McHenry holds the line on property levy increase but faces budget shortfall without it

McHenry might need to determine how to increase its income to pay for needed infrastructure improvements and maintenance, but that funding will not come from an increase in the new tax levy.

In a straw poll during Monday’s McHenry City Council meeting, council members indicated they would rather see the property tax levy remain flat for the upcoming year in a “wait and see” response to current economic conditions.

City Finance Director Carolyn Lynch and City Manager Derik Morefield asked for council direction as city staff prepare the levy. A public hearing and resolution on the levy is set for the Nov. 20 council meeting, with final approval set for Dec. 18.

McHenry’s fiscal year begins May 1. Budget discussions for the 2024-25 year start in early spring.

“We are going to be in a situation where this is going to get worse.”

—  Wayne Jett, McHenry mayor

Without increasing the levy, McHenry is looking at a budget shortfall of $585,000 and “there are also $18,350,000 in projects that currently do not have any funding source,” Lynch wrote in her report to the council.

Those projects include $13.5 million in proposed streetscape improvements, $1.75 million for Phase 4 of the McHenry Riverwalk, and $1 million in Route 31 improvements needed with the Illinois Department of Transportation’s expected widening of the state road.

McHenry has increased its levy just once since 2010, adding 2.6% in 2021. In 2016, the council reduced by levy by 3%.

Mayor Wayne Jett polled council members Monday, asking for their opinion on three options for the property tax levy: increasing it by the 5% allowed by Illinois’ Property Tax Extension Limitation Law, known as the “tax cap” law; creating a separate levy for its contribution to the Northern Illinois Special Recreation Association; or leaving the rate flat.

As a home rule community, McHenry does not have to follow the tax limitation law that prevents increases from rising faster than inflation. It has, however, continued to follow those guidelines. A 5% increase would increase the city portion of the property tax bill on a $200,000 home by $20.72, Lynch said.

McHenry is one of 13 communities that pay into NISRA to provide recreation for adults and children with developmental disabilities. Most of the other park departments or park districts fund the agency through a separate levy. McHenry funds its portion – $127,000 – through the general fund. Increasing the levy for that cost would increase the city portion of the property tax bill on a $200,000 home by $16.45, Lynch said.

With no changes to the levy, the request would be for $4.7 million, Lynch said. That includes $710,366 levied for the city’s contribution to the McHenry police pension fund.

Jett said remaining flat “is not going to work.”

“I don’t think anyone wants to raise it, but how long are we going to be pushing this down the road?” Jett said of needed capital improvement projects. “We are going to be in a situation where this is going to get worse.”

There is too much uncertainty now to consider raising taxes, said 6th Ward Alderman Michael Koch, who advocated for waiting to see if the U.S. Federal Reserve makes interest rate changes. “I can’t see raising taxes now until something improves ... and it does look like it is improving.”

Alderwoman Chris Bassi, 4th Ward, agreed, suggesting the council hold off on an increase for one more year.

But years of holding that line has put McHenry in a position where it does not have enough money for infrastructure, 5th Ward Alderman Shawn Strach said. “We have to have enough money to run the city, and our residents deserve that as well.”