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Village of Butler taxes may go up $200 in 2015

Aug. 25, 2014

Village of Butler — Residents of moderately priced homes are facing the prospects of their municipal real estate tax bills increasing by almost $200 as the result of a proposed debt restructuring plan that may be included in the 2015 village budget.

The municipal real estate tax bills would be raised from $1,108.24 to about $1,299 —an increase of about $191 — for a home with an assessed value of $163,000, according to a proposal being reviewed by village trustees that was submitted to them by Village Administrator Kayla Chadwick at an Aug. 19 village board meeting.

The municipal tax bill increase does not include taxes levied by school districts and other units of government.

The proposed municipal real estate tax levy — the amount of money raised from real estate taxes — would increase from the existing $1,508,900 to a proposed $1,801,173, an increase of about $292,000 for 2015, according to the power point presentation Chadwick presented.

In addition to the $100,000 to help pay debts, there is also an additional $100,000 for salary, benefits and administrative support for an eighth officer for the village police department and $85,000 as an initial payment for establishing a reserve fund that will pay off future road maintenance.

Chadwick emphasized that the budget estimates were preliminary numbers and the village board has not taken any formal action or votes on her plans for changing the way the village government has paid its debts, which is what accounts for the biggest share of the tax levy increases.

Since 2006, the village trustees have usually borrowed about $100,000 out of unrestricted reserve funds in order to help pay off debt. While the practice has helped reduce tax levy increases, it has also nearly drained the unrestricted cash reserve.

There are other reserves, such as those accumulated in utility, capitol project or debt service fund accounts, but they cannot be used for general operating expenses. The cash reserves for general operating expenses has dwindled from $747,000 in 2006 to an estimated $256,749 in 2014, which is equivalent to roughly two months of operating expenses, according to Chadwick.

Paying off debts

Chadwick said that by increasing tax levies rather than borrowing money to pay off debt, the village trustees are presenting their constituents with a more fiscally responsible and transparent budget.

It will also help eliminate the long-standing budget deficits, she said.

In addition, it will allow the village to increases its tax levy so it can fund priorities, including adding an eighth police officer and beginning to establish a reserve fund for future road projects.

The village's real estate levy limit can be increased as a result of the village raising taxes to pay off debts rather than borrowing from cash reserves. Tax money raised to pay off debts is included in state imposed levy limits, Chadwick explained.

According to a state law adopted in 2005, municipal governments cannot raise their annual tax levies at a higher percentage rate than the percent of new economic growth in the community, as measured by new construction. There has been very little new construction in the village since 2006 and, at the same time, the village's tax base has been shrunk because property values have declined in five of the past six years because of the recession.

Consequently, village government has been trying to operate on "costs of doing business" at 2014 levels with revenues that have been at the 2007 level.

"Using the general fund balance to help pay debt made sense back in 2006. The village had a very health balance and levy limits had not yet been implemented," Chadwick explained.

But, she added, using cash reserves to help pay debts in 2014 does not make as much sense because it restricts the village's ability to raise its tax levies and it drains its reserve funds.

The amount of money — or tax levy — used to pay off debts is not applied as part of the village's overall levy limit.

The village's total 2014 budget is about $4.4 million. Approximately $1.4 is for sewer, water and storm water control utilities, which are paid for through customer fees and service charges. The village pays about $900,000 in debt service. The budget for day-to-day operations is about $2 million; about $1.3 million is paid with real estate tax levy revenues. The tax rate in the village is $6.79 per $1,000 assessed valuation, which would increase to $7.97 if the debt payment restructuring plan is adopted.

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