Property Tax Freeze Legislation Update Property Tax Freeze Legislation Update

Property Tax Freeze Legislation Update

The proposed property tax freeze bill (the “Amendment”) was recently passed yesterday by the Illinois Senate and would impact every taxing district in Illinois if it became law.  The legislation provides that for 2016 and 2017 levy years the Property Tax Extension Limitation Law (PTELL) applies to all school districts (other than the Chicago Public School District) with an extension limitation of 0% (instead of the lesser of 5% or CPI increase).  Although a similar version has previously been defeated in the House and there exists commentary indicating that such a bill is a long way from becoming law, Illinois school districts should be aware of the ramifications of the proposed property tax freeze on bond issues. 

The typical exceptions from PTELL for many types of bonds issued by school districts such as alternate revenue bonds, issues approved by referendum, would apply, which would mean that such bonds would not be subject to the Amendment. Tax levies already issued for pre-existing General Obligation (GO) bonds (although some technical language changes should be made to make this clear) should also not be subject to the Amendment.  However, school districts that are contemplating issuing working cash bonds, health safety bonds or funding bonds should do their best to issue the bonds and have the levy on the books prior to the effective date of the Amendment (likely 3/1/2016).  School districts that are contemplating issuing an alternate revenue bond should not be impacted by the Amendment.
 
Taxing Districts outside of Cook County would cease to be subject to PTELL beginning with levy year 2018 unless the voters of the County approved a referendum making the taxing districts in the County subject to PTELL.
 
Taxing Districts within Cook County would be subject to the tax freeze and all of the other provisions of PTELL for levy years 2017 and 2018, but taxing districts within Cook County not previously subject to the tax freeze would cease to be subject to PTELL beginning with levy year 2019.
 
Exceptions
Extensions for excepted purposes would not be subject to the tax freeze or included in or limited by the limiting rate.
 
The typical exceptions from PTELL for many types of bonds issued by school districts such as alternate revenue bonds, issues approved by referendum, would apply, which would mean that such bonds would not be subject to the Amendment. Tax levies already issued for pre-existing GO bonds (although some technical language changes should be made to make this clear) should also not be subject to the Amendment.
 
Public safety purposes extensions made for districts not previously subject to PTELL are also excepted, while public safety purposes extensions made for districts already subject to PTELL are excepted from each district’s aggregate extension for the years that the district is subject to the freeze, but a special limiting rate calculation for levy years 2016 and 2017 permitting increases based on Consumer Price Index.
 
Action Items for Districts Contemplating Issuing Bonds 
Districts that are contemplating issuing working cash bonds, public safety bonds or funding bonds should do their best to issue the bonds and have the levy on the books prior to the effective date of the Amendment (likely 3/1/2016).  School districts that are contemplating issuing an alternate revenue bond should not be impacted by the Amendment.
 
Questions
If you have any questions, please contact Jim Snyder or Enzo Incandela.

This publication is intended for general information purposes only, does not, and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

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