Evanston aldermen Thursday night appointed four of their own to a special committee to look for ways to squeeze more city revenue from non-profit organizations.
The decision came after the aldermen, meeting as the Rules Committee, failed to reach agreement on which of several possible tax-substitution strategies to pursue as they try to avoid having to cut city services.
One plan the committee seems likely to study closely, since all its members indicated some support for it, is to establish a separate fee for fire protection service — removing that cost from the property tax levy.
The city now spend about $12 million annually on fire services, about 13 percent of its $93 million general fund budget, plus $5 million more on firefighter pensions.
“The reality is non-profits are sucking our blood,” Alderman Steve Bernstein, 4th Ward, said. “They’re benefiting from the service and not paying for it.”
How much benefit to taxpayers?
City planning division figures show that 44.5 percent of the land in Evanston is tax exempt, while 55.5 percent is taxable.
But only 10.5 percent of land in town is owned by tax-exempt institutions. (Streets and alleys take up 25 percent and parks and open space make up the other 9 percent.)
So, assuming the fire service fee was based on land area, non-profit institutions might end up picking up about 16 percent of the total fire service bill.
Formula: (Institutional land) / (taxable land + institutional land) = (institutional %).
The concept is much the same as the shift the city made years ago from charging for water and sewer service on the property tax bill to charging a separate fee for it.
But it also carries the same limitation.
Property taxes are deductible on state and federal income tax returns to homeowners who itemize their deductions.
For high-income taxpayers that can mean the effective cost of a $10,000 property tax bill is reduced by 30 percent or more once income tax deductions are figured in.
But the water and sewer fee is not deductible, and the fire service fee probably wouldn’t be deductible either.
So, in return for having institutions pick up 16 percent of the fire service cost, higher-income taxpayers could lose a tax deduction that saves them roughly twice as much.
A key issue for the committee — composed of aldermen Lionel Jean-Baptiste, Ann Rainey, Elizabeth Tisdahl and Bernstein — will be to try to come up with a fee formula that leads to a more favorable result.