Lake Zurich residents and businesses soon will return to paying a local utility tax that village officials say is needed to help close a projected $1.6 million budget deficit.
Officials cite escalating public employee pension payments and increasing health insurance costs as the principal factors for the village's general fund deficit.
Village board members at a meeting Monday night voted 4-2 in favor of applying the 2.5 percent tax on monthly electric and natural gas bills starting May 1. The monthly tax will double to 5 percent on Nov. 1.
An average residential customer likely would pay about an extra $48 annually for gas and electricity when the tax reaches its maximum 5 percent, according to the village.
Lake Zurich had a 2.5 percent utility tax that expired by ordinance in May 2012. Illinois law allows non-home-rule communities such as Lake Zurich to impose a maximum 5 percent tax on gas and electric bills.
It's projected the utility tax will generate about $900,000 in new revenue for Lake Zurich in its first year and $1.2 million after a full budget season at 5 percent. Research by Lake Zurich's staff shows at least 40 suburbs have a municipal utility tax.
Mayor Thomas Poynton, who voted for the utility tax, said the village needs revenue to pay for services he often hears demanded by residents. He lacks money due to "a significant legacy pension nut" the village must get past.
"Why can't I have a program at the parks department? Why can't the police do this? Why doesn't the building and zoning department do that?" Poynton said in relaying some of the resident feedback.
Spending cuts of up to $700,000, combined with the $900,000 in utility tax income, would combine to plug the projected $1.6 million general fund deficit, according to Lake Zurich budget documents.
Lake Zurich's annual public employee pension costs have gone from $1 million in 2009 to the current $3.86 million -- what Village Manager Jason Slowinski labeled in a memo as "a whopping" 281 percent hike.
Moreover, insurance industry uncertainty due to the Affordable Care Act was cited for leading the village to budget 20 percent more for its share of employee health care premiums in 2014-15.
In July 2011, Lake Zurich started a half percent local sales tax after voters approved its creation. Village leaders at the time were bullish on what the revenue would do for the budget, saying the extra money would be used on needs such as street resurfacing and new public safety vehicles.
Also Monday, trustees approved the 2014-15 budget that starts May 1. The $50.2 million budget is up nearly $2.5 million from the current document that runs through April 30.