Libertyville weathering sales tax losses, with help from federal relief bills

Libertyville's sales tax revenue last year fell nearly $923,000 from 2019, but federal relief and other measures tempered the loss, village officials say.

And with a second round of federal aid expected, a new measure regarding online sales taxes and the wary expectation of a rebound, Libertyville officials hope a financial corner has been turned.

"There obviously are clear COVID impacts, (but) I think there's a lot of potential ahead," Finance Director Nick Mostardo Mostardo said of the sales tax hit.

The village originally anticipated having to draw $2 million from reserves for the current budget year ending April 30 but now expects it to be just $121,803, he said.

Next year, the budgeted drawdown is estimated at $1.8 million. But that is expected to be offset in part with aid from President Joe Biden's American Rescue Plan.

According to village figures, sales tax revenue dropped nearly 12% in 2020, from about $7.8 million to $6.9 million. Restaurant-related revenue dipped 25%. Sales taxes collected from automotive and gas sales - which accounts for 56% of the total - dropped 13%.

The amended 2020-21 general fund budget, which pays for day-to-day expenses, is $28.8 million. It was scaled back from $31.1 million in October to reflect COVID-19 impacts.

Mostardo said $1 million from the federal CARES Act helped offset the sales tax losses.

"It's kind of a wash. That helped quite a bit," he said this week during an update for the village's economic development commission.

Another key was the village's voter-approved non-home rule sales tax, which went into effect July 1.

That tax, which replaced a dining tax, was enacted to provide a reliable flow of money for local roadwork and other projects.

For the six months of 2020 it was in place, the non-home rule sales tax generated $1.24 million. The money has been targeted for local roadwork, a park project and improvements to public building and information technology.

"This has been kind of a lifesaver for us," Mostardo said.

Another pending, but so far unknown, source of revenue will be the village share of online sales taxes.

Beginning Jan. 1, online purchases previously subject to a state use tax of 6.25% instead are subject to the local sales tax rate, which is 8% in Libertyville, according to Mostardo.

Two percentage points of that rate is the local tax portion collected by the state. The way the money is distributed also will change.

"Because those activities are now subject to a sales tax, the village will now see the direct benefit of online sales made to Libertyville residents and businesses, rather that having everything going into a state pot and having it distributed back on a per capita basis," Mostardo said.

The village typically received $600,000 to $800,000 annually from the use tax, Mostardo said. Since there is a three-month lag between when sales are made and a municipality gets its share, the impact won't be known until April. The new budget year begins May 1.

Mostardo said the village is eligible for $2.5 million from the American Rescue Plan.

"That's obviously enough to balance our budget going into fiscal year '21-'22," he said. But because the timing is uncertain, that money hasn't yet been included as revenue.

Meanwhile, there have been hints of a business rebound, but the outlook is cautious.

"Slow but sure is definitely a good description of what's going on in downtown," said Jennifer Johnson, executive director of MainStreet Libertyville.

Johnson said three downtown businesses have closed since the pandemic began, but restaurants operated throughout the pandemic with only one temporary closure.

"It's been really hard, but they're finding ways to make it work," she said.