Taxes on phones and hotel/motel stays in Naperville are on the rise this year as the city looks to avoid a $2.1 million property tax increase.
The telecommunications tax charged on cellphone and landlines will increase 1 percentage point to 6 percent effective July 1, and the hotel/motel tax will increase 1.1 percentage points to 5.5 percent effective April 1. The city also will expand the hotel/motel tax to be charged for stays booked through online rental services such as Airbnb.
The two tax increases are expected to generate an additional $500,000 this year.
The new revenue will help the city avoid part of a $2.1 million property tax increase that was approved in December when the council set its levy at $48.6 million.
Changes the panel could approve before April -- the deadline to submit for a levy abatement through DuPage and Will counties -- could further eat into the property tax increase or erase it altogether, city officials say.
Finance Director Rachel Mayer and City Manager Doug Krieger have proposed measures that could negate the rest of the property tax increase by borrowing money at a lower interest rate than anticipated, delaying all storm sewer lining scheduled for this year and increasing the home-rule sales tax by a quarter-percentage point to 0.75 percent.
The council considered the home-rule sales tax increase Tuesday but did not take a vote. A vote is expected during the next meeting Feb. 20.
Lined up in opposition to the sales tax increase, which could bring Naperville's total sales tax rate to 7.75 percent, is the Naperville Area Chamber of Commerce.
Colin Dalough, the chamber's director of government affairs and business development, said the group "philosophically opposes" a sales tax increase that could make local businesses less desirable.
"If we're not competitive on price, taxes included, customers will go elsewhere," Dalough said.
The home-rule sales tax of 0.5 percent, which went into effect Jan. 1, 2016, is exceeding revenue projections, Mayer said. The state estimated the tax would collect $8.8 million a year, and it is collecting about $9.1 million. There is no evidence about whether the higher rate is deterring any shoppers, she said.
If approved later this month, the sales tax increase could go into effect July 1. The council is revisiting the issue after voting it down in September, before a full review of planned spending had been completed.
In December, council member Kevin Coyne asked city staff members to find ways to get around the property tax increase, saying he was "very confident there are still things to cut or other revenue levers that can be pulled."
If the council approves enough changes to erase the property tax increase, 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 flat with last year's average, Mayer said. Without any levy abatement, the average homeowner would owe $848.