Naperville considers a sales tax

Naperville may implement a sales tax and raise its gas tax to help shore up its budget.

The city will likely keep the property tax rate flat next year, though, and may lower the taxes on food and beverages at restaurants and bars.

The city is trying to fill a $14.1 million hole comprising a $5 million shortfall in general fund revenue, a $1 million cushion, a $6.6 million shortfall for road maintenance and $1.5 million to cover the proposed elimination of the roadway impact fee.

City Manager Doug Krieger said the cuts the city will have to make will be more painful - and more noticeable - to residents than the $11 million in cuts it made last year.

"The easy stuff is done," he said. "The kind-of-hard stuff is done and we are kind of down to the much-more-difficult decisions of evaluating trading dollars and service levels."

But cuts alone won't be enough, so the city is looking to generate more revenue.

City staff recommends creating a 0.5 percent sales tax that would generate $8 million annually. Automobiles and food purchased in a grocery store would be exempt.

Krieger said staff likes the sales tax because a chunk of the money would come from residents of other towns who shop in Naperville.

If Naperville creates a sales tax, it also will have to lower its downtown food and beverage tax by the same percentage, according to its ordinances. That means a 0.5 percent sales tax would eliminate the current 0.5 percent downtown food and beverage tax that helps fund parking projects.

Staff also would like to reduce the citywide food and beverage tax to 0.75 percent, down from 1 percent. This tax funds Special Events and Cultural Amenities grants, but the revenue it generates has grown beyond expectations.

The reduction would mean about $725,000 less available for the cultural grants.

Councilmen Doug Krause and Richard Furstenau suggested the city instead keep the tax the same and use some of the revenue for the general fund or capital projects. But councilmen Grant Wehrli and Jim Boyajian balked at the idea, saying it would be disingenuous.

Several councilmen said they would support increasing the city's motor fuel tax several pennies per gallon to shore up the budget hole. The city's fuel tax is currently two cents.

Councilman Robert Fieseler said it makes sense people who use their cars would pay the gas tax that will, in turn, help fund road maintenance.

The property tax rate is one area the city hopes to leave untouched, keeping a flat rate of 71.67 cents per $100 of equalized assessed value. However, people whose property values increase will still pay more in taxes to the city.

Budget talks continue at 5 p.m. today, Sept. 29, at the municipal center, 400 S. Eagle St.

Karen DeAngelis, director of finance, did have good news. The city has come up with $1.5 million of the $2 million it needs for the current year.