Mundelein passes property tax hike to pay for pensions

Mundelein passes property tax hike to pay for pensions

Village board members passed a 5 percent increase in the village’s property tax levy to make increased payments to police and fire pension funds.

In a near-unanimous vote Dec. 11, the Mundelein Village Board approved a measure to raise the village’s property tax levy by $630,000 to meet increasing police and fire pension costs. This amounts to a 5 percent increase over 2017’s levy.

The proposal will raise the village’s property tax levy to $13.2 million, up from $12.5 million, according to the Mundelein Review. Previously, the levy had stayed steady at $11.8 million a year for five years.

In addition to rising pension costs, Mundelein is also struggling in the face of disappointing sales tax revenue as well as state cuts to the village’s share of income tax revenue as part of Springfield’s July budget agreement. Mundelein also faces a new state sales tax handling fee that will cost the village even more revenue.

It’s easy to sympathize with local leaders dealing with mounting pension debts and shortfalls in revenue. Mundelein is located in Lake County, which is home to the highest property taxes in Illinois and the 21st-highest in the nation, according to 2011-2015 data from the U.S. Census Bureau.

A median property tax bill for Lake County homeowners is nearly $7,000 annually; for many, this is about equal to a second mortgage payment.

However, the Mundelein’s Village Board was clear about the problems confronting the village. The village’s police and fire pension funds are both facing shortfalls, requiring more and more revenue from taxpayers.

Mundelein’s police pension fund has less than 57 cents on hand for every dollar it must pay out in future benefits, despite long-term increases in funding. From 2006 to 2016, taxpayer contributions to Mundelein’s police pension fund increased by nearly 47 percent. Yet in spite of this massive taxpayer investment, the police pension fund is actually worse off, as its funding ratio dropped to 56.7 percent in 2016 from 60.2 percent in 2006.

Mundelein’s fire pension fund is in better shape, as it is 74 percent funded as of 2016, but still faces long-term problems. From 2006 to 2016, village contributions to the fire pension fund increased by more than 40 percent. However, the funding ratio took a nosedive, dropping to only 74.1 percent in 2016 from 88 percent in 2006.

Mundelein and other towns like it should have real choices when it comes to the retirement of their workers. One path would be to give new fire and police employees 401(k)-style retirement plans instead of costly defined-benefit pensions. That plan could be modeled on the State Universities Retirement System’s 401(k)-style plan. The plan has been operating for nearly two decades, and more than 20,000 state university workers have opted out of the traditional defined-benefit pensions in favor of the 401(k)-style plan.

Unfortunately, towns like Mundelein are mandated by state law to maintain pension funds for police and professional fire departments, meaning taxpayers, especially homeowners, are on the hook for pension failures.

Passing a property tax freeze on homeowners’ actual bills (not just the levies of local governments) and requiring voter approval for property tax hikes are two powerful reforms that would go a long way for families struggling to pay higher property taxes as their own incomes stagnate.

Barring real reform in Springfield, Mundelein residents should brace themselves for even bigger property tax bills.

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