Why Deer Park's sales tax rate could increase again
Deer Park voters will decide whether to increase the village's sales tax rate for the second time in three years.
Prompted by revenue losses triggered by the COVID-19 crisis, the village board on Thursday voted to put a proposal on the April 2021 ballot that would, if approved, increase the town's portion of sales tax by half a percentage point and keep it at that level for three years. That would result in an additional 50 cents of tax for every $100 spent.
After the third year, the rate would return to its current level.
Deer Park's overall sales tax rate is 7.5%. If voters approve the plan, the rate would be 8% for three years.
The increase could net Deer Park an extra $700,000 annually, Village Administrator Beth McAndrews said.
Deer Park voters last approved a sales tax rate increase in 2018. Starting that July, Deer Park's portion of the sales tax rate increased a quarter percentage point, or an extra 25 cents for every $100 spent.
The extra cash was supposed to help pay for stormwater drainage improvements and other infrastructure projects.
Deer Park collected more than $2,65 million in total sales tax during the 2019 fiscal year, which ended April 30, 2019, McAndrews said.
The total dropped to about $2.58 million in the 2020 fiscal year, which included the first two months of this year's COVID-19 crisis and saw many retail businesses temporarily close, reduce in-person service or both.
The sales tax haul for the current fiscal year, which began May 1, is expected to drop to about $2 million, again because of the pandemic, McAndrews said.
If voters approve the plan, the revenue from the tax increase will help make up for tax revenue lost during the pandemic, McAndrews said. In addition to sales tax cash, the village's revenue from hotel and entertainment taxes also has been affected by the health crisis, she said.
Entertainment tax revenue especially is down, Treasurer David Littwin said during Thursday's meeting.
"It's literally on life support," he said.
If voters reject the plan, program cuts will be needed to avoid running a deficit, Littwin said.
Unlike most towns, Deer Park doesn't levy a property tax.
The board approved the plan with a 5-2 vote. Trustees Michael Mann and Jodie Johnson voted against it.
"I don't think the voters are going to go for this," Johnson said.