Could higher sales tax prevent property tax increase in Naperville?
Naperville chose not to raise its home-rule sales tax last fall, but the idea is coming up again and the result could be different.
Mayor Steve Chirico said council members who hesitated to raise the tax from 0.5 percent now might be ready to authorize the increase because the city completed a review of spending, made two rounds of cuts and still had to raise property taxes.
The increase of roughly $38 for the average homeowner could be negated if the council finds $2.1 million in a combination of cuts and revenue increases by early April. That would allow time to file for an abatement to the $48.6 million levy approved in December.
The abatement would mean the owner of a $395,000 house, the average in the city, would owe $810 in property taxes to the city this year, an amount roughly flat with last year's bill, according to Finance Director Rachel Mayer.
Chirico said "most of the council agrees" the home-rule sales tax is a better place to raise revenue than the property tax bill. He said that's especially true now that the city has cut $14 million in personnel, equipment, maintenance, technology, consulting, capital projects, contract services and supplies.
"It was a timing issue," Chirico said about the 5-4 vote in September not to raise the sales tax to 1 percent. "That's why it failed originally. Not necessarily that it was a bad strategy."
Now city staff members are proposing an increase of 0.25 percentage point to bring the total home-rule sales tax to 0.75 percent effective July 1. That would make the total sales tax shoppers pay in Naperville, also factoring in other governing bodies' sales taxes, to 7.75 percent.
If approved, Mayer estimates the increase would collect $1.1 million more this year.
The Naperville Area Chamber of Commerce opposed the sales tax increase in the fall and plans to do so again during a meeting at 7 p.m. Tuesday at the municipal center at 400 S. Eagle St.
"Philosophically we oppose a raise to the home-rule sales tax that would make our businesses less competitive," said Colin Dalough, director of government affairs and business development. "We think that making our businesses less competitive puts downward pressure on growth and does not give us the opportunity to grow our economy to the level that it could grow."
If sellers in Naperville were required to charge more in local sales taxes, Dalough said they would lose more ground to online sellers in other states, who aren't required to charge sales taxes when customers here make purchases.
"It makes it more difficult for our local businesses to compete with what is increasingly an online sales environment," he said.
The sales tax increase is set to be considered as part of a strategy to find the $2.1 million needed to keep property taxes flat. The proposal also includes taking on debt at a lower interest rate than anticipated, raising the telecommunications and hotel/motel taxes, and delaying storm sewer lining for at least a year.
The council could approve the telecommunications and hotel/motel tax increases, which are predicted to bring in $500,000 this year, during Tuesday's meeting. Chirico said the home-rule sales tax is expected to be up for final approval at a later date.