Sales tax compromise brewing before Naperville vote

 
 
Updated 9/15/2015 9:46 AM

Naperville City Council members are working to come to a consensus before a vote Tuesday on whether to add a new sales tax of up to 0.5 percent.

The proposal on the table calls for a 0.5 percent permanent sales tax to be added beginning Jan. 1, 2016, as part of a plan to decrease the city's $120 million in debt and increase its reserves, which are about $18 million below required levels. The city does not currently levy a local sales tax.

 

But some council members, including Kevin Coyne, opposed the 0.5 percent tax as too high during the panel's last meeting, saying they would prefer a 0.25 percent tax.

So Coyne, Chirico and city staff members are working on one potential compromise that could establish a sunset date for the new sales tax and couple it with a property tax cut.

"I'm very hesitant to adopt a home-rule sales tax without other options being explored and vetted more fully," Coyne said.

Chirico has advocated taking action now to improve the city's financial situation and protect its AAA bond rating.

But he said council members such as Coyne have brought up "very legitimate concerns" about the proposed 0.5 percent sales tax so he's willing to discuss any reasonable proposal.

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Coyne said he's still formulating details of his compromise idea, but here are the basics:

Each quarter point increase in the sales tax rate is estimated to generate $4.25 million a year. When a 0.25 percent tax imposed by the DuPage Water Commission expires at the end of June 2016, that would negate the net impact of half of the city's proposed increase, Coyne said. The city could further lessen the effect on residents by cutting property taxes by half of the amount the higher tax is expected to bring in, or $2,125,000.

"That would be a win for residents and still make a meaningful contribution toward our financial issues," Coyne said. "We're getting almost to a wash for what the real dollar change would be for our residents."

Chirico said he expects council members to consider this compromise idea and others before taking a vote on the new sales tax during a meeting at 7 p.m. Tuesday in the municipal center at 400 S. Eagle St.

Also up for consideration will be a proposed garbage fee increase of $10.35 a month to generate $5 million a year and help fill an estimated $6.8 million budget gap.

                                                                                                                                                                                                                       
 

Options include charging each of the 41,500 residential units that receive garbage service the increased fee on monthly utility bills or spreading out the $5 million total cost as a property tax increase so each owner would face a different charge depending on the value of his home or building. A vote on the garbage fee also is expected Tuesday.

Before the council's votes, the financial advisory board will meet today to review three financial principles used to formulate the proposed sales tax and garbage fee increases. The principles, approved in August, include commitments to:

• Passing a structurally balanced budget each year.

• Continuously improving delivery of necessary, cost-effective services.

• Reducing debt by 25 percent and increasing reserves to 25 percent of annual operating expenses in the next eight years.

The first two principles have broad support, but Chirico said the goals within the third might have to be adjusted based on the reality of how much money the city could bring in through increases in the garbage fee and sales tax.

"I am open ... to modify it if needed so we have the funding to actually successfully meet the objectives," Chirico said.

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