The changes are prospective and do not retroactively change any current pension plan. In addition, it is limited in scope to police officers. However, it is a very positive step on pension reform that is achievable and constitutional and can be used as a potential template going forward.
School Funding Bill
After missing the first two payments, it looks like the State has resolved how it will fund schools. On Tuesday, August 29, the Senate concurred with the House and passed a school funding formula based on the Evidence Based Model. The Governor is expected to sign the bill on Thursday, August 31.
The bill creates an entirely new system for funding schools based on the evidence based model to match language passed in the budget compromise previously. This model evaluates multiple factors including district needs and local revenue sources. In addition, the new law permits tax credits for private school costs.
Home Rule Sales Tax
Naperville City Council will take up the Home Rule Sales Tax on September 5th for a first reading. The HRST, which was first approved by City Council in 2015, is set to sunset in 2017 unless City Council reauthorizes it before the October 1 deadline with the State.
The NACC opposed the implementation of the new HRST in 2015. We expressed concerns that once implemented the tax was not business forward and would not expire because temptation to maintain or increase the new revenue stream would be too great.
That prediction seems appropriate because the Financial Advisory Board recommended to City Council that the HRST should be raised at the HRST workshop on August 28. The FAB presented a formal recommendation that the HRST should be raised by 0.5%, up from its current level of 0.5% to a full 1.0%. In addition, the FAB recommends eliminating the $2 million property tax abatement.
City staff formally agreed with this recommendation late on August 31, recommending City Council raise the HRST by 0.5% to 1% and eliminate the $2 million property tax abatement. There is an extensive rational given for City Staff’s recommendation here, but in short they point to unexpected increases in the public safety pension obligation, increased investment in the Roadway Maintenance Improvement Program (MIP), implementation of the State budget which reduces LGDF by $750,000, a new state “administrative fee” on the HRST of 2%, and the property tax abatement. In total, there is approximately $7 million in additional costs.
However, the cart seems to be before the horse here. The FAB based their recommendation for a new tax on the additional costs presented at the workshop. However, Councilman Hinterlong asked for clarification on potential cost reductions. You can see the interaction here:
City Finance Director Rachel Mayer correctly highlights this point below as well. She puts the ball in Council’s court and says we haven’t produced an option here to reduce costs by $7 million because they haven’t asked staff to do that.