Evanston voters start down road to disaster

Evanston voters Tuesday decided to head down a road that, unless they turn back, leads inevitably to fiscal disaster.

They gave the District 65 school board carte blanche to increase spending at an annual rate of 3.9 percent -- the rate the administration says it needs to avoid making cuts -- in an era when the average household income of Evanstonians has been rising less than half as fast.


Viewpoint


The chart above shows where this road leads -- to a doubling of the school tax burden in just under 30 years.

Here's how you get there.

The Census Bureau says the median income of an Evanston household was $70,041 in 2015, up from $56,335 in 2000, for an average annual increase over that period of 1.4387 percent.

The median value of an owner-occupied dwelling unit in Evanston in 2015, the Census Bureau says, was $348,600. Assuming the tax assessor agreed that our median homeowner's house had that value, the homeowner would have paid, after her homeowner's exemption, $3,318.41 in property taxes to support the District 65 schools.

So, the school tax would have amounted to 4.74 percent of the household's income.

Let the school board continue increasing its spending by 3.9 percent on into the future, and if incomes increase at the same pace in the future that they have over the past 15 years, our average homeowner's District 65 tax bill will consume 9.73 percent of her income in 2045.

And remember, our median income household with the median value owner-occupied housing unit pays a total of $8,751 in property taxes to all units of government now. Let the rest of them decide to behave like District 65 and -- if voters permit it -- our average homeowner's total property tax bill will consume nearly 26 percent of her household income in 2045.

Fortunately, the 16.7 percent tax hike voters gave District 65 Tuesday will only get the board about six years down this road to disaster before they have come back and ask the taxpayers for even more.

We'll see whether the voters decide then that it's time to turn back.

Topic: 

Comments

The problem is the

The problem is the troublingly slow rise in median income. I realize that's not Evanston's problem (entirely) to fix, but if it continues to be that low there will be many reckonings to be had, not the greatest of which is how to fund schools.

Taxable base = problems

The problem is that Evanston's taxable base is too small. We're fortunate that we've actually got a LOT of room to widen the base. New construction of business & personal property is one addition to be optimistic about now that D65 will be adequately funded- welcome the construction for the taxes it will yield. The "other" issue centers around tax exempt properties. NW pays nothing concerning property taxes, nor do places of worship. If we're going to pay for children & elders in the future, these properties need to pay their fair share of property taxes. What is the current size of NW's endowment today? How many billions- literally? Take a look @ all the multimillion dollar construction projects underway on the Evanston campus. Here's your chance for a reasonable revolt Al- no more free rides.

Northwestern predated

Northwestern predated Evanston, and as such I think isn't technically on land that Evanston has the power to tax. 

Coveting

Northwestern's charter, granted by the state, gave it a perpetual tax exemption in return for the promise to establish a school, 12 years before Evanston even existed.

All the coveting of potential tax money from NU that city residents have done in the 168 years since hasn't yet persuaded the legislature to welch on its promise to the school.

Colleges have a reasonably effective lobby in Springfield, it seems.

But that hasn't stopped the Evanston parlor game of imagining how we'd all be in clover if the rules somehow could be changed.

-- Bill

Just because one has the

Just because one has the legal cover to avoid paying taxes doesn't mean one should not pay taxes. Not looking for clover, just putting forth that NW & houses of worship ought to pay their fair share given that they are inside/amongst the City limits. Label it an ethical/moral duty to be a good neighbor. Take what amount could be taxed & make an annual donation that is voluntarily (if impossible legally) given. Imagine what the PR love would be if such a move were made. Even I'd buy some purple stuff.

Set an example?

Well, if you belong to a religious congregation, why not bring up the idea of having your congregation pay taxes at the next meeting of the board controlling the group. See how that goes over.

The university already makes a variety of voluntary contributions, and all a contribution seems to lead to is a "thank you" today followed by a demand from some people tomorrow for more.

-- Bill

I have brought up the issue

I have brought up the issue of paying/donating @ least a portion of what property taxes would be in my place of worship. Similar to NW, the response is centered primarily on what is already being donated. NW & various congregations have done an amazing job in philanthropic giving to our city. As you note, however, it is not enough projecting into the future. If forced to prioritize in the face of diminishing funds, kids will & should take priority over the needs of adults. That's not negotiable in my perspective. The D65 referendum shows broad support for this position. So, if we need more funding to pay for the needs of adults & kids moving forward for because of the ethically bankrupt behavior of previous generations, where do you propose it'll come from?

Frugal

Hi JPC,

I would suggest that we need to be more frugal and innovative in allocating the resources we have.

Funds are not diminishing -- we just are faced with an increasing demand for ever more funds.

At some point, if you keep increasing the share of spending that goes to educating children, there's no money left to feed them.

-- Bill

Agreed on the issue of

Agreed on the issue of frugality. It's not the kids who will be hungry in your example. Lots of adults will be. Just like before the New Deal per Pickety's historical analysis. Capitalism returning to it's larger historical trend. What do you think of the idea of IL declaring bankruptcy a la Detroit? Could write down debts that way via renegotiating unfunded promises previously made.

That;s a No Go

States can not declare bankruptcy but cities like New York, Chicago, and Evanston can do that now or in the near future.

In the mid-70's, to avoid NYC from declaring bankruptcy. the federal gov. loaned 2.3B to New York State to bailout NYC. The entire state paid up to repay the loan from the fed. gov. over a period of years. Chicago and Evanston just keep raising taxes and fees to belay to problem.

NU Charter

I don't like a lot of things NU does, but look at what was given NU at its start. NU was given all the land to Central and Asbury [I don't recall how much south of campus]. Look at how much NU has given back to the city---and that includes houses many of the resident now live on. Should NU ask for the land back or homeowners pay a tax or royalty to NU ?

Steve, this is absurd.  Has

Steve, this is absurd.  Has anyone actually looked at the pension and healthcare situation?

This has nothing to do with incomes. These pressures are woefully underfunded and growing exponentially.  No amount of income growth solves this issue,

Voters are so uninformed.

This is exactly what Ive been

This is exactly what Ive been saying. You are increasing taxes and throwing money into a pit that can not be filled. And everyone who voted for this thinks its "for the children." They are going to give themselves nice raises, and then ask for more money in 5 years.

"We'll see whether the voters

"We'll see whether the voters decide then that it's time to turn back." All you have to say is "this is for the children." No one has a clue where the budgetary pressures are coming from. If you don't cough up money for salary and benefit costs (that can NEVER be funded without reform) it means you "hate children." The left is so fiscally irresponsible its almost comical.

Did voters even know which District the Referendum was for ?

I found it funny--no sad---that some people I know [and as I recall some comments in EvanstonNow implied] that they voted 'Yes' because their children had such a great education at ETHS !!. They did not even know that they were voting for elementary education and could not say why the District needed the money, or what they planned to do with it. They just heard the 'its for the children' and 'don't cut back on education' and 'your some kind of racist/bigot if you vote against schools' statements. But it is not much of a surprise that voters don't pay attention. We have known for years that some [too many] voters pick candidates for/against by race, gender, ethnicity of how the name sounds, party, what my uncle or barber tells me and other things but the issues---and certainly don't study or even read up on the issues.

High Property Taxes

Do you know when this new increase will show up on our property tax bill.  I was expecting someone to be knocking on my door by now with their hand out to collect.

On the bill ...

The referendum text on the ballot indicates it's to take effect with the 2016 levy year -- which would be collected this year. So I would expect people should plan to see the increase on the 2nd installment tax bills ... arriving in our mailboxes sometime this summer.

-- Bill

2nd tax installment

The second installment for 2015 taxes was due 8/1/16. Assume 2016 will be 8/1/17

Usually

Usually the deadline is Aug. 1 ... but in recent years the county has sometimes gotten the bills out anywhere from a few days to a few months late, thus shifting the payment deadline, which is a month after the bills are mailed. That's why I left my answer a little vague.

-- Bill

Huge Tax Hike - and its retroactive

So the $400 will be on our bills for the second installment. That means we passed a retroactive tax hike for 2016, payable in 2017. Will we have to come up with the full $400 at once this year? Better check Escrow to ensure there is enough.

Should have posted before the vote

Bill,

Thank you for posting this analysis.  It is what I believed when the referendum was first mentioned.  I only wish you would have published it well in advance of the vote.  People always want to "help the kids".  But if I understand correctly how this tax money is going to be spent, "the kids" will see very little benefit from it.  That is what is sad about how the messaging was rolled out.  Thanks for the posting anyway.

School district budget opportunities?

Two areas for questions that may be helpful: 1 - Is this school district running their "business" as lean as another business owner and taxpayer would have to run theirs? Have the layers of bureaucratic "middle management" been examined by those knowledgeable in efficient operations? Are there other areas of waste? Many companies, hospital systems, etc. bring in qualified consulting firms to identify areas of operating savings and improvements. 2 - Has their physical facility portfolio been examined for ways to manage them more efficiently or identify potential opportunities to consolidate? Are there surplus facilities that should be disposed? Can some assets be monetized, freeing cash for reinvestment in operations, but controlled via long term leases, sale-leaseback or ground leases? (We have been doing this with revenue-pressured hospital systems for some time.)

Another level of consolidation

There have been many comments about 65 and 202 consolidation, and about the only argument given why not possible is basically "the union won't let us do it"---i.e. we'd have to pay everyone the same, again no thought of merit payor what we have heard for years about equal pay for women---evaulate the job and pay equal amounts for equal job description---elementary and high school jobs are not the same.

Maybe we now need to consider bringing Wilmette and Skokie into the consolidation mix.  If  not opening all schools to those who want to go there, then combine admiinistrations---at least have only one K-8 and one 9-12 administration.

Small quibble

It seems like the quick and dirty math forgets (at least) one thing.  A great number of renters figure into the average household income for Evanston.  And those renters likely reside on the lower end of the income spectrum for the city.  Thus, the actual income for these purposes (taxable property owners only) would be higher.  How much?  I have no idea.  However, it would probably have a not-insignificant effect on your calculations.  

Doesn't affect the trend

Hi Jeff,

I understand your point and considered it while preparing the story.

Had to choose some number as a starting point, and the tax burden on a median price owner occupied housing unit seemed like a plausible choice

Note that that "housing units" include condos as well as detached single family homes. 

The important point here is that no matter what you pick as the starting point amount that somebody is paying today in property taxes for District 65, the board policy decisions that the voters embraced on Tuesday lead inevitably to a doubling of that tax burden if they are pursued over the next 30 years and if we continue to be in the low-income-growth environment that we have been over the past 15 years.

Renters will see an equivalent increase reflected in the rent checks they have to write.

So if you feel squeezed by your D65 tax burden now, you'll feel twice as squeezed 30 years from now  if we don't change course.

-- Bill

how did it get here?

I moved to Evanston about 5 months ago. Can someone please tell me how in the first place the situation got to increase the property taxes or no money for the schools? This is a ridiculous way of funding schools and as far as I see the schools are already in pretty bad shape compared to some other places in the country.

School referendum

I've been a resident of the west side, Chicago and Evanston(20 years and counting).  Here is what I know:   My vote yes for the referendum is because I trust my neighbors.   Because I know that Evanston is an exceptionally special place that needs to continue to invest in education and diversity   .  I vote yes because I want Evanston to remain exceptional and I trust that my neighbors will not abuse the authority that my yes vote has given them 

I have a bridge to sell---ocean front in Arizona

Trusting 'neighbors', the Council, school Board/union or politican is not a good bet. I'd have thought people would have learrned by now.  They will always ask for trust and money, promise great improvements [just don't make us accountable or to publish standards, we only have boiler plate promises, and a chicken in every pot.