Schools brace for bad year as home values fall

Pop the champagne cork and put on the party hats -- home values are going down, which means lower taxes, right?

Right?

Wrong.

Not only do dropping home values not necessarily mean lower property taxes, they could hurt some school districts' funding. West Aurora is bracing for a hit, and Oswego could see cuts, even layoffs next year.

Put away the party hats and let's learn how dropping home values really affect your bottom line.

Lower home values don't mean lower property tax bills, as nearly 2,000 Kane County homeowners found out this year when their home values went down but their tax bills went up.

On a cheerier note, the reverse happened to 10,000 Kane County folks last year -- lower taxes, higher values.

Home values and property taxes used to be directly linked -- and still are in two-thirds of the state. Not so locally, thanks to a 1991 law called PTELL.

In the 1980s, DuPage County home values skyrocketed. Yearly increases hit 20 percent, which meant 20 percent jumps in property taxes.

"If you're looking at, say, a park district, does it cost 20 percent more to maintain a park district just because the houses are worth more?" Kane County Supervisor of Assessments Mark Armstrong asked.

Taxpayers cried foul and the state passed the Property Tax Extension Limitation Law, which unhooked the home values and the tax rate.

In the 39 PTELL counties like Kane and Kendall, each district can only ask for what they got the previous year, plus a cost-of-living bump -- either that year's inflation or 5 percent, whichever is lower.

They don't have to ask for that much. That's just the upper limit -- the limiting rate.

PTELL doesn't apply in home-rule cities like Aurora, St. Charles and Elgin.

"In home rule, you can basically levy (ask taxpayers for) whatever the elected officials desire," Aurora Finance Director Brian Caputo said.

Don't worry. Aurora isn't going to ask for an increase, Caputo said. The city is going the other route to make budget -- layoffs.

Shocker: The economy is bad.

And this is hitting equalized assessed values which, for simplicity's sake, let's just use to mean home values.

By and large, townships' EAVs (figured by adding all the properties' EAVs) have still been going up, just by less than in the past. Some townships, like Campton and Kendall, have dropped, though.

"The ones that have gone up haven't gone up by much," Kendall County Supervisor of Assessments Andy Nicoletti said.

Armstrong expects the problem to grow.

"We're starting to see a few areas go down, but I expect that to spread to the entire county next year," Armstrong said.

Remember the limiting rate? What the districts got the year before plus inflation? Well, inflation in 2008 was lousy, a mere 0.1 percent.

So no matter how much costs rise next year (heating, teacher salaries, gas for the buses, etc.), the schools are going to have to pay for it with what they got last year plus 0.1 percent.

However, West Aurora and Oswego schools actually could see their money drop.

Those districts locked in their limiting rates through recent referendums -- West Aurora in 2007 and Oswego in 2006. With EAVs dropping, they're asking for the same size piece of a smaller pie.

"If your rate is fixed and it's applied to a smaller number, you'll have less money," West Aurora spokesman Mike Chapin said.

Although the dollar amounts won't be available until next year, the only options are to tighten belts or to ask taxpayers for more money.

"We'll live within our means and we're not going to be asking for a property tax increase," Chapin said.

In Oswego, things are at crisis level. The district barely held the line last year. Layoffs and cuts are on the table for next year.

"It's a possibility," Oswego schools Executive Director for Finance Tim Neubauer said. "Right now, we're looking at all aspects of the operation."