There have been some interesting local discussions about tax caps recently. I have also received a number of calls asking for an explanation of how tax caps work. Here’s a brief primer.

Tax caps is the common name for the Property Tax Extension Limitation Law. It was passed by the Illinois legislature in 1991 as a mandatory part of the tax code for the five county area that borders Cook County. In 1995, PTELL was extended to Cook County and in 1996 it was extended to downstate counties subject to referendum. Champaign County passed property tax caps in November, 1996.

PTELL’s intent is to limit the growth of property taxes to the rate of inflation.

PTELL does not directly address tax rates or tax assessments. Instead, it addresses the overall extension amount that any taxing district gets. The extension is the tax rate multiplied by the assessed value. In addressing rising property taxes, the state legislature realized that capping either tax rates or assessed value increases would do nothing to limit the overall growth in property taxes. Capping increases in the extensions does.

Because the cap is on the overall extension, it is possible that a property owner’s tax could go up more or less than the rate of inflation. Over time, a person’s overall property tax bill should generally match the rate of inflation, unless the property owner does something to increase the value of their property or if a referendum is passed that increases the tax rate.

There are two exceptions to tax caps in Champaign County.

First, the home rule taxing districts of the City of Champaign, the City of Urbana, and the Village of Rantoul are not covered by tax caps.

Second, a taxing district which has territory in another county is not covered by tax caps. In future years, it is possible that those territories would be covered by tax caps if the following happens. First, all the counties in which the district has territory have voted on tax caps (but not necessarily passed tax caps). Second, at least half of the assessed value of the taxing district is located in counties which have tax passed tax caps.

For example, the Mahomet Seymour School district is not covered by tax caps because part of the district is in Piatt County. The Piatt County portion of the district contains just .02% of the EAV of the Mahomet Seymour School District, but it’s enough to prevent tax caps from taking effect. However, if Piatt County ever votes on tax caps Mahomet Seymour School District will then be subject to tax caps, even if the tax cap referendum in Piatt County fails.

Our office has the responsibility for enforcing PTELL. Each year, prior to the final extension of property taxes, we compute the maximum rate allowed under PTELL. We then inform the districts and adjust the tax rates accordingly.

Calculating just how great the savings are under PTELL is difficult. There are various models that could be used, but each requires that assumptions are made about what the taxing districts would do in the absence of tax caps. However, it is indisputable that tax rates have generally dropped for those districts under PTELL (in the absence of referenda), and that at least some of that decrease is from tax caps.

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