Urbana could follow Champaign's lead on new liquor tax

URBANA — If the city of Champaign imposes a new 4 percent charge on package liquor this summer, Urbana could be quick to follow, Urbana Mayor Laurel Prussing said on Tuesday.

The proposal to generate new revenue as both cities deal with tight budgets is a joint venture, though Urbana city officials have yet to discuss it in public sessions. Urbana residents who want to avoid paying 4 percent more for their alcohol should keep a close eye on the outcome of the debate in Champaign, where the proposal is growing more contentious.

On Monday night, Champaign officials held an informational session about the tax — which applies to retail liquor sales and not bars — and a few liquor store owners there expressed their disapproval. They said that the city should not target one industry.

But city officials say the revenue is needed to save three jobs at the police department's front desk, where staffers keep the station's doors unlocked at night and protect police officers on the street.

The Champaign City Council has voted 7-2 to give initial support to the tax. Council members will vote again on Tuesday after they hear more details about the specifics of the proposal, and they could give final approval not long after that. If approved, city officials could start collecting the revenue — which they estimate will generate $700,000 annually — sometime during the second half of this summer.

And if the tax is adopted in Champaign, it is likely Urbana residents would start paying more for their liquor, too.

"If they adopt it, I think that's something we would do as well," Prussing said.

City administrators in Urbana have already been discussing the tax with officials in Champaign, she said.

"We always try to work with Champaign because we don't want to put either city at a disadvantage," Prussing said.

Prussing said there is no firm timeline on when Urbana might adopt the tax — it would require city council approval. Budgeters are awaiting the outcome of labor negotiations, which could significantly affect the city's overall financial picture.

Both cities are leaving open the question of what exactly the tax would pay for. Elected officials in Champaign said the new revenue would maintain the jobs of three police front desk staffers, which cost the city $212,000 annually. The nearly $500,000 that would be left over has not been targeted at a specific program, although some have suggested it might go toward maintaining fire protection at its current level.

Prussing said the new revenue that a 4 percent package liquor tax would generate in Urbana is estimated roughly to be $500,000, and she said there is no specific place in the budget where that might go.

"It's kind of a mistake to say you're going to pay for a certain thing with this because our overall problem is a gap between spending and revenue," Prussing said.

Prussing has proposed a budget with $32.6 million in general spending during the next fiscal year, which begins July 1. That is a 0.5 percent increase over the previous budget, mostly due to rising costs of employees' health care and pensions.

That leaves a $1.7 million gap between spending and revenues, which are projected at $30.9 million. But due to uncertainties in projections and actual spending, budgeters say it is effectively a balanced budget.

The budget leaves little room for flexibility, as 11 vacant city positions were to remain unfilled. More recently, Prussing has introduced a plan to fill two vacant police positions, but that would require an 25-cent increase in parking rates on campus and cutting $71,000 worth of tourism promotion. The city council has yet to make a decision on that proposal.

Budgeters need to look at the overall spending plan, she said. Administrators from both cities have said uncontrollable costs — mainly employee benefits — have been rising while revenues have been flat or decreasing during the past several years, and that is what is creating the spending gaps.

But, assuming the tax passes in Champaign, it is not likely that the outcome of the labor negotiations would affect whether the city of Urbana would adopt the 4 percent tax.

"I think both cities realize that we don't want to be out of sync," Prussing said.

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cretis16 wrote on June 08, 2011 at 10:06 am

If our "overall problem" is a gap in spending and revenue....then stop wasteful spending? Art on corners, bike paths,etc. Friar Tuck...you just got all my business!!

David Illinois wrote on June 08, 2011 at 11:06 am

"I think both cities realize that we don't want to be out of sync," Prussing said.

What about property taxes, or the gas tax?

Patrick Wade wrote on June 08, 2011 at 2:06 pm
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Thanks for your comment.

Both cities have identical property tax rates -- $1.29 per $100 of equalized assessed valuation. Any difference between what residents actually pay is because of the other taxing bodies, like the school districts, whose tax rates are out of the cities' control.

Urbana assesses a 2-cent local motor fuel tax in addition to the motor fuel tax imposed by the state. Champaign does not have the local motor fuel tax.

ROB McCOLLEY wrote on June 08, 2011 at 11:06 am
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... or license fees.

But hey, at least she gave Urbana businesses a week to think (hope?) they'd see an uptick in sales.

Sid Saltfork wrote on June 08, 2011 at 12:06 pm

I am confused. Urbana just voted to decrease it's number of liquor licenses to vendors. Now, Urbana is going to follow Champaign's lead in raising the tax on liquor. If you were interested in raising more money by raising the tax on liquor; why would you decrease the number of places that would sell liquor? Maybe, Urbana could commission a statue of a Budweiser bottle with tourist signs that include liquor sales establishments?

soups7 wrote on June 08, 2011 at 1:06 pm

The only time Urbana is interested in staying insync is when it will provide them with more money.

Urbana has not never seen a tax of fee that it dosen't like. And it will impose it at the maximum allowable rate.

Squirrel wrote on June 08, 2011 at 1:06 pm

So what's with Champaign? They need $200,000 to "save" the front desk at the Police Department but (1) just spent that on a make-work, feel-good "jobs" giveaway to unemployed teenagers (2) they want to impose a tax that brings in over $700,000. First of all maybe the city council should have hung on to the 200K they just frittered away on the teenaage job program and spent it on the adult jobs at the CPD. In addition, if they need 200K then go find that, not 700K!

Raver wrote on June 13, 2011 at 10:06 am

I'm unclear a couple of things on this proposal. First, if Champaign needs $200,000 to save the police night desk, why isn't the increase being discussed in the 1 1/2% range rather than 4%? It's difficult to agree with increased taxes in the first place, but to state, "What exactly it (the excess) might pay for has yet to be decided," is just bad policy.

Secondly, why doesn't the Champaign simply increase the fuel tax by 2% as Urbana did? This would not only raise probably over $1,000,000 annually, but also put Champaign on a parity with Urbana. Since Urbana instituted the fuel tax, I haven't noticed any real disparities in fuel prices between the two cities. Taxpayers will, however, see a disparity in pricing of package liquor in Champaign, and if Urbana follows their lead and takes their own 4% "bonus bucks," package liquor sales will most certainly be driven to Savoy and other areas. This proposal is for a regressive tax which should be defeated.

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