A study released by a government watchdog group in Chicago last week concludes that a property tax cap that went into effect in five suburban Chicago counties last October will have a significant impact on property tax levels in that region.

The Civic Federation also found that the reduced revenue most governments will receive because of the tax cap will force them to seek "substantial economies," such as pursuing service cuts, seeking other local, state, or federal revenue sources, and considering consolidation of local governments. The cap, which was passed by the Illinois General Assembly last year, limits annual increases in property tax collections by most local governments in the counties to 5% or the rate of inflation, whichever is less.

The group based its findings on a study that applies the cap to previous property tax data.

Using data from 1984 to 1989, the Civic Federation found that local governments in the five counties would have lost more than $589 million over the five-year period if the cap had been in effect.

Rating agencies have raised concerns that the tax cap could harm the creditworthiness of some affected governments.

The study also examines the possibility that property tax caps could be extended to Chicago and other governments in Cook County this year by the legislature.

Plans to extend the cap are being urged by Republicans in the House and Senate.

Meanwhile, using the same five-year period, the study finds that the 332 governmental units in Cook County would have lost about $1.6 billion in property taxes if the cap had been in place during that time.

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