three year period based on the median of similarly sized libraries. The library board also plans to bulk up its reserve funds.

“The library board here is working to meet the different needs of the library but we’re not planning on adding more staff,” Faulkner said. “This is really the budget to keep things where they basically are.”