What is Debt Abatement and How Does It Affect Me?
From time to time, it was necessary for the Village to incur debt to incentivize development and to provide for public infrastructure. The majority of the debt consists of general obligation bonds which are backed by the Village’s ability to levy and collect property taxes. As such, the County automatically levies the required annual debt service, also known as debt payments, directly from East Dundee property owners on the property tax bill.
As a result of home rule revenues, the Village has historically abated, or cancelled, the property taxes that would otherwise be collected to pay the Village’s debts. Through the abatement process, the property taxes that would otherwise be levied and collected from residents is abated, or cancelled, and the Village instead makes the debt service payments from other revenues, including home rule sales taxes.
The Village issued general obligation bonds for various public infrastructure and economic development projects. As a result of this debt, the Village has seen a positive transformation of the Village beginning in the downtown and spanning to the edges of the Village. The issuance of the debt was a conscious decision made by the Village Board over the years to allow for this transformation in order to improve the quality of life, broaden the tax base, and increase property values. At the time the Village took on the debt, it was assumed that the Village’s home rule status would remain in place.
Should the Village ever lose its home rule status, the Village would stand to lose nearly $1.6 million in home rule revenues derived from sources such as home rule sales taxes and vehicle title transfer fees. These revenues are most frequently derived from patrons coming from outside the Village and almost always involve discretionary expenditures made with disposable income.
Should the Village lose these home rule revenues while the Village has significant debt service payments to make, the Village will not be able to abate the property taxes required for the payment of the general obligation bonds, which would lead to a significant increase in property taxes.