Council to look at tax increases

CHAMPAIGN – The Champaign City Council will consider tonight whether to increase the city sales tax and the city's telecommunications tax to help pay for a new city library and other projects.

Champaign Mayor Jerry Schweighart predicts the votes are there to pass both increases.

The council meets - in study session at 7 p.m. today in council chambers at the Champaign City Building, 102 N. Neil St.

The tax increases, if approved, would generate an additional $3.7 million annually. The proposal, from the city administration, calls for increasing the city's home rule sales tax from the current 1 percent to 1.25 percent. That increase would generate an additional $2.5 million annually.

The telecommunications tax on telephone bills would be increased 2.5 percent, to 6 percent total, under the proposal. The increase would generate an additional $1.2 million per year.

Schweighart said his nose counting shows seven council members supporting the tax increases and two opposed. Schweighart is among the supporters.

"It's going to cover the three major goals the council laid out: staffing Fire Station No. 6, building the library and improving city streets," the mayor said. "All three things need to be done and we're not going to be able to afford it without some kind of tax increase. And if we delay these projects, they're just going to get more expensive."

Schweighart said there had been a burst of initial enthusiasm on the council to levy a new real estate transfer tax of $2 per $1,000 of value, with the seller to pay the tax, as a way to fund the three projects. But subsequent research showed that such a tax wouldn't generate $2.4 million annually, as first estimated, but only $450,000. And such a tax would require voter approval in a referendum.

Those findings dampened the enthusiasm for such a tax.

City Manager Steve Carter said he and city Finance Director Richard Schnuer decided to recommend the two taxes for a couple of reasons. Carter said he didn't want the city to have to raise too many different taxes to generate the necessary income. And council members had expressed to him that they favored broader-based taxes, instead of a tax targeting a particular industry, such as an increase in the food and beverage tax.

Carter said the city did look hard at a real estate transfer tax, but backed away when they found it wouldn't raise nearly as much money as first thought.

"Sometimes when things look too good to be true, they are," he said.

Council member Ken Pirok said he won't be among the council members supporting the tax increases.

Pirok said the fact that the library board wouldn't scale back the $29.4 million library project and that the library foundation wouldn't increase its private fund-raising goal beyond $3 million helped dissuade him. The city also could have pared back the amount of money it wants to devote to street maintenance from $1 million per year (up from the current $300,000), he said.

Pirok said when he campaigned for the city council three years ago, he said he wouldn't support a major tax increase for a new library.

"If this doesn't fall under the category of a major tax increase, I don't know what does," he said.

Under the city's tentative plan, the library would be able to devote $700,000 annually in existing property tax income, for library improvements and operations, to pay debt service on a bond issue. Tax growth from annexations of subdivisions will help the city meet that goal.

That, along with other city contributions, would leave $1.6 million annually in debt service for a new library that would have to be funded through the proposed tax increases.

The city would need another $1.2 million per year to pay for hiring additional firefighters to work at the new fire station in western Champaign.

Additional street maintenance funding of $700,000 per year is also being sought. City officials note in a council memo that the extra funding would enable the city to provide street maintenance, such as asphalt overlay or concrete patching, every 34 years to the city's 220 miles of street. At the current average cost, the city's maintenance cycle is 59 years on average.

The city's public works department said the city currently has 360 city blocks that need maintenance attention and, of those, 40 blocks with a serious problem. The Garden Hills, Holiday Park and Garden Park neighborhoods have the highest need.

The city plan also calls for setting aside $200,000 annually as a contingency against unexpected increases in interest rates, or variations in income or spending.

Under the city's plan, the new taxes would not become effective until Jan. 1. Construction of the sixth fire station would begin next year and open in summer 2006.

Construction of the new 121,000-square-foot library would begin next year as well, with completion in the first part of 2007.

The library would be located just north of the current 40,000-square-foot facility, built in the 1970s, at 505 S. Randolph St.

You can reach Mike Monson at (217) 351-5370 or via e-mail at mmonson@news-gazette.com.

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