Property Taxes Could Increase Due to Accounting Error

Village property taxes could increase by 5.8 percent in 2012 due to an accounting error that misrepresented the value of the village’s business district.

The error came when the value of the village's Tax Incremental Financing District No. 1, which blankets much of the business district, was recorded and published by the state Department of Revenue as $76.7 million too high, according to village officials.

As a result, the amount the village levies in property taxes next year could be set artificially high, as it must be based on the total equalized value of property in Shorewood published by the Department of Revenue.

If the error can't be fixed, all property owners could have to contribute an extra 5.8 percent in property taxes to compensate.

Based on estimates using 2011 tax rates, the oversight could translate to a total of $2 million extra in property taxes or $442 more on a home assessed at $300,000. That money would roll over into 2013 when taxpayers would pay $2 million less.

Shorewood, like other communities, uses TIF districts as a mechanism to spur development. When a district is created, a municipality borrows money to pay for various public improvements related to development within the district. Once the development is built, the additional property taxes generated within the district are used to pay off that debt.

According to Department of Revenue Equalization Section Chief Scott Shields, the tax district's value was already wrong when it reached the department in an electronic file from the contracted assessor for the village, Associated Appraisal Consultants, Inc.

Shields said a department employee contacted the assessor when the tax district value seemed too high. He said the assessor confirmed the value.

Mark Brown, Associated Appraisal's project manager for Shorewood, did not immediately return calls for comment.

Village officials caught the error the same day the state released the numbers August 15. But state officials said they can’t fix the numbers after they have been published because other entities have begun using the numbers for planning and taxing purposes.

“As soon as we publish them people are running with them, using them, estimating impacts,” Shields said.

Shields said the department is bound by state statute to wait until the following year to correct the error, at which point they will lower the tax district value by an equal amount.

However, village officials are still hoping for a correction.  

“We’re asking the state Department of Revenue to consider that this is just an entry mistake and it doesn’t affect anyone else,” Swartz said.

If it can’t be corrected, Swartz said he is looking at other options for coming up with the extra money other than raising property taxes. One option could be for the village to borrow the money, but that would translate to higher taxes in the future.

“There’s no good way,” Swartz said. “It’s going to have a budget impact that you have to make up somehow. It’s how do you minimize the negative budget impact?”