An ordinance passed by the Urbana City Council on Tuesday leaves open the possibility to increase property taxes by nearly .05 percentage points. The possible tax hike would compensate for the budget deficit created by the tax exemption of two major hospitals.

The ordinance set the levy amount at $7.3 million. This does not necessarily mean that Urbana will collect the full amount; it only ensures that the city can tax up to that amount, according to an Urbana City Council Comptroller Memo. The actual levy rates will be set once the final property values have been established.

If the city does decide to tax to the full amount, however, homeowners could find themselves paying a property tax of 1.4 percent.

Comparatively, last year’s property tax rate was 1.355 percent.

“If the rates stay the same (as last year), the city portion of the property taxes for a home valued at $150,000 would be $596,” said Urbana’s interim comptroller Rich Hentschel. “The city’s portion is only 15 percent of an average tax bill.”

According to a council memo, Carle Hospital pulled more than $1 million from the tax rolls by acquiring tax-exempt status for the 2013 fiscal year.

If Presence Covenant Medical Center follows suit, the city would lose more than $67,000 in revenue, further decreasing the pool of revenue the city can draw from.

The possibility that property taxes may increase has concerned citizens who had previously been told that the increased sales tax would keep property taxes from rising.

“Of course I’m concerned,” Mike Madigan, Ward 6, said. He said he would oppose a property tax rate increase if it came to council, and even indicated that he wasn’t happy with the current tax rate.

Urbana Mayor Laurel Prussing explained that the levy amount does not necessarily ensure a tax rate increase. “We normally have a higher levy than what we expect to get because we do not know the assessed value at the first step in this process,” she said. “We adjust (the rate) once we know what (the accessed value) is.”

Eli can be reached at [email protected].