Drop in sales taxes brings Schaumburg hard choices

The health of today's retail economy affects more than just the entrepreneurs and workers who earn their livings by the sale of merchandise.

Also closely watching the rise and fall of consumer behavior are municipalities like Schaumburg, which have tied their own fortunes to those of the marketplace.

With the luxury of being Illinois' second largest economy after Chicago, the village has foregone such typical revenue generators as a property tax to rely almost exclusively on sales taxes and other consumer-generated income.

But what seemed like the most resident-friendly policy in better times is now causing a budget crunch for Schaumburg that's putting some difficult decisions on the horizon.

Schaumburg Finance Director Doug Ellsworth said the village has seen a significant drop in sales taxes, averaging about 3 percent per year or 15 percent overall since 2006.

This comes despite store occupancy and shopper traffic being relatively good for an economy like this.

"Foot traffic at the malls is only part of the story," Ellsworth said. "Retailers are discounting things so much."

Community Development Director Christopher Huff agreed that's the heart of the problem. Other than car dealerships, which truly are selling less product than they did - the Cash for Clunkers program notwithstanding - most other retailers are simply charging less for what they manage to sell, he said.

So far, the village has been able to avoid laying off workers, but has had to cut some services considered noncritical like brush pickup and community education programs. And if the economy continues to sputter, the village will have to look at further service cuts, new revenue sources or both, Village Manager Ken Fritz said.

Fritz believes it's not a question of Schaumburg having painted itself into a corner. He said the village has more untapped options, ones that other cash-strapped suburbs have already exhausted.

"The (village) board has a number of options it can consider," he said.

Mayor Al Larson hasn't given up on the possibility of economic recovery.

"I think the critical year is 2010, but there are things that can happen between now and then," Larson said.

He also said Schaumburg would be in greater trouble if it relied entirely on retail, but that it's achieved a good mixture of restaurants and entertainment as well.

Fritz noted that Streets of Woodfield in particular has evolved into something of an entertainment center. An L.A. Boxing training facility will soon fill a long-vacant restaurant space next to the movie theaters.

Still, Ellsworth cautioned against thinking an economic recovery will spell immediate relief for village budget woes.

The downturn may have had a permanent impact on people's spending habits, he said. And employment - now above 10 percent nationwide, the highest since 1982 - is usually the last thing to recover in a poor economy and is what's most responsible for driving retail sales.

"The one good thing we have going for us is that retail attracts retail," Ellsworth said.

Fritz also believes Schaumburg has handled everything within its control just right throughout the recession. "I think we're doing good," he said, "but the lack of consumer spending has really hurt us."