Elk Grove Village proposing electricity tax

Elk Grove Village officials are proposing a new electric utility tax to pay for a growing local pension obligation for village employees.

The tax, unveiled by Mayor Craig Johnson at a village board meeting Tuesday night, is proposed to be a 1/2 cent per kilowatt hour of electricity used, officials said.

It's expected the new tax would cost the average homeowner $3 per month.

Officials estimate the tax would generate $4 million per year, with all proceeds earmarked to closing a $60 million local pension funding shortfall.

Johnson said the goal is to ensure the village's three pension funds -- for police, firefighters/paramedics, and public works and administrative staff employees -- are fully funded in 15 years.

"Unlike the state, we're going to take care of our issue," Johnson said. "It's not fair for our employees, our former employees now collecting pensions, or the taxpayers. ... We appreciate the work our employees do for us, and we want to make sure this is there for them when they retire," Johnson said.

There are about 300 village employees covered under the three pension funds.

Elk Grove is one of the few towns in the Northwest suburbs that doesn't have a utility tax on electricity.

On Monday, the Hoffman Estates village board approved a new electric utility tax, along with three other new taxes and a new stormwater fee, to help fund road improvement projects and other capital needs.

Johnson said Elk Grove hasn't had a need for an electric tax -- until now.

In 2000, all three of the village's pension funds were fully funded. As of last year, the pensions were about 63 percent funded, officials said.

Over the course of the last seven months, Johnson said he and the village staff evaluated different options that could be used to pay for the unfunded pension liability, including taxes on gasoline, natural gas and phones. The electric tax was deemed to be the best for residents and businesses owners, Johnson said, because they can control how much electricity they use.

"We wanted to go with one where the user could minimize the impact," he said.

Johnson blamed state lawmakers for the village's increasing pension liability, which has required increases in property taxes to fill the gap.

He pointed to two "unfunded mandates" from Springfield: when lawmakers reduced the number of years it took to receive a pension from 35 to 30, and when they allowed surviving spouses of those receiving a pension to collect 100 percent of benefits instead of just half.

The new electric tax will help "stabilize" property taxes, Johnson said, as next year will be the first time in several years that there will be no levy increase in property taxes dedicated to funding village pensions.

The village board is expected to consider an ordinance adopting the new electric tax on Nov. 19. If approved, electricity usage would be taxed starting Jan. 1, with first bills sent out in February.

The village would begin receiving proceeds by March.