THE TRUTH IN TAXATION ACT

If your park district is subject to the Act, you could lose a substantial amount of revenue if you fail to comply. A word to the wise . . .

By Earl L. Hoover*

The Truth in Taxation Act(Chapter 120, Section 861 et seq. of the Illinois Revised Statutes) requires additional publication and hearing procedures before levy ordinances can be enacted when those ordinances levy taxes in amounts greater than 105% of the previous year's extension of taxes. Considering developing litigation concerning the application of the Act and somewhat misleading language to be found in the Act, the following discussion and forms may be of value to park districts in avoiding certain pitfalls — and the accompanying losses of revenue — which could result from an unwitting noncompliance with the Act.

Procedure

To determine whether your district is subject to the Act, a determination must be made whether this year's proposed levy (not anticipated extension) exceeds last year's extension or anticipated extension (not last year's levy) by more than 105%. If so, the following must be performed or this year's levy will be reduced to 105% of last year's extension:

1. At least 20 days prior to enacting the levy ordinance, the Park Board must meet and determine the amount of funds to be levied through real estate taxes;

2. If the amount determined exceeds the amount estimated or known for the prior year's extension by more than 105%, the Board must:

A. Determine the percent of increase;

B. Advertise its intent to exceed the prior year's extension in a newspaper.
This advertisement must:

(1) cover no less than 1/8, of a page;

(2) be at least 12 point type;

(3) not be placed in the "legals" or the "advertisements" sections of the newspaper; and,

(4) be enclosed by a black border of no less than 1/4-inch width.

C. The notice must state:

(1) The tax extended (or anticipated to be extended) for the prior year;

(2) The amount proposed to be levied for the current year, exclusive of election costs;

(3) The per cent of increase;

(4) The date, time and place the Board will meet to hear comments from the public on the proposed levy increase and to explain its reasons for increasing the tax levy. The notice must appear in a newspaper of general circulation not earlier than seven days nor later than 14 days prior to the date of hearing. This date may be the same as the date for hearing on the budget and appropriation ordinance. D. After the hearing, the Board can proceed to adopt the levy ordinance but the amount in the levy ordinance must not exceed the amount advertised in the notice.

E. If the final levy amount is greater than the published figure or is greater than 105% of last year's extension and there was no publication, the Board must, within 15 days of enactment of the ordinance, publish notice providing the information as given at C(l), (2) and (3).

F. The levy ordinance, when filed with the County Clerk, must be accompanied by a certificate of the President of the Board, certifying that the Board has complied with the provisions of the Act.

If there is a failure to comply with the Act, the total extension of the present year's levy ordinance may be reduced to 105% of the total extension of the previous year.

Exclude Debt Service

Sections 6 and 8 of the Act require notice to be published, a public hearing to be held, and a special certificate to be filed if the current year levy exceeds 105% of the prior year's extension. In arriving at the levy for the present year, and the extension for the prior year, debt service is to be excluded. As stated by the Illinois Attorney General, File No. 81-030, dated October 15, 1981, at pages 3 and 4:

Although the only express exception set forth in Public Act 82-102 is for election costs, an analysis of the Act leads to the conclusion that the Act must have been intended to apply to the annual corporate levy and to those special purpose levies which are also made annually, and not to debt service levies such as levies for the payment of principal and interest on bonds or notes.

The failure to exclude debt service from the calculations to be made under the Act can result in substantial losses of revenue. Assume that a park district has a prior year extension for general and special purposes of $400,000 and a bond principal and interest extension of $125,000. Assume further that in the current year the district has $500,000 in general and special purpose levies, but no bond levy due to the bonds being retired with the prior year payment.

If, in comparing amounts for the Truth in Taxation Act 105% standard, the district mistakenly includes, for the prior year extension, the $125,000 for payment of bonds, the figures would be:

1982 extension	$525,000
1983 levy	$500,000

*Attorney Earl Hoover of Overholser, Flannery, Hoover and Boyd, Libertyville, represents several park districts in Lake County, Illinois. His practice is concentrated in the representation of parks, libraries and municipalities.

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From these figures, it erroneously appears that there is no need to comply with the Act as the 105% standard has not been exceeded. The unfortunate result is that the district would not receive $80,000 of the monies it levied for the year 1983, as the County Clerk would reduce the extension to 105% of the 1982 extension, or 105% of $400,000 (the amount of the 1982 extension without the $125,000 extension for debt service). Thus $400,000 times the 105% standard produces $420,000 which is $80,000 less than the $500,000 levied by the district in 1983.

The correct application of the 1982 extension and 1983 levy, after excluding debt service, is as follows:

1982 extension           $400,000

1983 levy                    $500,000

As the 1983 levy exceeds the 1982 extension by more than 105%, the notice, hearing and certificate requirements of the Act must be met in order to avoid having the County Clerk cut back receipts from the 1983 levy to 105%o of the 1982 extension.

Decreased Assessed Valuation

Successful tax objections by major corporations, litigation on methods of computing assessed valuation and the economic times have all contributed to significant losses in assessed valuation for some districts. When a current year levy ordinance is to be enacted before the extension is known for the prior year, care must be taken in estimating the prior year extension. This can be particularly important when a district levies the maximum in its general purpose funds and has a significant increase in a special purpose fund, such as IMRF or insurance. If doubt exists, the better procedure is to hold the hearing.

Make the Determination

Section 4 of the Act requires that, at least 20 days prior to the adoption of the aggregate levy, the district "shall determine the amounts of money, exclusive of any portion of that levy attributable to the cost of conducting an election required by the general election law ... estimated to be necessary to be raised by taxation for that year upon the taxable property in its district." Many districts ignore this requirement when it appears the current levy is less than 105% of the prior year's extension.

At least in this writer's opinion, the district should always make the determination and cause the determination to be placed on public record in the minutes of a meeting, whether or not the 105% standard is exceeded. If this is not done, the district may have some difficulty in using the relief from the hearing requirements of the Act afforded by Section 7. That provision allows a district to adopt a levy ordinance in excess of 105% of the prior year's extension, even though no prior notice was given and no hearing held, provided the lack of notice and failure to hold the hearing were (1) in good faith, (2) reasonable under the circumstances, and (3) notice of the levy amounts, as actually enacted, is published within 15 days of enactment of the levy ordinance.

"To determine whether your district is subject to the Act, a determination must be made whether this year's proposed levy (not anticipated extension) exceeds last year's extension or anticipated extension (not last year's levy) by more than 105%."

The foregoing comments by no means discuss all possible problems which may be encountered in dealing with the Act; the comments are those of the writer and may not in all instances be in accord with other park district attorneys' interpretations of the Act. The district's attorney should review the levy ordinance and Truth in Taxation Act timing and procedures each year to determine whether the notice and hearing requirements of the Truth in Taxation Act are applicable.

Forms

The following forms may be useful in meeting the requirements of the Act. The park district's attorney should be consulted before any attempt is made to adapt the forms to the specific needs of your district:

A. Form of notice to be given to a newspaper of general circulation within your district. If your district is located in more than one county, consult your attorney to determine the correct publication to be used (See Public Act 82-760).* With reference to timing of this notice, it must be published not more than 14 nor less than seven days prior to the date set for the public hearing. The Board should have met at least 20 days prior to the date of public hearing to determine the amount of the current year tax levy, which is the figure to be inserted in the second blank of this form:

(Name of Park District)
Notice of Hearing

A public hearing concerning the proposed budget and the proposed levy increase for (name of park district) will be held on (day and date) at (time) in the (address).

The amount of property taxes, exclusive of election costs, extended or estimated to be extended on behalf of (name of park district) for the preceding year is $______.

The amount of the proposed levy, exclusive of

*EDITOR'S COMMENTS: Note that P.A. 82-760 also amended the publications provisions of the Truth in Taxation Act to change the requirement that notice be published in a newspaper of general circulation in the county in which any part of the district is located to the requirement that notice be: 1. Published in a newspaper of general circulation in the taxing district if the district is located entirely in one county. If there is no such newspaper then in a newspaper of general circulation published in the county and having circulation in the taxing district. 2. If the taxing district is located primarily in one county but extends into small portions of adjoining counties then the notice is to be published in a newspaper of general circulation published in the taxing district, or if there is no such newspaper, in a newspaper of general circulation published in each county in which any part of such district is located. The Act further requires that the legal name of the taxing district be included in the notice, although in practice most districts have been doing this already. Park officials are urged to consult their district attorney before taking any action under P.A. 82-760. It is a complicated piece of legislation.

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election costs, for the current year is $______.

The percentage of increase of the current year levy over the amount extended or estimated to be extended for the preceding year is _______%.

Dated: ________________

___________________________
Secretary (name)
Park District

B. Form of letter to newspaper which is to accompany the notice sent to the newspaper. The date on which the notice is to appear is to be inserted in the blank provided. You may or may not wish to modify the billing instructions given as the last paragraph of this letter:

Dear Sir:
Enclosed please find a notice of hearing for publication in the (name of newspaper), which notice must be published on the_______day of ________, 198____. In accordance with "The Truth in Taxation Act", please publish this notice:

(1) in an area not less than one-eighth page in size;

(2) the smallest type to be used is twelve point;

(3) enclose the notice in a black border no less than one-quarter inch wide; and

(4) do not place the notice in that portion of the newspaper where legal notices and classified advertisements appear.

If for any reason you cannot comply with or have any questions on the foregoing instructions, please contact the undersigned.
Kindly contact me when the proof or galley is available so that I may review same prior to publication.

Once published, kindly send duplicate certificates of publication, and your billing, to me.

Sincerely,
________

C. Form of certificate which is to accompany the tax levy ordinance at the time it is filed with the Tax Extension Department of the County Clerk's Office of each county within which your district is located. Please note that this certificate is not be executed by the Secretary, but is rather to be executed by the President:

CERTIFICATE

The undersigned, President of (name of park district) hereby certifies that I am the presiding officer of (name of park district), and as such presiding officer. I hereby certify that the levy ordinance, a copy of which is appended hereto, was adopted pursuant to, and in all respects in compliance with, the provisions of Sections 4 through 7 of the so-called "The Truth in Taxation Act."

Date:_______________

___________________
President
(name) Park District

D. Form to be used if levy amount is increased over amount published or if there was no prior publication and amount of levy exceeds 105% of preceding year's extension. This notice is to be published with the same requirements for print size, location, etc., as item A except it must appear in the newspaper within 15 days of enactment of the levy ordinance. File the levy ordinance after the notice has been published:

(Name)
NOTICE

The final tax levy ordinance as adopted by the Board of Park Commissioners of (name) Park District, (name) County, Illinois, is in excess of the amount of the proposed levy stated in the notice heretofore published by said Board.

The amount of property taxes, exclusive of election costs, extended or estimated to be extended on behalf of (name) Park District for the preceding year is $______.

The amount of the levy, exclusive of election costs, for the current year is $______.

The percentage of increase of the current year levy over the amount extended or estimated to be extended for the preceding year is ______%.

Dated:______________

___________________
Secretary
(name) Park District

(NOTE: This form will require modification if there was no publication prior to enactment of the levy ordinance.)

• • •

Finally, the procedures required by the Truth in Taxation Act prior to enacting levy ordinances are in addition to, and do not modify, the publication of notice, public hearing, and time period requirements associated with the annual budget and appropriation ordinance.

Illinois Parks and Recreation   36   May/June 1983