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April 15, 2024

Shelbyville Township – Excessive Tax Levies & Fund Balances?

By Kirk Allen & John Kraft

On March 1, 2017

Shelby Co. (ECWd) –

After a lengthy investigation and review of public records, we found numerous concerns, of which some are consistent with findings in other townships.  We have been assured on some of those concerns they are going to fix, while others raised have been met with justification and others still awaiting a response.

We welcome self-correction to items identified as more often than not, justifications are made for the wrongs being done.  In some cases, we have even seen attempts made to change the law to make their past violations of law to be legal in the future.  We have written about those types of situations as well and they are not limited to Township Government.

According to the Shelbyville Township Supervisor, if they are doing something wrong he assures us they will fix it. We appreciate that position and hope that is the case for the matters addressed in this multi-part series.

Fund Balances and their relation to tax levies – Alarm to the residents!

The financial records we reviewed point to serious concerns as it relates to fund balances, actual expense, need, and the levy itself. Understanding “need” can be a moving target on road related issues, we do believe “need” is easily identifiable as it relates to the Township matters.  Based on the information provided and case law, we believe the Township has an unnecessary and potentially illegal accumulation of money.   “However, the law is also clear that an unnecessary accumulation of money in the public treasury is against the policy of the law, and a real estate levy or tax rate that results in such an unnecessary accumulation is illegal. Toynton, 285 Ill. App. 3d at 361.

Our application of the Illinois Supreme Courts formula for excess taxation points to an illegal accumulation of funds.  The formula applied was total funds available for the fiscal year by adding the fund balance at the beginning of the fiscal year (provided from Township Annual reports), to the taxes extended for the prior year (provided by Township tax levy resolutions), then that total was divided by the average annual expenditure from the fund for the previous three fiscal years (provided from the Township Annual reports).  This is the formula used by the IL Supreme Court in the Miller case which can be found at this link.

In the Miller case, the Supreme Court concluded that where the computed sum of funds available was 2.84 times the annual average expenditure and 3.24 times the amount expended in the last previous fiscal year, any further tax levy would result in an illegal excess accumulation.

The court also stated: “Based upon the numerous Illinois authorities referenced herein, we believe it is preferable to scrutinize the accumulation in each fund independently of all other funds even if the monies in various funds are to some extent transferable.”

That being the position of the IL Supreme Court, we applied the same analysis, by fund, and the results are staggering. The analysis shows, as applied to the Township funds, every fund is substantially over the established threshold as defined by the court’s formula with one exception.

  • General Town Fund -3-year analysis – 1.72 times the needed amount1-year analysis 2.04 times the needed amount
  • General Assistance -3-year analysis – 3.70 times the needed amount 1-year analysis 3.56 times the needed amount
  • Cemetery -3-year analysis – 3.84 times the needed amount 1-year analysis 9.20 times the needed amount
  • Audit Fund -3-year analysis – 5.78 times the needed amount 1-year analysis 8.79 times the needed amount
  • IMRF-3-year analysis – 11.16 times the needed amount 1-year analysis 27.29 times the needed amount
  • Insurance Fund – 3-year analysis – 6.43 times the needed amount  1-year analysis 4.66 times the needed amount
  • Medicare Fund -3-year analysis – 17.88 times the needed amount 1-year analysis 12.17 times the needed amount
  • Social Security Fund -3-year analysis – 6.03 times the needed amount  1-year analysis 6.10 times the needed amount
  • Unemployment Fund –3-year analysis – 209.59 times the needed amount 1-year analysis 206.53 times the needed amount
  • Workers Comp Fund -3-year analysis – 63,757.84 times the needed amount  1-year analysis 63,757.84 times the needed amount

The same analysis was applied to the Road Commissioner funds and although some funds exceeded the one-year analysis limits, we find that these funds, are under the high limit for the three-year analysis but are still high enough to potentially warrant a tax reduction in future levies.

  • Road & Bridge Fund -3-year analysis – 1.66 times the needed amount  1-year analysis 2.54 times the needed amount
  • Building & Equipment -3-year analysis – .080 times the needed amount  1-year analysis 2.31 times the needed amount
  • Permanent Road -3-year analysis – 1.44 times the needed amount  1-year analysis 3.68 times the needed amount
  • Bridge Construction -3-year analysis 2.13 times the needed amount  1-year analysis 14,800.74 times the needed amount
  • Road Damage Fund-3-year analysis – 2.37 times the needed amount  1-year analysis 9.57 times the needed amount

You can review the spreadsheet at this link or view/download it below to see the numbers which were all taken from the Township Annual Financial Reports 2013-2014, 2014-2015, and 2015-2016, and tax levies resolutions provided by the Township.

The above figures, especially in the Town funds, clearly point to a vast majority of the tax levy funds exceeding the threshold for excess taxation as defined in the courts and are potentially creating an unnecessary accumulation of tax money. As previously pointed out, “The law is also clear that an unnecessary accumulation of money in the public treasury is against the policy of the law, and a real estate levy or tax rate that results in such an unnecessary accumulation is illegal”. Toynton, 285 Ill. App. 3d at 361.

The prior levy total of $511,234.53 and the beginning balance of funds for 2015-2016 fiscal year, $1,197,559.00, equals $1,708,793.53 Million dollars. Yes, that is $1.7 Million dollars!  Expenses for the 2015-2016 year totaled $443,702.55.  With the funds on hand, the Township, theoretically, could eliminate their tax levy for approximately 3.85 years.  Theoretically because doing so brings other problems due to the passage of Property Tax Extension Limitation Law (PTELL), in the county.  However, even with PTELL limitations on tax increases, I believe most will agree by the end of this multi-part series the Township Officials should provide a clear justification for such taxation and if they are not able to do so, a reduction in taxes would be in order.

For those not familiar with PTELL, “PTELL taxing districts do not get less money; they just cannot raise as much from property taxes as they would be able to without the PTELL”.  To better understand PTELL you can review the Technical Manual found here. 

Part II and III will be focused on Fund Transfers, General Assistance, Donations, and Prohibited Officers Activities as it relates to Township officials and the Townships position on those matters.

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