$6 million deficit has Arlington Hts. considering sales tax increase

Facing a budget deficit of $6 million, the Arlington Heights village board will consider raising the sales tax rate by one-quarter of 1 percent at its meeting Monday, Sept. 21.

That would bring the total sales tax for general goods in the village to 10 percent, including the taxes charged by the state and Cook County, said Tom Kuehne, finance director for the village.

Automobiles, food and drugs are not included in the home rule sales tax.

The recommendation to raise the tax was made earlier this week when the board reviewed a status report on the $62 million general fund budget for the fiscal year that began May 1.

The proposed sales tax hike would begin in January, and is expected to raise $500,000 from Jan. 1 to April 30.

The report indicated the village would have to continue to seach for more revenue and cuts in expenses. This might include a property tax increase, which was kept to nearly 0 by the board last year.

In the last quarter of the last fiscal year and so far this fiscal year, tax revenues are below expectations. The village's projected deficit for the current fiscal year has grown from a previously estimated $2 million to a current estimate of just over $6 million.

In a survey of 11 neighboring communities, Arlington Heights was the only municipality charging three-quarters of a percent sales tax. Others were at the 1 percent level.

Therefore, implementing the added tax will not place local businesses and consumers at a competitive disadvantage, Village Manger Bill Dixon, said in a news release posted on the village Web site.

Thomas W. Hayes, who is mayor pro-tem while Villge President Arlene Mulder is on vacation, said the board always tries to avoid doing anything that would drive people to shop elsewhere.

"It's a relatively small increase that will not force any of our residents or customers of our local businesses to go elsewhere," said Hayes.

He added that residents who live in northern Arlington Heights near Lake County -- where the sales taxes are lower -- will probably cross into Lake County no matter what the village board does.

Jon S. Ridler, executive director of the Arlington Heights Chamber of Commerce, could not be reached for comment.

However, Ridler sent the village's news release to the group's board members with the note, "A ... part that has me concerned is the statement that they are looking at new revenue sources! This puts our revenue sources in more jeopardy for 2010."

If the village board approves the recommendation Monday, the new rate will become effective Jan. 1. An increase approved after Oct. 1 wouldn't take effect until July 1, 2010.

For the fiscal year beginning May 1, 2010, the new revenue source could add $1.5 million.

The general fund is the village's largest fund and is dependent on revenues such as sales tax and income tax, which have dramatically decreased in the recession, said village staff. The general fund covers basic services, including police, fire, health, and public works such as snow removal, the manager said.

The village eliminated 10 positions effective May 1. Since then, it has not filled eight open positions, froze salaries for the village manager and department directors and made other cutbacks, said Dixon.

A larger share of the village's upcoming property tax levy will go to police and fire pensions, Kuehne said in the report, and the board decided last year to keep the property tax increase close to 0. Those two items decreased the levy for the general fund by almost $800,000 alone.

The general fund's reserves are predicted to drop from $19 million at the beginning of Fiscal year 2010 to $13 million by next spring.

The board also will need to raise the 2009 property tax levy by $1.1 million to keep nine firefighter positions, currently funded by a grant, the report said.

Otherwise the positions need to be eliminated by Nov. 1 and $680,000 of the federal grant returned.

The board must propose its 2009 property tax levy by Dec. 7, and will discuss it this month and next. The staff will also present alternatives for cutting wages, services and staff in the next few months.