Prospect Heights to impose 2-cents-per-gallon gas tax to adapt to state funding losses

Prospect Heights city council members unanimously approved a 2-cents-per-gallon gasoline tax that takes effect Jan. 1 to partly counteract the state's reduction of the local share of Illinois income tax revenue.

But one gas station owner said it's naive to think a price increase won't affect sales so close to neighboring towns and Lake County, especially considering the 90% reduction in cigarette sales he's seen as Cook County taxes on those have risen.

"The same thing is going to happen with the fuel," said Pete Schuetz, owner of the Mobil station at Wolf and Palatine roads. "That's really going to hurt all the stations. I think the people making the decision don't understand it makes a big difference in our business."

Council members were aware of a letter Schuetz had sent but considered a 2-cents-per-gallon tax a reasonable compromise to address the reduction in state income tax revenue given to local governments to serve residents.

The local share of what's called the local government distributive fund had been set at 10% in 1969 and stayed that way until 2011, when it dropped to 6%. There have been increases and decreases since, and proposals as recently as this year to restore some of what was cut, but the local share hasn't approached the original 10% and today still stands at about 6%.

The state in 2020 allowed non-home-rule communities like Prospect Heights to charge a 1-cent, 2-cent or 3-cent-per-gallon municipal fuel tax.

Ward 2 Council Member Patrick Ludvigsen suggested it was a way for the state to allow smaller municipalities to adapt to its own reduction to their funding.

"So now we have to be the bad guy, even though they took our money and have offered us this way to recoup it," he said. "I don't like this, but this is the hand we're dealt."

An analysis based on how much money the tax already is generating for another, larger municipality with eight gas stations concluded that Prospect Heights' five gas stations could generate roughly $60,000 for the city annually.

The tax is tied only to the amount of gas purchased, not its fluctuating price.

Ward 3 Council Member Wendy Morgan-Adams said the tax is a small way the city can adapt to the loss of hundreds of thousands of dollars due to the reduction in the local distributive fund.

At 2 cents per gallon, she said it would likely mean less than 50 cents per fill-up for most people and would be provided by nonresidents as well.

Fellow council members Michelle Cameron, Danielle Dash and acting Mayor Matthew Dolick agreed 2 cents was the right amount.

"It's always challenging for a non-home-rule city to get any additional revenue and I think that would help," Dolick said.

Though the council made its original decision on Sept. 28, the vote had to be redone Oct. 24 due to minor changes in the Illinois Department of Revenue's requirement of certain information.

Village Administrator Joe Wade said Schuetz was the only gas station owner to respond to the city's correspondence about the tax.

"I was absolutely floored when I found out I was the only one who'd brought it up," Schuetz said of his neighboring gas station owners, both independent and corporate. "I guarantee you they care."