Saturday, May 3, 2008

BF council considering tax increase

Clara Garcia News-Bulletin Staff Writer; cgarcia@news-bulletin.com

Bosque Farms With a $90,000 budget shortfall projected in next year's Bosque Farms budget and decline of gross receipts revenues over the past several months, the village council is considering increasing taxes — both property and gross receipts.

During a budget workshop Tuesday Gayle Jones, the village's clerk administrator, told the council that the village is currently imposing a 2.225 mill levy on property owners, which provided the village with about $46,000 this year — $2,000 less than what was projected. The state caps property rates for municipalities at 7.65 percent.

Jones said if the council does not impose a property tax increase, then the village will not be able to balance the budget and will be forced to borrow money from the water and sewer fund to cover the shortfall in the general fund.

"The 2.225 is a very low rate," Jones said. "When you impose an increase, it doesn't go through yield control the first year, so in essence, you receive 100 percent on the tax. The second year, however, it will go through yield control and you will not be allowed to impose the full value. Yield control reduces the end so it doesn't hit the tax payers hard."

Jones explained that because yield control doesn't kick in the first year, the intent is to benefit the municipality. She said yield control is a very complicated system, but after running a scenario of increasing property taxes by 1 mill, it would increase the village's property tax revenue to $107,921.

If the village decided to increase property taxes by 1 mill this year and another 1 mill next year, the village would get partial value of the first levy and full value of the second levy next year, which would benefit Bosque Farms with $165,517. Year three would bring in $159,167, which would be where it halts.

Mayor Wayne Ake said he's not sure if the village's property tax rate has ever been adjusted since incorporation, and they're now seeing that it's negatively impacted the village's budget this year.

"We have not done anything for years," Ake said. "This is just going to have to be changed, just like our water rates. Now we have all these increases in costs, and we're getting to where it's impacting our general fund. This is just one part of the whole puzzle.

"It's got to be done; it's not popular and nobody likes it," Ake said. "But if we keep sitting around, we're going to have to impose the 4 percent that we can impose, and that will hurt the people."

Councilor Bob Knowlton said by only looking at the number of residential properties in the village, he estimates that, on average, property taxes would increase by $30 a year per household if the village imposes a 1 mill levy.

"If all these 1,700 households pay an extra $30, we (the village) will more than double our tax income," Knowlton said.

Councilor Dolly Wallace voiced concerns about how seniors on a limited income will be able to handle the tax increase. She said with the increase in fuel costs, prescriptions and food, she asked if there was a way to freeze the tax increase for certain individuals and then impose it when they either sell their home or when they pass away.

"We do have people here who have lived here all of their lives and, to some of us sitting around the table here, $30 doesn't seem like a lot and won't make a huge difference," Wallace said. "But for them, they're already having to make some choices between medicine, fuel and food."

Jones told Wallace that it would be difficult to pick and choose who would have to pay the tax increase and that it may be in conflict with anti-donation laws.

"I agree with what you're saying — maybe for us, $30 a year doesn't make a bunch of difference, and I don't mean to sound cold, but I know that there are things all of us are doing that we did five years ago," Ake told Wallace. "But at the same time, I feel for our employees and the needs of this village. And without these monies, we can't do it, and we're getting to the point where if we don't do something soon, we'll have to lay off people."

Ake said if a municipality doesn't increase taxes at times, people's jobs could suffer as well as some of the services that people expect.

"We've been able to move and juggle (the village's finances) until now, but there's no moving and juggling anymore," Ake said. "And we're the last ones to do it."

Councilor Virgil Proctor voiced his concern about the proposed property tax increase and said he would not support it. He said he feels that property owners are already paying too much and that the mill levy would be a temporary solution to the village's financial problems.

"I think we're going to either have to cut some services or focus on increasing the gross receipt taxes as well as the water and sewer rates," Proctor said. "This (property taxes) is something that should not increase because they (residents) don't have any control over it."

The council also discussed the possibility of holding a mail-out election asking voters to increase gross receipts taxes. The current gross receipts tax within the village is 7.0625.

"We need to get more gross receipts in," Knowlton said. "And maybe if we get the gross receipts in, we can work toward getting the PERA plan increased."

Jones told the council that while the amount of gross receipts the village has been receiving over much of the past fiscal year was less than projected, they did go up in March. She said that she would be requesting a formal audit from the taxation and revenue department to try and understand the inconsistencies.

"The big thing in gross receipts tax, I think, is to really develop economic growth in the village," Ake said. "If we can get two major things, a grocery store or a steakhouse or whatever it is, that people would support, then it would help. But you can't make people come in."

Jones said while the village does need to raise gross receipts, a property tax increase would be an immediate payout where gross receipts would be more of a long-range increase.

Jones said she could look into the possibility of a mail-out election in September and will bring it and the 1 mill levy increase before the council at its regular meeting scheduled for May 15.

In other action, the council: