Government

McHenry County Board to vote on property tax increase as inflation throws curveball at budget

The budget includes a $1.4 million levy increase, which would be the first in five years

The McHenry County Board will vote on their fiscal 2022 budget Tuesday night, but uncertainty remains following discussion about how inflation will impact the budget and some board members disapproved of a proposed property tax levy increase

The county’s $217.7 million 2022 budget, which is about $9.3 million more than 2021, includes a $1.4 million property tax levy increase. While small, board members are unsure if raising property taxes to capture inflation for the first time since 2016 is the right decision.

“At this point in our trajectory, I think it’s not going to send a proper statement to the residents at this time in the middle of a pandemic to raise taxes,” board member Jeff Thorsen, R-Crystal Lake, said at Friday’s Committee of the Whole meeting.

The county’s $71.1 million property tax levy still is well below the $79.4 million levy from 2016, prior to the county’s 10% levy reduction in 2017, but an increase of about 2% from this year.

County administrators said the increase is necessary to shore up the county’s funds after the 10% reduction in 2017, county Chief Financial Officer Kevin Bueso said. Failing to capture inflation growth this year would have long term consequences.

“This would set us in a very difficult situation for fiscal year 2023,” Bueso said. “A lot of our forecasting and planning has taken this into account. Especially if the [Immigration and Customs Enforcement] revenue stays the way we are budgeting, that would require 2023 for us to make some tough recommendations.”

The county has been taking property taxes on new construction since 2017, but has not levied an increase on existing property over that time. The county expects $975,000 of the $1.4 million increase will come from existing property, Bueso said.

County officials said this doesn’t mean everyone will be paying more.

“With the surging values of properties, most McHenry County property tax payers will see a reduction in their tax rate,” Austin and Bueso wrote in a letter to board members.

If the $1.4 million levy increase was divided equally among all county residents, it would amount to a $4 increase per person, board member Michael Vijuk, D-Cary, said.

“People are conscious about what they do and I agree with Mr. Thorsen that we have to be conscious of what we’re going to be saying to the general public,” Vijuk said.

Bueso says the county’s fiscal responsibility and strong financial footing softens the blow on such an increase, adding “the amount could be a lot higher” considering the pressure inflation is putting on operational costs.

If the County Board does not vote to increase the property tax levy, other areas of spending such as capital projects taken on by the Division of Transportation will need to be reevaluated, County Administrator Pete Austin said.

Rapid inflation and costs of goods and services this year are threatening to cause more problems for the county’s budget as well. Last month, the consumer price index, a measure of inflation based on the price of goods and services, increased by 6.2% from a year ago, meaning Americans are paying an average of 6.2% more for things than they did in Oct. 2020.

“We’re kind of anticipating a mid-year budget adjustment for a lot of folks for wages,” Austin said of how inflation may impact the 2022 budget in the months to come.

Higher costs because of inflation was the biggest challenge behind the budget, Austin and Bueso said in their letter, and the county continues to deal with effects of the labor shortage as well.

“Like employers across the county, McHenry County is struggling to attract candidates to vacant positions and an organization-wide compensation study is currently underway that is anticipated to bring some mid-year compensation adjustments in 2022,” they wrote wrote.

While some board members said they were uncertain about the budget proposal in front of them, others gave the county administration a vote of confidence for trying to the find the best solution to a difficult situation.

“I think the administration is presenting what they think is in the best interests of the county on a long term basis,” said board member Mike Skala, R-Huntley.

While inflation presents uncertainty over future costs, the county is also dealing with new state mandates such as election expenses and the end of the county’s ICE contract allowing the county to be paid by the federal government for holding federal detainees.

Board vice chairman Carolyn Schofield, R-Crystal Lake, said new requirements from the state are costing the county $6 million next year.

“These are decisions that are being made that are out of control that are affecting our residents and our budget, yet we have to pick up the mess they created for us. We need to start pushing back on this and we need to do something to make people aware it’s not us who are making these decisions, it’s the state,” Schofield said.

After a state law passed in May ended the county’s contract with ICE, the county will be losing between $3 million and $9 million in revenue next year and in each following year. In response, the county sued the state to allow the contract to continue beyond Dec. 31.

“To assume it’s going to end I think is not correct. It could go either way,” board member Jeff Schwartz, R-McHenry, said.

Schwartz asked county officials to provide a budget that reflects keeping the ICE revenue and said if the contract remains in place, it would offset the need for a property tax increase.

County Board Chairman Mike Buehler, R-Crystal Lake, said the county has not heard any updates on when a decision might be made about the county’s lawsuit. Bueso and Austin said they are moving forward assuming money from ICE will not be coming in next year.

Austin said the need to increase the property tax levy was realized last year before any mandates were handed down from the state.

“These are all things we didn’t see last year, but we still saw that our fund balances were getting really thin and we need to build them back up,” Austin said.

The final budget and tax levy will go before the County Board at 7 p.m. on Tuesday for a final vote as some members remain uncertain about where they stand the county’s proposed property tax levy increase.

Correction: This story has been updated to correct the names of those who wrote a letter to the County Board. The letter was written by county administrative officials. The Northwest Herald regrets the error.