Sterling opts for 3.91 percent levy increase

November 22, 2018

STERLING – The City Council looked at three possible tax levy estimates this week and opted for the one in the middle.

The council approved city staff’s recommendation of going with a levy of $4,908,573, which would be a 3.91 percent increase. The other options were an increase of 1.26 percent or a 4.97 percent hike.

The driving force in their choice was how much the city wanted to put toward unfunded police and fire liability in the next fiscal year.

The 1.26 percent increase would have been the statutory minimum funding level as determined by the city’s actuaries, Naperville-based Lauterbach & Amen. The minimum level actually would have lowered the fire and police pension funding by a combined $125,541. 

The highest funding option, which required the 4.97 percent levy increase, would have increased the fire and police pension funding by a combined $175,541 over the actuary’s minimum and $50,000 over the staff recommendation. 

Property values are another big piece of the levy puzzle, especially this year for Sterling. The equalized assessed valuation is up a robust 4 percent.

“Because of the EAV increase, the 3.91 percent levy increase actually results in a slightly lower property tax rate,” City Manager Scott Shumard said. “This would be the second year in a row in which the rate decreased.”

The bottom line with the 3.91 percent levy increase is that if the median value of an $83,000 home remained the same, the owner would see a drop of $1.12 in the city’s portion of their property taxes.

Fire pensions were up 9.09 percent, while police pensions rose 8.11 percent. The city’s fire pension funding ratio increased 1.3 points to 49.64 percent and the police pension funding ratio rose 1.03 points to 54.73 percent. The state average for downstate fire and police pension funds in 2016 was 57.1 percent and 57.9 percent.

State law requires that municipalities’ police and fire pensions be 90 percent funded by 2040.

Combined, Sterling’s police and fire pensions make up 50.9 percent of the city’s portion of the tax levy. The city is now paying more for firefighter pensions than for active firefighter payroll. 

“If we’re going to strive to level out levy increases as discussed in 2017, we have to put in more in the low years if there is hope to put in less in the high years,” Shumard said.

Alderman Jim Wise broke from the pack, however, and recommended the 1.26 percent increase.

“We have a chance to give property owners relief,” Wise said. “It would only be a 7 cent reduction in the tax rate, but it’s something.”

The mayor and the rest of the council were more focused on trying to stabilize taxes over the long haul.

“My concern is finding a way to avoid wild swings in our levy recommendations,” Mayor Skip Lee said. “We also want need to look at the long term and not just shift yesterday’s liabilities to future generations.”

Wise backed off his argument and the council unanimously voted for the 3.91 percent levy option.

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