Danville officials propose monthly fee of $22-85 for pensions in addition to property tax hike

Danville officials propose monthly fee of $22-85 for pensions in addition to property tax hike

A new city proposal would have owners of Danville property pay fees of up to $1,020 a year just for public safety pensions.

Danville city officials are proposing new citywide pension fee hikes in addition to a 10 percent city property tax increase to prop up failing local pension funds.

The proposal would increase Danville’s pension fees to $267 annually on property under 5,000 square feet, up from the current $96 a year, according to the Commercial-News. The fees would be collected monthly, reflected as an additional $22.25 a month on residents’ sewer and garbage bills. This marks more than a 178 percent increase from the previous fee.

Under the proposal, owners of properties bigger than 5,000 square feet will have to pay a flat fee of $600 or $50 monthly for properties valued $50,000 or less. Owners of properties valued above $50,000 would pay $1,020 a year, or $85 monthly.

And even some of Danville’s more vulnerable residents won’t escape the pinch.

Those who qualify for the veteran, senior or disabled household exemptions on their property taxes will also see an increase in the pension fee, to $133.50 annually, or $11.17 a month.

But Danville isn’t the only community struggling with a local pension crisis. Statewide, local pension debt has shot up to nearly $57 billion in 2016, up from $38 billion in 2010.

While the problem of local pension debt is rapidly growing across the state, municipalities are severely limited in how they can deal with their own pension crises. And for communities like Danville, all options need to be on the table.

Pension funds deeply underwater

Danville’s tax hikes aren’t likely to end with the most recent proposed increase.

As part of Danville’s long-term plan to pay off $105 million in local pension debt, pension fees and property taxes will increase 10 percent the first two years, 9 percent in the third year, 4 percent for the fourth year and 3 percent over the course of 18 years.

However, there’s ample evidence that simply throwing more money at Danville’s pension crisis will not right the ship.

Taxpayer contributions to Danville’s police pension increased by more than 30 percent from 2012 to 2016, but despite the additional taxpayer investment, the pension fund ended up worse off. As of 2016, Danville’s police pension fund only has 30 cents for every dollar needed to pay out future benefits. That same pension fund was 36 percent funded in 2012.

And the situation for the Danville fire pension fund is far worse. In 2016, the fund was less than 17 percent funded, down from 24 percent in 2012. And it’s not for lack of trying: Since 2012, taxpayer funding for the fire pension fund has increased by nearly 28 percent. The severity of Danville’s pension crisis isn’t surprising considering there are nearly two pensioners for every active participant in the fire pension fund.

Both pension funds are, by any real standard, insolvent.

A perfect storm

There are a number of factors that will make it incredibly difficult for Danville to pull itself out of the financial mess it’s in.

First, the city is struggling with a flatlining local economy. The Danville Metropolitan Statistical Area has lost 300 jobs on net since October 2016, according to the Illinois Department of Employment Security. And Danville’s job situation has never fully recovered from the losses the city incurred during the Great Recession. It’s not surprising that the city’s population has been in a slow, steady decline.

Further, residents are likely to be especially sensitive to tax hikes that don’t result in any new or better services. That’s because a friendlier tax environment is just a stone’s throw away. Danville sits minutes from the Indiana border.

If a short drive can save a resident from having to fork over thousands of additional dollars for fiscal mismanagement, it’s unreasonable to expect him or her to stick around.

Changing course

Communities facing insurmountable pension debt need the freedom to pursue real solutions. Currently, local governments are limited by state law in this regard. Springfield should give local leaders across Illinois the ability to take control of local finances to minimize pain felt by taxpayers and residents who are most dependent on local government services.

This would entail allowing municipalities to file for bankruptcy, allowing cities to offer 401(k)-style plans for municipal fire and police departments, and allowing towns to restructure pension benefits by amending the pension protection clause in the Illinois Constitution.

Local public sector unions could also play a role in reform, agreeing to reasonable pension changes through collective bargaining agreements.

Danville and other communities facing high costs from failing city pension funds should have the choice to embark on major reform efforts, not simply raise taxes in perpetuity.

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