Moraine Valley Community College trustees could set a state precedent if they go ahead with a recent suggestion to deannex from south suburban Palos Hills to avoid paying a new city tax.
College board trustees have voted to “consider the option” of separating the college from the city limits, and they directed the school’s attorney to “explore the options” of deannexing. The board may make a decision at its March 18 meeting.
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The aggressive move came after Palos Hills officials refused to exempt the college from paying the newly instituted utility tax–a levy the city assessed on all utility customers to shore up a depleted reserve balance.
College officials estimate the tax, which went into effect March 1 and will last two years, will cost the school a total of about $82,000.
“No decision has been made, but we think it’s important to explore all our options and deannexation certainly is one of them,” said Dr. Vernon Crawley, president of the 16,000-student college.
Tax skirmishes between educational institutions and host municipalities are not uncommon. Northwestern University and Evanston officials, for example, have engaged in a 100-year war over taxation that has included threats of a tuition tax and the imposition of a hotel tax on a campus conference center, which later was voided by the courts.
But annexation experts and state education officials say they’ve never known a college or university to physically separate itself from a municipality to avoid paying taxes.
“Around the state, there have been some examples of college officials fighting against being annexed into a town, but I don’t think we know of another college trying to get out of a town,” said Steve Morse, spokesman for the Illinois Community College Board. “It’s unusual, but not illegal.”
But if Moraine Valley officials decide to deannex, the school very likely would lose the sewer and water services provided by Palos Hills.
“Obviously, we will have to consider the cost ramifications of that,” said college board trustee Mary Nolan. “What we would do for water and sewer services are issues we are looking hard at.”
Moraine Valley Community College, like virtually all public and private non-profit educational institutions, is exempt from local property taxes. For the most part, these schools are self-sustaining and do not use property-tax financed municipal services, such as police protection or sanitation services.
But some municipal leaders complain that the students who pour into their towns take a toll on local resources. And, as they face budget deficits and tax hike-weary residents, some are turning to colleges and universities, among other groups, to help pay the bills.
“When 16,000 students come into our city, obviously they are impacting services outside the school boundaries and, whether the school appreciates or realizes it, we have to improve those areas,” said Palos Hills Mayor Gerald Bennett.
Unlike a large state university, community colleges such as Moraine Valley are run by local boards and are financed mainly through tuition and local taxes. The Moraine Valley taxing district covers most of the southwest suburbs.
Moraine Valley and Palos Hills have enjoyed an amicable relationship since the 1960s when college trustees purchased 300 acres of sod farms and open land on the city’s southwestern border to expand the campus. For years, Palos Hills has held its annual festivals on the college campus, and the city often has used school facilities for recreation programs.
But the relationship hit the skids last year when city leaders first floated the idea of a 5 percent tax on telecommunications, electric and gas utilities. They said the tax flow was needed to help refill a depleting fund reserve.
Moraine Valley asked to be exempt from the tax because officials did not think it appropriate for the city to tax a community college district, which itself is a taxing body.
The City Council eventually adopted a 4 percent utility tax. They refused the college’s exemption request, as they did similar inquiries from other local school and park districts.
Nolan said some college board members were offended by what she termed the City Council’s “snubbing” when it did not come to college officials and tell them about the city’s budget crisis before floating the utility tax idea.
“I think that could have made a difference in what has happened so far,” Nolan said. “I’m not saying I would not have voted to look into deannexation. But if they had talked to us first, I certainly would have taken that into consideration.”
Bennett sees things differently.
“In the 17 years I’ve been mayor, this is the most stupid thing I have ever heard of,” he said. “We always felt like we were home to the college and now, because they are mad about a tax, they decide they want a new home. It seems a little childish to me.”
Though not unheard of, cutting oneself out of a city is rare because Illinois law makes it difficult, said Larry Frang, assistant director of the Springfield-based Illinois Municipal League. Subdivisions, schools or businesses can separate from a city only if they rest on the edge of that municipality.
Moraine Valley falls into that category. The school’s sprawling campus lies on the southwestern edge of Palos Hills, sandwiched between the town limits and the Palos Forest Preserves.
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Crawley said school officials expect to decide on the deannexation by the end of the month.
If trustees vote to deannex, and the city fights it, school officials would have to file a petition in Cook County Circuit Court. They would have to prove the disconnection would not “unduly harm” Palos Hills through the loss of future tax revenue, Frang said.
Crawley said school officials have not determined how costly a legal fight would be.
But, responds Mayor Bennett: “They will probably end up paying more money in attorney fees researching the issue than they would paying the dumb tax.”