By: Nancy Mathieson*
Most property owners are familiar with remedies for challenging their property’s assessment for tax purposes, but there’s a rarer, broader remedy occasionally asserted. In a typical property tax appeal, the owner tries to have his taxes reduced by challenging the assessor’s market value estimate, or its assessment related to similar neighboring properties.
In contrast, tax rate objection lawsuits generally involve groups of taxpayers looking for recourse. The lawsuits typically allege the taxing bodies are levying more than they are spending, storing the rest in savings and taking resources from businesses which need them in tough economic times.
Carla Wyckoff, Lake County Clerk, says tax rate objection lawsuits are uncommon. Case law provides some guidance on whether a property owner has been overcharged. According to Evan Karnes, representing a group of Lake County businesses in a 2011 tax rate objection suit, the laws historically have determined that taxes levied should be an appropriate amount to provide for services and that citizens should not be unduly burdened.
In a 1953 Illinois Supreme Court case People ex rel. Meyers v Chicago & North Western Railway Co., it was found that tax levies could be struck down as unnecessary when a district already had assets for the fiscal year in an amount almost twice its estimated expenditures. As this type of case is not a class action lawsuit, if the levies are struck down, the “winnings” are made solely to the parties who initiated the complaint.
Each year a taxing district calculates the dollar amounts it needs, within statutory limits, and the County converts the number into a tax rate. In the 2011 tax rate objection suit represented by Karnes, a group of businesses are suing Lake County and 56 other taxing bodies, including local townships, park districts, fire protection districts, public library districts, school districts, high school districts, unit school districts and junior college districts.
One defendant in the lawsuit, Adlai E. Stevenson High School in Lincolnshire, has historically been given the highest fiscal rankings by the Illinois State Board of Education. However, the suit alleges that for three separate funds (Transportation, Social Security, and Liability Insurance), the amount of property tax Stevenson levied in 2010 was unnecessary because the district already had at least twice the amount of “projected expenses as available funds” prior to making the levies. According to Karnes, “School districts look at their numbers; sometimes they get it right, sometimes they don’t get it right.”
Mark Michelini, Asst. Supt. for Business Services at Stevenson High School says an accumulation did occur in the school’s Transportation Fund beginning around 2007, when bussing costs for special education students skyrocketed. According to Michelini, the school’s Transportation Fund was as high as $8 million in 2010 and $10 million in 2011. However, by around 2010, a smaller number of students were being transported to Grayslake for special services. Stevenson is no longer bussing any special needs students to Grayslake, and now provides all their classes on the Lincolnshire campus. This change has reduced tax levies for their Transportation Fund in the more recent years.
Stevenson has faced Karnes’ tax objection litigation three times in the recent past; the district grouped the lawsuits together and settled out of court in 2013 for $300,000. Michelini says it has not been determined if the 2011 case will be settled or taken to court.
*Nancy Mathieson has a 30-year career in business, securities regulation and public policy. She held positions at the Chicago Mercantile Exchange (CME) and the New York Stock Exchange (NYSE), where she was a Director of Market Surveillance and managed a professional staff in the investigation of securities trading violations.
She served as Operations Director at Truth in Accounting, a Chicago non-profit whose mission is to promote transparency in government financial reporting. In this role, she directed Accounting teams in grant-funded research studies on the financial condition of state and local municipalities.
Nancy was an officer of the National Investor Relations Institute (NIRI) in Stamford, CT and has lectured at the University of Connecticut. She received her B.S. in Economics from the University of Illinois at Chicago and her M.B.A. from New York University.