Summary of Library Taxes and Borrowing Devices

Taxes/Funds

General Corporate Fund Taxes

Purpose: To establish, maintain, and support the public library or libraries within the district.

Limitations: The annual maximum tax rate is .15% or such greater amount not exceeding .60% of all taxable property within the district if authorized by referendum.

Citation of Authority: 75 ILCS l6/35-5; 75 ILCS 5/3-l et. seq.

Specific Restrictions: This fund covers most general library expenditures. The monies and accrued interest can be spent for any proper library purpose. While some accumulation in the fund is unobjectionable, it should not be used for accumulation. In such instances the balances should be transferred into the Special Reserve Fund.

Personal Property Tax Replacement Funds

Purpose: These funds substitute for the revenues once derived from ad valorem taxes on personal property. Districts downstate may obtain 48.35% the fund. The ratio for each taxing district is the ratio which the Tax Base of that taxing district bears to the Downstate Tax Base. The base year for such determination is 1977. The monies must be first applied to debt service, then to the proportionate share of pension or retirement obligations. The balance is placed in the general fund.

Building and Maintenance Fund Taxes

Purpose: To maintain, repair, or alter the physical facilities or equipment, to purchase buildings, sites, furniture, or equipment, to construct or rent buildings required for library purposes.

Limitations: This is a separate tax from the General Fund with a maximum tax rate of .02% of the value of all the taxable property in the district. The board must adopt a resolution each year to levy this tax and, within 15 days after its adoption, publish it at least once within specific notice guidelines. If no petition, which includes the signatures of at least 10% of the registered voters of the library, is filed in opposition to the tax within 30 days after publication, the district may levy the tax. If such a petition is filed, the library may rescind the action or place a referendum which concerns the tax on the ballot at the next general election. If successful, the district may levy the tax.

Citation of Authority: 75 ILCS l6/35-5; 75 ILCS 5/3-l et. seq.

Specific Restrictions: This fund covers or supplements most library capital improvement needs, custodial and maintenance services, and major equipment needs. The money and accrued interest should either stay in the fund for these purposes or be transferred , at year’s end, to the Special Reserve Fund. It cannot be spent for Audit, IMRF, SSN, tort liability, or insurance; but if these special taxes are used (or general fund taxes), it is not necessary anyway.

Special Reserve Fund

Purpose: To provide monies for the library physical plant needs or for emergency expenditures.

Limitations: The fund consists of the unexpended balances of the proceeds received annually from the annual public library taxes provided that the board has resolved to develop and adopt a plan for expansion or repair within two years after the adoption of the Special Reserve Fund. However, these funds may also be used to meet emergency expenditures. The board must also provide in the annual appropriation ordinance for the accumulation of any unexpended balances.

Citation of Authority: 75 ILCS l6/40-40; 75 ILCS 5/5-8.

Specific Restrictions: The plan adopted to use the monies of the Special Reserve Fund may subsequently be amended as circumstances require. Unless the accumulation actually reaches six figures, we are of the opinion an actual architect’s building plan is not necessary. A relatively definite and detailed building or remodeling plan should be in place within the two years if the fund is in five figures, even if it is only a long-range plan. Actual interest as well as new transfers stay in this fund until expended. The fund has no accumulation ceiling.

Working Cash Fund and Taxes

Purpose: To provide funds for a library to have cash on hand from one fiscal year to the next and to meet the demands for ordinary and necessary expenditures for library purposes.

Limitations: Collection of the tax shall not be anticipated by the issuance of any warrants. The balance cannot exceed .2% of the full cash value of all taxable property within the district as of the date the fund was created, if prior to 1978, or as of that date. The fund may receive such appropriations and any other contributions desired. No public library may levy this tax for more than four years, although the four years need not be consecutive. The annual rate limit is .05% for each of the four levies. The fund may be carried over without reducing future tax levies. The proceeds may be temporarily transferred to the General Library Fund and disbursed in anticipation of taxes. Such taxes when collected and after payment of tax warrants should reimburse the fund.

Citation of Authority: 75 ILCS l6/35-35 and l6/30-95; 75 ILCS 5/3-9 and 5/4-l3.

Specific Restrictions: The first tax levy is subject to a backdoor referendum. Any taxpayer may file, within 30 days of the ordinance, a petition signed by 10% of the registered voters of the library requesting a referendum. The library may rescind the ordinance or submit the question to the voters at the next election. If a majority favors it, the tax is authorized. If it fails, the tax cannot be levied. Presently no notice requirement of the ordinance’s passage exists in the statute.

Gifts and Memorials Fund

Purpose: Any person or firm desiring to make donations of money, personal property, or real estate for the benefit of any library, may vest title to the donation in the board of library trustees of the district receiving the donation. The board is considered to be a special trustee of such donated property.

Limitations: The donation, in order to be accepted in the first instance, is subject to the terms and conditions of the donor, i.e., if the donor’s restrictions are not agreeable to the board, then the gift need not be accepted. However, if the gift is accepted, the library’s use of the gift is limited to the donor’s directives.

Citation of Authority: 75 ILCS l6/30-75; 75 ILCS 5/l-6.

Specific Restrictions: Items which the board itself could not invest library funds in, such as stock and improved real estate, may still be accepted and held by the board as Trustee of the gift for a reasonable period of time.

Tort and Insurance Fund Taxes

Purpose: To pay costs of settlements or judgments, to pay costs of protecting itself or its employees against liability, property damage, or loss, including self-insurance pools, principal and interest on bonds, risk care management programs, purchase of insurance, administrative costs, employee wages, legal and consultant services, workers’ compensation, and unemployment insurance.

Limitations: This tax may be levied at a rate sufficient to pay all tort, insurance costs, and the like listed above, and the library may establish reserves for expected losses. The library may enter into an intergovernmental contract not to exceed 12 years for joint self-insurance. Funds due under such contracts are not a debt. This tax is in addition to that authorized for the general purposes, is not subject to any referendum, and is not limited by rate, only by the fact that expenditures must be for a proper purpose as noted above.

Citation of Authority: 745 ILCS l0/9-l07.

Specific Restrictions: Cannot transfer the collected taxes or any accrued interest into any other fund or use for any other purpose. However, if the board expressly declares the interest on the fund is surplus, such excess interest only may be transferred to the general fund. Some libraries budget and levy separately for Workmen’s Compensation and Unemployment Compensation. This method is not illegal, however, all derive their legal authority from the same statute, and the separate accounting is not required.

Audit Fund Taxes

Purpose: To pay all expenses encountered to complete the annual audit.

Limitations: There is an annual tax limit of .005% of the value of all taxable property in the District. This is in addition to the General Fund taxes and is not subject to any referendum.

Citation of Authority: 50 ILCS 3l0/9.

Specific Restrictions: Cannot transfer the collected taxes or accrued interest into any other fund or use for any other purpose except the audit or certain limited bookkeeping expenses which facilitate or reduce the cost of the audit.

Municipal Retirement Fund Taxes

Purpose: To cover the library’s costs of participating in the municipal retirement fund designed to provide annuities and benefits to library employees.

Limitations: The tax may not exceed the amount appropriated for contributions to the fund. Revenue under this tax may only be used for the referenced purposes.

Citation of Authority: 40 ILCS 5/7-l0l et seq.; 40 ILCS 5/22-40l et seq.

Specific Restrictions: Cannot transfer the collected taxes or any acquired interest thereon into any other fund or use for any other purpose.

Medicare Fund Taxes

Purpose: To meet the demands of the federal medicare program.

Limitations: May increase tax levy above the amount authorized when such is necessary to meet the cost of the federal program.

Citation of Authority: 40 ILCS 5/2l-l09; 40 ILCS 5/2l-ll0.l.

Specific Restrictions: Cannot transfer the collected taxes or any accrued interest thereon into any other fund or use for any other purpose except the Social Security Fund.

Social Security Fund Taxes

Purpose: To cover the requirements placed upon the library due to the federal social security insurance program.

Limitations: The tax is based on the actual cost incurred by the library and is not subject to any referendum. The library is allowed to tax separately for these actual costs beyond its authorized tax ceiling.

Citation of Authority: 40 ILCS 5/2l-110.

Specific Restrictions: Cannot transfer the collected taxes or any accrued interest thereon into any other fund or use for any other purpose except the Medicare Fund.

Library Building (Referendum)

Purpose: To rebuild or restore a library building which was destroyed or seriously impaired.

Limitations: Must adopt an ordinance, and such ordinance must be submitted to and approved by the voters. The annual tax may not exceed .08333% of the assessed value on all taxable property in the district and cannot last more than 10 successive years or exceed the difference between the actual cost of reconstruction of the building and insurance benefits paid to the board as a result of the loss.

Citation of Authority: 75 ILCS l6/35-30.

Specific Restrictions: The tax may not be effective until the Library presents the issue to the voters for their approval in a “front door referendum.”

Borrowings

Anticipation of Revenue Notes

Purpose: To provide finances to pay obligations, whether general expenses or otherwise, whether due or to accrue within the fiscal year.

Limitations: Must state the purpose of the note, the estimated revenues, and the aggregate appropriations for such purpose. The notes are due on a date certain not more than 12 months from date of issue. A copy of the resolution must be filed with the county treasurer.

Citation of Authority: 50 ILCS 425/l et seq.

Specific Restrictions: Whatever the purchaser of the notes requires, which is typically certified copies of the budget and appropriation ordinance, certified copies of the tax levy, truth in taxation affidavit, County Clerk’s Equalized Assessed Valuation Certificate and the Opinion Letter of the Library Attorney or Bond Counsel, a certified copy of the Note ordinance, and the Note.

Bonds

Purpose: To assist libraries to build on a new site, repair, remodel, or improve an existing library building, or build an addition, purchase necessary equipment, books, or films.

Limitations: The board must hold a public meeting to discuss the financing of the proposed project, and notice of this meeting must be published. The library district may not issue bonds or levy a special tax unless the bonds and the tax have been approved by the voters of the district at a general or special election. The maximum term of the bond cannot exceed 20 years, and the interest rate may not be greater than permitted by statute.

Citation of Authority: 75 ILCS l6/40-l0 et seq.; 75 ILCS 5/5-l et seq.; 75 ILCS 35/1.

Specific Restrictions: The bond ordinance must make provisions for a special annual tax on all taxable property within the district, which is sufficient to pay the principal and interest on the bonds as they mature.

Local Library Act: Library materials purchased within five years from the date the building is purchased or is constructed may be acquired through the Bond funds. However, if the corporate authority approves of the project but not the bond issue, the cost may be absorbed in the annual appropriation and tax levy. 75 ILCS 5/5-1 et seq.

Borrowing of Money (Supported by Special Tax)

Purpose: To provide and secure the necessary money to do any and all things libraries are authorized to do.

Limitations: The amount cannot exceed 75% of the value of purchase or construction. The voters must approve the decision to borrow monies and the subsequent special tax needed to repay the loan. This tax shall not exceed .0833% of the value of all taxable property and shall be in addition to the otherwise authorized taxes. The tax must end when the loan is repaid.

Citation of Authority: 75 ILCS l6/40-20 et seq.; 75 ILCS 5/5-6.

Specific Restrictions: Whatever the creditor may place on the library, which typically includes certified copies of the borrowing ordinance, certified copies of the referendum canvas, County Clerk’s Equalized Assessed Valuation Certificate, and the Opinion Letter of the Library Bond Counsel or Library Attorney.

Township Libraries: Money may be borrowed only for the purpose to erect, repair, or improve library buildings or purchasing sites for library buildings. 75 ILCS 35/1.

Full Faith and Credit Tax Anticipation Notes

Purpose: To provide a means for library districts to finance anticipated cash flow deficits.

Limitations: No note shall be issued during any fiscal year in which tax anticipation warrants remain outstanding. The notes shall mature on a date certain within two years from the date issued. The amount of the note may not exceed 85% of the taxes levied for a specific fund.

Citation of Authority: 50 ILCS 420/4.

Specific Restrictions: Whatever the Purchaser may place on the library, which typically includes certified copies of the budget and appropriation ordinance, certified copies of the tax levy, truth in taxation affidavit, County Clerk’s Equalized Assessed Valuation Certificate and the Opinion Letter of the Library Bond Counsel or Library Attorney, a certified copy of the Note Ordinance, and the Note.

Tax Anticipation Warrants

Purpose: To defray necessary library expenses when both general and working cash funds are depleted.

Limitations: The anticipation warrants cannot exceed 85% of the total amount of tax so levied and must be repaid from the first taxes received. The warrants bear an interest rate not exceeding that established by statute.

Citation of Authority: 75 ILCS l6/30-l05; 50 ILCS 430/2.

Specific Restrictions: Whatever the bank/buyer requires; typically certified copies of the budget and appropriation ordinance, certified copies of the tax levy, truth in taxation affidavit, County Clerk’s Equalized Assessed Valuation Certificate and the Opinion Letter of the Library Bond Counsel or Library Attorney, a certified copy of the Warrant Ordinance, and the Warrant.

Investment of Funds

50 ILCS 340/1 specifically authorizes certain local governmental units, including libraries, upon adoption of a resolution by the board, to invest in:

a.	their own tax anticipation warrants;
b.	their own general obligation bonds;
c.	bonds or other interest-bearing obligations of the United States or the State of Illinois;
d.	savings accounts and certificates of deposit of any state or national bank, provided such accounts and certificates are fully insured by the FDIC (meaning the amount of the account or certificate cannot exceed applicable insurance limits); and
e.	treasury notes and other securities issued by agencies of the United States.

All interest paid upon such investments, all monies paid for their redemption, and all monies received upon resale are to be credited to the funds originally used to purchase them.

Under 50 ILCS 340/2, any warrants purchased under the authority granted by 50 ILCS 340/1 may, by ordinance or resolution of the board, be either resold or canceled and reissued in the same principal amount, in either case at the same or an adjusted rate of interest. Proceeds from such resale or reissuance are to be applied first to repayment of the funds used to purchase the warrants, with the balance to revert to the fund for which the tax anticipation warrants were originally issued.

30 ILCS 235/2; 235/3; 235/4; and 235/5 authorize investment by local governments, including libraries, in:

a.	bonds, notes, certificates or indebtedness, treasury bills, or other securities guaranteed by the full faith and credit of the United States government;
b.	interest-bearing savings accounts, certificates of deposit or time deposit, or other investments constituting direct obligations of any bank, as defined by the Illinois Banking Act;
c.	short-term obligations of corporations organized in the United States with assets exceeding $500 million if: 1. such obligations are rated at the time of purchase within the three highest classifications established by at least two standard rating services and which mature not later than 180 days from the date of purchase; and 2. such purchases do not exceed 10% of the corporations’ outstanding obligations;
d.	in money market mutual funds registered under the Investment Company Act of 1940, provided the portfolio is limited to obligations specified in the statute and to agreements to repurchase such obligations.

Investments may be made only in banks which are insured by the FDIC. Any public agency may invest any public funds in short-term discount obligations of the Federal National Mortgage Association or in shares or other forms of securities issuable by savings and loan associations. Investments may be made only in those savings and loan associations, the shares or certificates of which are insured by the FSLIC. Any such securities may be purchased at the offering or market price thereof at the time of such purchase. Such securities so purchased shall mature or be redeemable on a date or dates prior to the time when, in the judgment of the governing authority, the public funds so invested will be required for expenditure. The expressed judgment of any such governing authority as to when public funds will be required for expenditure or be redeemable is final and conclusive.

Public agencies may invest in the Public Treasurer’s Investment Pool or in a fund managed, operated, and administered by a bank. Public agencies may also invest in repurchase agreements of government securities, subject to the Government Securities Act.

75 ILCS l6/35-25(d) and 30 ILCS 235/6 provide that no bank or savings and loan shall receive public funds unless it has complied with the requirements established in the Act. Briefly stated, the requirements include the furnishing of the last two sworn statements of resources and liabilities which the institution has filed (and is required to file) with its respective regulatory agency. Additionally, the funds not insured (i.e., typically greater than $l00,000) or collateralized by a federal agency shall not exceed 75% of a bank’s capital stock and surplus or 75% of a savings and loan’s net worth.

Glossary

Fund Accounting

Governmental accounting systems should be organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

Governmental Funds¹

¹ Illinois State Public Library Accounting Workshop, 7-8, 1991.

Backdoor Referendum

Means that the law requires a Library District which enacts a specific type of ordinance to publish notice of the ordinance to the citizens of the district who may then follow certain procedures such as passing and filing a petition with a specified number of signatures of voters to have the issue placed on the ballot. If no referendum petition with the required number of signatures is filed within a specified period of time, the library has the authority to do the act, e.g., to levy the additional tax or complete the annexation. If it is filed, the Board may rescind the act or put the matter to referendum.

Frontdoor Referendum

Means that the law requires that the Library ordinance place the action, e.g., a change in tax rate or the addition of a new tax category, to the voters for their approval in the first instance. Without voter approval, the library does not have the authority to do the act.

Corporate Taxes

Those monies collected for basic corporate needs and necessities, which can then be spent for any proper library purpose.

Special Taxes

Those monies collected for particular projects or needs pursuant to special statutory authority, such as to rebuild or restore library buildings, to repay borrowed monies, for IMRF payment, Social Security, and the like.

Equalized Assessed Valuation

Generally, the equalized rate is 33 1/3 percent of the fair cash market value as appraised, except for farm acreage and buildings, certain pollution equipment, and special tax zones. The General Assembly has defined 33 1/3 percent in terms of assessment-to-sales ratio studies for the three most recent years preceding the assessment date. If the board’s assessments are too far above or below, a multiplier is applied to “equalize” assessments among townships and among counties. This effectuates the constitutional mandate requiring uniformity in levels of taxation. The assessment rate then provides the sum total of value of district property from which the revenue for the district is determined. Farm property is assessed by use of a “productivity index” computed for each Illinois county as a dollar value per acre. 35 ILCS 205/146.

Library Funds

75 ILCS l6/35-25 adds specific labels to be used for the annual public library tax (i.e., Library Fund), the working cash fund tax proceeds (i.e., Working Cash Fund), and the annual restoration fund tax proceeds (i.e., Restoration Fund). All other tax proceeds are to be kept in special funds as listed above (e.g., Municipal Retirement Fund, Social Security Fund, Audit Fund).

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