Naperville undecided on sales tax increase

Posted2/21/2018 5:30 AM

Decisions about how Naperville residents and visitors will pay for a city budget roughly $2 million higher than last year's are expected next month after the city council delayed a vote Tuesday.

Council members did not vote to raise the home-rule sales tax a quarter-percentage point to 0.75 percent, nor did they eliminate that option as a possibility to help close a budget gap that remains at $1.4 million after other rounds of cost cuts and tax increases.


Instead, they asked for a multiyear budget projection, an explanation of risks affecting revenue sources and an outlook about debt levels, all of which City Manager Doug Krieger said staff members will compile before the next meeting on March 6.

The idea of raising the home-rule sales tax, which went into effect Jan. 1, 2016 at 0.5 percent, met continued opposition from the Naperville Area Chamber of Commerce because it would bring Naperville's total sales rate to 7.75 percent.

Colin Dalough, director of government affairs and business development, said that rate would be in line with or higher than rates in nearby towns including Geneva, Lisle, Oak Brook, Winfield, West Chicago and Woodridge. It would remain lower than rates charged in Aurora and Bolingbrook.

"We want a competitive advantage for our businesses," Dalough said.

Several on the council said they think raising the sales tax is better than allowing the cost of the 2018 budget to fall to property taxpayers. But they also voiced concerns about the sustainability of increasing various taxes to fill holes.

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Already this year, the city increased the telecommunications and hotel/motel taxes to bring in $500,000.

These increases helped close the budget gap, which started at $2.1 million, to $1.6 million. The city also saved $200,000 on borrowing money, with a lower-than-anticipated interest rate, bringing the gap to $1.4 million.

Mayor Steve Chirico said it's important the city taxes at a rate to support the services it provides instead of taking on debt and making future residents pay.

He said he hopes the mayor and council members a decade from now will look back and say, "'Thank you for putting us on a path that is affordable going forward."

Part of the impetus to raise taxes comes from financial principles the city adopted in August 2015. The principles say the city will:

• Pass a structurally balanced budget each year.


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

• Work to increase its reserves to 25 percent and reduce debt by 25 percent by the end of 2022.

The chamber and some council members, though, are calling for a review of the principles, saying they are causing the city to raise costs to residents for services such as garbage pickup, utilities, phones and store-bought goods.

The city's reserves stood at 21 percent at the end of 2016, the most recent information available on the city's open data portal, and its debt had fallen to $104.6 million from $121.3 million, which is projected as on track to meet the goal of $90.9 million by December, 2022.

Still, some questioned if those goals are worth the pain of tax increases to achieve.

"Maybe that was too aggressive as we're working through the process," council member Patty Gustin said about the financial principles, which she suggested be revisited. "That is a conversation that should be had in the future."

Beyond lowering debt and increasing reserves, Chirico said the city needs to increase revenue so it can innovate.

"It's not just about replenishing our cash reserves or reducing our debt," he said. "It's also about having funds available to improve the city."

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