Glen Ellyn might raise local sales tax

Glen Ellyn trustees plan to raise the village's local sales tax to help offset state cuts in the municipal share of state income tax revenue.

The board has reached a consensus to implement an increase of 0.25 percentage point to bring the home-rule sales tax to 1.25 percent and use roughly $600,000 in reserves to plug a projected deficit in the village's 2018 general fund budget.

Trustees will discuss raising the current 1 percent local sales tax and take public comment during board meetings on Feb. 26 and March 12.

Last year's state budget included a 10 percent reduction in the amount of income tax revenue municipalities and counties receive. In Glen Ellyn, the cuts represent a loss of about $290,000, village financial planners said.

As part of his proposed spending plan for the 2019 fiscal year that begins July 1, Gov. Bruce Rauner wants the state to continue withholding 10 percent of municipal revenue - more than $120 million - from the Local Government Distributive Fund.

"I don't know if they're going to go into this cycle where they consider it every year or if at some point they're just going to say it's permanent," Glen Ellyn Finance Director Christina Coyle said of the reduction in the municipal share. "But certainly we're not going to be planning for that to come back."

The Illinois Department of Revenue also began charging a 2 percent fee for collecting and distributing local sales under a policy included in last year's state budget. Glen Ellyn lost roughly $40,000 due to the fee.

The 0.25 percentage point increase in local sales tax would generate about $500,000 in additional revenue over a year for the village's operating fund, Coyle said.

The state allows home-rule sales tax increases to take effect at the start of the year and on July 1. To implement the hike in July, the village would have to give notice to the Illinois Department of Revenue by April 1.

If approved, the village expects to collect $247,500 from the increase for the six months remaining in 2018.

Trustees are more inclined to look for new revenue by raising sales taxes on purchases as opposed to boosting property taxes.

Since the 2014 levy, the village board has limited increases in the general fund operating levy to only include amounts for new construction or new growth. That approach has generated savings for property taxpayers of roughly $300,000, Coyle said.