Phone, hotel taxes likely to rise in Naperville
Two taxes charged in Naperville might be on the rise to help prevent a $2.1 million property tax increase from going into effect.
The city council on Tuesday took a first look at proposals to increase both the telecommunications tax on cellphones and landlines and the hotel/motel tax on renting rooms.
If approved, the telecommunications tax would increase from 5 percent to 6 percent and the hotel/motel tax would rise from 4.4 percent to 5.5 percent. The hotel/motel tax also would be expanded to cover room rentals through online services such as Airbnb.
The increases could shift the cost burden from home and property owners to phone users and visitors.
"From my perspective, especially with the new federal tax law that caps state and local taxes at a $10,000 deduction, it makes a lot of sense to look for alternative revenue streams other than property taxes," Mayor Steve Chirico said. "I think these two particular taxes are good ones to look at."
Implementing the tax increases as soon as possible after potential approval Feb. 6 could bring in $500,000 this year. That would leave City Manager Doug Krieger with an additional $1.6 million to raise or cut to meet the council's $2.1 million goal.
Filling that gap would prevent the owner of a $395,000 house - the average in the city - from owing $39 more on the city's share of the property tax bill. Instead, it would result in a $1 decrease.
The city already has authorized the increased spending as part of its $48.6 million tax levy and $443.6 million budget.
At this point, Chirico said, it's a matter of where the money comes from.
Krieger has until early April to find cuts or revenue boosts and submit paperwork to DuPage and Will counties to abate a portion of the property tax levy before bills go out this summer.
Council members gave preliminary approval to increasing the telecommunications tax without discussion but spent a few minutes asking how an increase to the hotel/motel tax would affect incentives for new hotels or the online rental business.
Finance Director Rachel Mayer said an increased hotel/motel sales tax rate would allow hotels with agreements to recoup taxes to be paid back faster.
But she said projections still show the agreements reaching their expiration deadlines, typically 20 years, before paying out the maximum in rebates, such as a potential of $7.5 million to the Embassy Suites that opened three years ago.
The city would find a mechanism to track online room rental activity in order to tax it, she said, although it is unknown at this point how many properties are rented through services such as Airbnb or HomeAway.
A third tax remains on the city's wish list but is harder to implement: collecting local sales taxes on online purchases made from sellers with no physical location in Naperville.
City Attorney Michael DiSanto said he hasn't heard of any cities using home-rule authority to begin collecting online sales taxes from all sellers, but he will look into it.
Krieger said the city loses $3 million a year in taxes not charged on online sales.