At the public hearing for Schaumburg’s Property Tax proposal on December 15th, 2009 Village employees handed out a flyer that was in direct response to harsh criticism the Village has received in regards to numerous examples of wasteful spending highlighted by the Schaumburg Freedom Coalition over the last few years. I was absolutely appalled that the Village would hand out such a flyer when it was so riddled with distortions, misleading quotes, and outright lies about the Village’s activities and wasteful spending practices.

The citizens of Schaumburg deserve a full account of the truth in regards to this misleading flyer and the below article is part one of the response to the Village’s flyer. The Village’s flyer text is italicized and our responses are noted below by each question or groups of questions.

Read part 2 of Rebuttal here.

1. Does the Convention Center and Hotel have a negative impact on the Village’s general services paid for from the General fund? No. The hotel and convention center get no financial support from the Village’s General fund. The convention center and hotel are not competing for General fund revenue. The convention center and hotel’s financing was designed to be paid for by revenues from its operations and a portion of the hotel tax, amusement tax, and telecommunications tax. Most of these taxes are paid by users of the hotel or visitors to Schaumburg. In return the convention center and hotel generate at least $43 million per year of economic activity for the local economy and much more when the multiplier effect of this activity is considered. The total economic benefit to the area is positive even though the Village can only capture a portion of the economic activity in the form of taxes and revenue from operations.

2. Would selling the convention center and hotel eliminate the deficit in the Village’s General fund? No. The hotel and convention center was 100% financed using bonds. If the property was sold these bonds would need to be paid off. Due to the recession and associated decline in property values it is unlikely a buyer could be found that would be willing to pay the entire amount of the outstanding bonds. It would benefit the Village to hold this asset until such time as the market rebounds. If the property was sold taxes in place to support it could be reassigned to the General fund, but they amount to $6 million per year and the deficit is $17.6 million. Without a property tax the Village could not capture any property tax generated by privatizing the facility.

Claim 1 False. Claim 2 Misleading.

General Fund revenues have been used on the Convention Center. Selling the convention center would greatly reduce, if not eliminate, the General Fund deficit.

The Convention Center has received support from the Schaumburg’s General Fund in the past, including a $5,188,000 transfer in the 2007. The Village of Schaumburg’s claim that the Convention Center did not get support from the Village’s General Fund is patently false.

Also, the Schaumburg Convention Center & Hotel is financially supported by taxes that could go to the general fund including the Telecommunication, Hotel, and Amusement Taxes. For the Convention Center’s 2010 budget, it is expected to collect $5,924,129 in these taxes that could have been used in the General Fund to offset a property tax.

Additionally, the Schaumburg Convention Center & Hotel receives a property tax exemption worth an estimated $6.6 million per year, based on its $243 million purchase price. When this property is sold to a private business the property tax exemption would be repealed. The property taxes they pay would offset property taxes for the rest of the community. All businesses and residents in Schaumburg should be on an equal property tax playing field.

The $228 million dollar bond is a general obligation bond meaning that if the Convention Center continues to lose money the taxpayers are 100% on the hook for the losses. The Hotel & Convention Center Fund has plummeted from over $44 million in reserves at the beginning of 2007, and is anticipated to finish the 2010 at an estimated $4.4 million in reserves due to losses and construction costs. Once this money is gone, the convention center will start drawing on general fund revenues to make up losses. With mortgage payments accelerating from $11.4 million per year to $21 million per year the projects financial situation will likely get worse over time, not better.

The Village is trying to draw attention to its general fund to distract from the wasteful spending elsewhere. There is more than just the general fund that taxpayers need to worry about. In Schaumburg there is also a capital projects fund, pension funds, Convention Center & Hotel Fund, Airport Fund, and Baseball Stadium Fund, just to name a few. All funds require taxpayer money. If there is wasteful spending in any of these funds then wasteful spending should be cut and resources reallocated to the general fund to avoid a property tax increase.

A recent Daily Herald article “Schaumburg foresees bleak year for convention center” pointed out that the convention center is expected to see in 2010 a $14.5 million loss and a drop in reserves from $8 million to $4.4 million in 2010. This does not include the $5.9 million in tax revenues or $6.6 million in property tax exemption. From the perspective of the taxpayers the Convention Center is losing over $27 million per year, which is more than the $24 million property tax and the $17 million budget hole.

Click here for the 2010 Schaumburg Convention Center Budget for further reference.

3. Does the airport lose money or rely on taxes to support it? No. The airport operating costs are paid for by revenues derived from airport operations. No General fund money is used to support the airport currently.

4. Would selling the airport reduce the deficit? No. Ninety percent of the airport purchase was funded by the federal government, five percent from the state and five percent from Schaumburg. If the airport was sold the grant money would need to be paid back to the federal and state governments. In addition, it is likely that the federal government would want to keep it as an airport and would hand it over to DuPage County Airport Authority to operate. The assets the Village owns like the terminal building and the hangars would only be useful if the property were operated as an airport.

Both Claims are false. The airport loses money and relies on taxes to support it. Selling the airport would reduce the deficit. The Airport has never posted a profit. As of the 2009 Mid-Year Review (December) the Village reports $1,033,907 in expenses for the facility, but only $453,636 in revenues for a loss of $580,271 so far. This is consistent with previous years. Revenues from airport operations have financed only 48.9% of the $12.8 million in total costs over the last 5 years.

There is more than just operating costs to pay for including capital costs and paying off the principal and interest on the bonds. For example, the Village of Schaumburg transferred $616,517 from the General Fund to the Airport fund for debt service payments in 2006, $598,823 in 2007, and $584,167 in 2008. Later in 2008 the Village issued General Obligation bonds totaling $500,000 for additional hanger construction at Schaumburg Airport.

The Village has not demonstrated a single year in which the airport has been profitable and not cost the taxpayers money. This statement is wholly unjustified and only represents wishful thinking.

While the original purchase of the airport was financed through 95% federal and state funds, the rehabilitation and ongoing construction at the airport has largely been paid by Schaumburg taxpayers. Many of the buildings on the property were 100% financed by the Village of Schaumburg and those that are sold can be used to reduce the Village’s General Fund deficit in addition to the yearly payments from the general fund.

Furthermore, the Airport does not pay any property taxes. When this property is sold to a private business the property tax exemption would be repealed. The property taxes they pay would offset property taxes for the rest of the community. All businesses and residents in Schaumburg should be on an equal property tax playing field.

5. If the new property tax is technically for 2009 why do the offsets of garbage and vehicle sticker fee elimination start later? The recommendation to the Village Board was to implement a property tax for 2009, payable in 2010, eliminate the vehicle sticker for 2011 and start paying for garbage January 1, 2011. The Village has a projected deficit for 2009-2010 of $12 million. The vehicle sticker for 2010 is included as revenue for 2009-2010. If the sticker was eliminated is 2010 the deficit would be that much bigger and without adequate reserves to cover the loss in revenue the Village would be that much closer to running out of money prior to the receipt of property tax revenue in December 2010. The same timing problems hold true for starting to pay garbage service cut in that case it isn’t a revenue loss but additional expenses created by taking over the fee. In short the offset is not meant to be one for one and is dictated by the timing of financial needs.

Misleading. There is no reduction in fees for year one, and the Village doesn’t adjust for the planned 15% property tax hike in year two.

It is important to note there is NO reduction in trash collection or vehicle sticker fees in year one. The net impact of the property tax increase on residents is a 100% increase. For year two, the Village says they plan to reduce the Village Sticker Fee and the Trash Collection Fee but there is no guarantee. Additionally, there is no guarantee that the property tax will not go up. In fact, the Village estimates that the year-two property tax will go up an additional 15% for 2011, but plans no additional cuts to other fees for citizens. Unfortunately, to show effects of the tax hike on citizens they used year-one property tax rates and year-two theoretical cuts to village fees. This was done purposefully to minimize the perceived costs on the citizens. In reality, the property tax will be much higher in year two and the savings will never materialize.

It is important to remember the effects of this property tax on businesses. Businesses for the most part already privately contract out trash collection and will receive no savings from any reduction in fees. Also, businesses pay a much higher property tax rate and will be hurt dramatically by this new tax.

If the Village expects to raise $17 million in new revenue it has to come from somewhere. Any increase on taxes on our local businesses will mean either higher prices for goods & services or less employment opportunities as companies leave Schaumburg for a more hospitable tax environment.

6. Would selling the baseball stadium help reduce the deficit? The baseball stadium is owned by the Village and Park District. The first hurdle would be to get the Park District to agree to sell the stadium. Any sale would result in a one-time payment that would need to be split with the Park District and would not generate any significant amount of money. Based on the lease revenue stream the value of the stadium is probably in the $1-2 million range for investment purposes.

False. From 2004-2009 the Village of Schaumburg transferred a total of $3,701,830 from the general fund to the baseball fund for debt services on Alexian Field.

It is shocking that the Village estimates that the property value is only $1-2 million. Especially considering the building was originally constructed for $15 million dollars, with millions of dollars in renovations since then. Additionally, in the spring of 2009 over $800,000 was spent on re-painting the facility. With a 50% ownership in the facility the Village spent more on the paint job they say their share of the property is worth. The Village’s own rebuttal to property tax critics shows just how wasteful they have been with the taxpayer money. No one in their right mind would pay for paint job this expensive for a building that is worth so little. These facts show the continued mismanagement of Village resources and prove that selling the baseball stadium would help reduce the general fund deficit year over year.

Government should not be involved in the entertainment industry, instead it should focus on core services such as police, fire, and public works.

Read part 2 of the rebuttal here.

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