My Take on Arlington Heights’ 2025 Budget and Impact on Property Taxes
Tomorrow (Monday, December 2) the Village Board will officially approve the 2025 budget for Arlington Heights. I’m writing this note to share my perspective on the key points for residents to understand.
Overall, I’d label the 2025 budget as “ok” when looking at it from a short-term perspective. We’re not Chicago, and we’re not in a financial crisis. However, there are issues to be concerned about when looking at the long-term trend.
Let’s start with the big numbers. Across all funds, the Village will budget income of $211.6 million and expenses of $232.3 million. That looks like a deficit but this includes all sorts of categories where swings are expected from year to year such as the various TIFs and the Capital Projects Fund, which means neither the total nor the year-over-year change are particularly meaningful by themselves. Also, some of those expenses are for capital improvements, such as the lead service line replacement project, which are necessary to prevent our infrastructure from falling behind.
This means that the General Fund is a better place to look to understand whether spending is responsible. This is the Village’s main fund for Police, Fire, Public Works and other basic functions.
The key numbers here are:
- Spending is planned to increase by 4.6% to $92.9 million.
- Income is expected to increase 3.8% to $92.9 million.
That’s a balanced budget. That’s good, as far as it goes.
Of note, we are also adding a 5th ambulance because of the growing needs of our community, which is a multi-year process that will be completed in 2026.
What most of us are probably most interested in is the impact on property taxes. Here again the year-over-year increase is no huge concern: The property tax levy is going to increase from $38.04 million to $38.98 million. That’s a 2.5% increase. That’s higher than the very low (0% – 1%) increases of the past few years, but it’s in line with current inflation levels.
But there are two reasons to be cautious when it comes to the longer-term trend:
- First, even though in recent years increases have been small, that’s not the case when looking at the 20-year history. The property-tax levy increased from $16.6 million for the 2004/05 budget to $38.98 million for the 2025 budget. That’s more than double (a 134.5% increase), and that’s more than twice the inflation over that period, which was 66%. It is also significantly more than the 92% increase in General Fund expenditures ($48.3 million to $92.9 million). Simply put, it is not good when expenses grow quicker than inflation, and it’s worse when property taxes grow even quicker than expenses.
- Second, the biggest cause of the increase in the property tax levy is the need to increase contributions to the police and fire pension funds. I certainly fully support properly funding both pension funds (much as I support the Police and Fire Departments in general), and I believe that as a pension actuary by training I understand these challenging issues better than any member of the village’s board or staff. Right now, the actuaries for these plans are projecting even more increases and this will require some careful planning and management.
If you’ve lived in your current home for a while, you can look at your own property tax bill. I certainly have, and here’s what I’ve experienced, from the 2003 property taxes (payable in 2004) to the 2023 property taxes (payable just recently in 2024):
- Overall: $6,525 to $12,507 (92% increase)
- Village of AH portion: $556 to $1,390 (150% increase)
- By comparison: CPI-U increase: 66.4%
What strikes me most is that there is no line on my bill that has increased more than the property taxes charged by the Village of Arlington Heights. (For comparison, the school taxes have grown by 97%.) Even though it’s still only a small portion of the tax bill overall, every part of government has the responsibility to watch their spending, and the trend is something to watch out for.
This is particularly true given the potentially large changes that are coming to Arlington Heights, whether they are tied to existing TIFs or to Arlington Park. But that’s something for a future note.
Please reach out and let me know if you have any thoughts or questions.
Martin
P.S.: I’ve just started to share my views on what’s going on and am planning to do so on a semi-regular basis. For a complete set of my reflections, see the “Blog” section of my website, BauerForAH.com.