Small property tax increase on table for McHenry County’s 2022 budget

County officials say it’s necessary for the county’s financial sustainability, but not everyone will see their rates increase

McHenry County taxpayers could collectively be on the hook for an additional $1.4 million under McHenry County’s proposed budget in part, officials said, because of a 2017 property tax cut and the state’s move to end the county’s contract with U.S. Immigration and Customs Enforcement.

At a hearing Thursday with County Board members, county Chief Financial Officer Kevin Bueso and County Administrator Pete Austin outlined the county’s budget proposal for next year and actions they would ask board members to take to keep the county’s financial house in order.

While they offered a positive economic outlook for the county overall, Bueso said increasing the property tax levy – the total amount the county collects in property taxes – by about 0.7% was necessary for the county to ensure sustainable spending after the County Board reduced the tax levy by 10% in 2017.

“It’s something we need to do in order to sustain the viability of what we’re trying to do with our operation,” board member Mike Skala, R-Huntley, said Thursday.

If the levy is approved as presented, the county expects to take in about $71.1 million from property taxes, which is about $1.4 million more than last year. Austin said the new tax dollars come from a combination of an inflation-based increased, which is about 1.4%, plus additional income from new properties in the county, which is expected to be $55 million.

Not everyone will see their property tax rates increase, Bueso and Austin said. They expect property values will increase by enough so most people also will see their property tax rate decrease.

Changes to individual property assessments and decisions by other local taxing bodies also will impact how much property taxpayers will end up paying overall.

In 2017, the county slashed their tax levy by 10%, Bueso said. Smaller decreases followed before a $322,000 increase in 2020.

“The county is in great financial position overall,” Bueso said, but increasing the tax levy will help areas of the budget that were hurt by the 10% levy reduction in 2017. Austin said the county knew before the pandemic that it couldn’t sustain the 10% tax cut long-term.

“This reduction has caused some of the levy purposes to fall well below the fund balance requirements, which need to be brought back up,” Bueso said.

The state-mandated end of McHenry County’s contract with the federal government to hold immigrants in the county’s custody is also a factor because the contract can bring in millions of dollar in revenue for the county.

“We wouldn’t be asking to raise taxes” this year, Skala said in an interview, if a new state law did not end the contract. (McHenry and Kankakee counties filed a joint federal lawsuit last month challenging the law.)

The county is seeing a strong increase in income tax and sales tax revenue, which help make up for the lost funds and allow the increased tax levy to be under 2%, Austin and Bueso said.

Some board members raised concerns Thursday about increasing taxes.

“I think it’s an awful hard [sell] at a time when we received $59 million from the federal government, and I hear comments that COVID didn’t drag us down as far as we thought,” said board member Jeff Thorsen, R-Crystal Lake.

Lawmakers and government officials around the country were concerned about COVID-19′s impact on local government budgets in 2020. Local governments spent more money trying to fight the virus while tax payments were delayed or reduced because people lost their jobs. Congress took action several times to allocate funds for local governments to use filling budget holes and on pandemic-related expenses.

McHenry County has been able to recover 100% of the funds it spent on COVID-19 thanks to federal dollars, Bueso said. The county received about $59 million from the American Rescue Plan passed by Congress earlier this year.

“The perception would not be good for us to do a levy increase after we received $59 million,” Thorsen said.

The American Rescue Plan Act prohibits local governments from reducing taxes, Bueso said. The county has instead been using those funds for one-time expenses.

Next year’s budget also comes with a positive sign for the county’s financial health. The county will pay off its remaining $1.7 million debt in December, leaving the county debt free.

“I don’t know many other units of government that have zero debt altogether,” Skala said Thursday. “To say that we have zero debt is something to be very proud of.”

The fiscal year 2022 budget is currently expected to be around $212.4 million. McHenry County will be hiring for new positions for the first time in several years, Austin said.

The budget is an increase from last year’s $208.4 million budget, but still below the $215.3 million budget passed in December 2019 prior to the pandemic.

The county’s new fiscal year begins on Dec. 1, and board members will be asked to pass the budget in November.