Orland Imposes New Utility Tax, Raises Sales Tax

ORLAND PARK, IL — Orland Park residents will soon pay extra on their electric and gas bills, after officials last week voted to approve a new tax as a source of revenue.

Trustees also voted in favor of an ordinance including an increase to its overall sales tax, and its home-rule sales tax. The first is expected to increase from 10 percent to 10.5 percent, with the latter rising from .75 percent to 1.25 percent. Groceries and medicine are exempt from the home-rule sales tax.

The utility tax is expected to bring in $3.5 million to $3.9 million annually, much of which would be earmarked for projects including an indoor police firing range, and a police training center.

The fee coming to residents' ComEd and Nicor bills will mean an estimated increase of $12.55 per month between gas and electric costs. Residents can expect the tax to appear within 60 to 90 days of the vote.

The increases to both the home-rule sales tax and the sales tax would begin in January 2024. The overall sales tax increase is expected to bring in $7.6 million in revenue annually. Officials said the village's sales tax revenue in 2023 is estimated to be $44.8 million.

The utility tax and home sales tax increases are necessary, Mayor Keith Pekau said, to cover substantial capital projects and offset mistakes made previously in village finances. Pekau stressed work needed to roads and parks, specifically.

"Credit to staff and the board for all the work building out the fact base ... there aren't surprises here," Pekau said. "The choice really is, do what we're doing, or let our roads and parks and everything not get fixed, and let that decline. And I don't think that's what we want.

"... not a single person in here wants to raise a tax, ever, but we were elected to be adults and make the hard decisions. We're making those hard decisions, so the next boards don't have to, so the next boards will be in a better spot."

Mayor Keith Pekau also walked through a five-year capital improvement plan through 2027, detailing areas where he said the village previously painted itself into a corner, forcing the changes now.

The village this year seeks $13.9 million for a 2022 tax levy—a 2.4 percent increase from the prior year’s levy of $13.6 million. Officials hope to lower the levy to $13.4 million next year.

The current 5-year capital improvement plan comes in at total spending of $198 million through 2027, notably with $93 on roads and paths, $57 million on facilities, and $33 millions on parks. Facilities included in the total include an indoor firing range, police training facility and public works garage. In 2024, specifically, officials anticipate needing $14.4 million for water system projects, $10.3 million for a police firing range, and $6.4M for road repair.

The village's borrowing this year totals $14 million, with two bond sales last year of $11.3 million for land purchases and road repairs, and $11.8 for work at parks. Included in that amount are Schussler Park and Centennial Park West. Trustees last week also signed off on spending $10 million for a stage at Centennial Park West.

Pekau pointed to a shortfall in state and federal money as one reason for taking such steps now, in addition to past practices of pulling from current fund balances and relying on bonds to cover capital projects. The administration also inherited legacy capital costs that have taken their toll on the finances in recent years. Those projects include Orland Health and Fitness, Tinley Creek, Orland Park Triangle, LaGrange Road landscaping and Boley Farm. The Orland Triangle project, specifically, cost the village $31 million, Pekau said.

Property tax rebates were also problematic, Pekau said. From 2003-2017, the Village borrowed money to be able to issue residents a refund on the village portion of property taxes paid, he said.

"This to me is what really bothers me a lot," Pekau said. "Every year that we gave a rebate, we borrowed money to give you the rebate."

The rebates were politically charged, Pekau said, usually timed to arrive just before an election.

"They were basically buying your vote with borrowed money," Pekau stated. "That's really stupid."

Pekau said $39 million was given in rebates, accruing $18 million in interest.

In addition to the local government's decisions, state and federal funding shortfalls totaling $106 million created a $29 million gap in funds needed for capital projects, Pekau said, an amount that could have been covered with the town's borrowing capacity.

"We can't change the past, we have to deal with what our current, present situation is," Pekau said.

The new revenue sources are anticipated to meet almost half of the unfunded capital needs, Pekau said, with the village's borrowing capacity able to fund the remainder, "only borrowing as necessary."

Officials' goal is to get the village's portion of property taxes: 6.82 percent in 2017, down to 6.6 percent, in 2021, hopefully down to 5 percent.

"That's what the board is trying to do here," Pekau said.

Pekau also hopes to make the village less reliant on the state, he said. Other outcomes would include an improved water main system, "best in class" local roads, ADA-compliant sidewalks and roads, "major" park upgrades, and an ability to shift to a "pay as you go" model while increasing fund balances.

The changes now are needed to impact future finances, he said.

"I believe this will keep Orland Park the great community that it is," he said. "I believe this is an action we have to take, and we've done everything we can to avoid it. But that's where we're at."