Story posted Wednesday, November 4, 2009
Increased Property Taxes To Fund Pension Shortfall
By RICHARD MAYER Assistant Managing Editor
As a result of tough economic times that led to $13 million is losses in Mt. Prospect's Police and Fire Pension funds, taxpayers will be called upon to pay more in property taxes.
Mt. Prospect Finance Director David Erb said in 2008, the Police Pension Fund lost $6,700,242, while the Fire Pension Fund lost $6,348,325.
As of Dec. 31, 2008, after the combined $13 million in losses, Erb said the Police Pension Fund totaled $36.3 million, while the Fire Pension Fund totaled $36.9 million. Both were over $40 million before the decline.
He said since investment earnings is one of the three ways a public safety pension is funded (the other two being employee contributions and property taxes), losses can only be made up by increased property taxes.
The proposed 2009 property tax levy is expected to increase 9.89%. Residents with a home market value of $350,000 paid $695 in property tax money to the village this year. Next year, they will pay $764. A tax levy is the amount of revenue an individual taxing body requests to collect from property tax payers to fund operations for the year.
Employee contributions are set by state statute and cannot be increased without legislative changes.
"I have not seen a decline in (pension fund) values to this degree in my tenure here at the village," said Erb, who has been with the village since 2003. "In order to move the pension funds to being fully funded by 2033 (100%) contributions on behalf of the village via property taxes will most likely continue to grow unless changes are made to the pension statutes."
Erb said the village is mandated to fund the pensions at the required amount. That impacts the property tax levy and siphons money that could otherwise be used to support village operations.
"Although not a direct impact on operations, it could limit options for providing services to village residents," Erb said. "The hit to the pensions in 2008 will take several years to earn back."
There are approximately 60 individuals in each of the Police and Fire pensions currently receiving a monthly pension, Erb said. There are an additional 86 police and 73 fire personnel who are contributing to their respective pension plans that in time will become eligible for a pension.
According to Erb, the decrease in pension values did not contribute to the overall $1.9 million budget deficit in the General Fund in 2009. He said that deficit was solely due to revenue shortfalls.
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