Champaign County sales tax: New approach to school funding
Randy Johnson doesn't live in Champaign County – he's in Vermilion – but he's hoping the proposed 1 percent sales tax for Champaign County school facilities passes Nov. 4.
He does most of his shopping in Champaign, so he knows he'll pay more at the cash register, but Johnson – the representative for Carpenters Local No. 44 in Champaign – thinks the new tax will help boost the economy by generating local jobs in the trades and help local education.
"I know people are going to look at it as 'Oh, here we go, another tax,'" he said. "If this is a good way to help education with our kids, then it's a plus for all of us."
But University of Illinois student Sean Mills sees several minuses. He sees a tax designed to hit him – and other UI students – in the wallet.
Mills, co-chairman of the Student Senate's governmental affairs committee, said a new tax couldn't come at a worse time. He said many students are paying more for tuition, books and rent already this semester.
He's not against giving money to schools but feels the tax unfairly targets those who don't own homes, both in terms of promised abatements and in terms of what's taxed.
"The tax itself is completely unfair to students," he said.
Many of his fellow students agreed. The majority of the UI Student Senate voted against the tax.
Following are some questions and answers about the proposed tax.
1) Who's getting more money? Who's spending more?
If the majority of voters approve that 1 percent sales tax, Champaign County residents will pay that much more in tax on clothes, household goods, appliances, gas, eating out and most other retail expenses.
To counter that, those owning property in most of the county's school districts may also see a decrease in their property taxes if the sales tax passes. School officials are promising to pay off building bond debt – now paid with property taxes – with some of the sales tax money they'll receive if the tax is approved.
So will you end up paying more taxes or less taxes?
That depends on what you spend and where you live.
Illinois residents spend $10,446 per capita annually on retail sales, according to Census Bureau statistics. A resident in Champaign County spending that amount on taxable items would pay $104.46 more every year if the school facilities sales tax is approved.
Of course, not all residents will spend $10,000 every year on taxable items – and some will spend more. Among the items not subject to the tax: groceries, prescriptions and vehicles.
However, property owners in five of the 14 school districts in the county stand to save more than $104 in property taxes. In the nine others, they'll save less than that amount.
Three school districts have no bond debt. That means residents in the Ludlow, Prairieview-Ogden and Rantoul City Schools districts won't see any immediate property tax savings.
John Dimit, who is on the Urbana school board and directs the Champaign County Economic Development Corp., said students should help pay local taxes.
"They use our local services," he said. "They use police protection, they use our streets."
Students, like anyone else in the area, pay sales tax already, including a countywide public safety tax of 0.25 percent. Property tax is also a factor in the cost of rent.
However, "with all the new building going on, I think the economy will dictate what rental prices are going to be," said Alan Nudo, president of the realty firm Robeson's Inc., and a Republican county board member representing District 3. "I think there are more likely to be concessions on rental prices because of competition."
And depending on the school district, some homeowners stand to save more than others.
In Prairieview-Ogden, which has no outstanding debt, homeowners won't see any lessening of property taxes, according to Superintendent Victor White. However, in Unit 7 – which built three new schools in the last decade – owners of a $150,000 house may get about $352 in tax abatement, according to information provided by the Regional Office of Education.
But while Prairieview-Ogden area families might not get a lower tax next year, White thinks they won't be asked to pay more property tax either.
"That (sales tax) will stop me from ever having to go out for a bond again," he said.
Nudo is normally skeptical of requests for more taxes, but he said, "I no longer feel it's a tax increase. I feel like it's tax-neutral or tax-positive for property owners."
But that won't help Mills.
"Just paying for everything this year has been so hard," he said. "Sales tax? It's going to be pretty rough."
2) What's the effect on property taxes?
Of the 14 school districts in Champaign County, 11 have bond debt. Those districts have all pledged to use a portion of their sales tax revenue, if the tax is approved, to pay down their debt and abate property taxes.
The amount a homeowner will save depends on the amount of debt the school district has and the number of property owners paying taxes to the district.
For example, the Champaign school district has about $15 million in debt. The owner of a $150,000 home will save an estimated $44.50.
Williamson County, in southern Illinois, passed the sales tax early this year. School districts received their first checks about two weeks ago.
In the Herrin school district, which have relatively new buildings, property taxes were lowered by $1.47 per $100 of assessed value.
That means the owner of a $150,000 home saves $735 in property taxes – more than twice the savings of property owners in Unit 7, who could see the highest tax savings in Champaign County.
"People were very pleased," Herrin Superintendent Mark Collins said. "We're basically telling people that travelers from all over the country are helping pay for your new high school."
However, a lawsuit has been filed in Williamson County, challenging the tax on procedural and constitutional grounds. Collins said his district will have to increase its levy, and thus its tax rate, again to ensure it will have the money to make next year's bond payment. If the district is still receiving the sales tax money, though, it will once again abate the amount of property taxes designated to pay the bond debt next year, Collins said.
The lawsuit also put planned building projects in other districts on hold.
3) How will districts use the money?
School districts can use the sales tax money for construction, renovation, maintenance and repairs, energy-efficiency work, or paying off building bond debt.
Urbana school board Vice President John Dimit said that if the sales tax fails, the district would have to consider asking voters for more money to upgrade schools. "The needs at our early childhood center are dire," he said.
Prairieview-Ogden Superintendent White said staff members are "always finding electrical problems." With new money for facilities, the district would invest in alternative energy, which could save money over time.
When school district budgets are tight, one of the first things to be cut is building needs, said Jane Quinlan, regional superintendent for Champaign and Ford counties.
"One of the things districts often do is put off building maintenance and repairs," Quinlan said. "What we might see with this (sales tax) is districts better able to maintain their buildings, or take care of things before it comes to a crisis situation."
4) How will the tax work?
If voters approve the 1-cent sales tax in November, the county board must implement it. It would then go into effect July 1, 2009. Sales tax revenue collected by the Illinois Department of Revenue will go to the Regional Office of Education for distribution to the school districts. They'll get their first payments in October 2009.
If retail sales remain the same as in fiscal year 2007, the 1-cent sales tax would bring in about $17 million.
Each school district will get a share of the money proportionate to its enrollment of county students.
5) Are there any limits on its use?
If voters approve the sales tax, the county board can set the tax rate in quarter-cent increments up to 1 cent, so even if voters approve a 1-cent increase, the county board could implement a lower rate. However, school boards have based their plans for using the money, including tax abatement, on a 1-cent tax.
Dimit said if the district boards don't hold to their tax abatement promises, then board members should be voted out.
"It would be very easy to replace those school board members," he said.
But voting board members out doesn't erase the sales tax or alter any bond debt or building contracts.
Some local leaders are seeking changes to the sales tax law.
Champaign County Chamber of Commerce President and Chief Executive Officer Laura Weis, chamber Public Policy Manager Andrew Flach and Nudo met with local legislators recently. They'd like to see a sunset provision or revote provision, so the law would either expire after a period of time or would have to be re-enacted by voters, Flach said.
They also want to ensure school districts receiving money from the sales tax won't be at a disadvantage in receiving construction money from the state in the future; to require that a portion of the sales tax money be used to pay down any existing bond debt (tax abatement is not required by law now); and to require that districts put a revenue purpose statement, outlining how they'll spend the tax money, before voters every year.
Flach said the chamber is working with legislators to get something drafted for the spring legislative session, and the state chamber of commerce will put the items on its 2009 legislative agenda.
Proposed sales tax's effect on Champaign County's school districts
Student enrollment: 9,248
Estimated annual 1 percent sales tax income: $6,758,531
How they'd spend it: Improve energy efficiency, renovate older schools, add to capacity of north side schools, potentially add school in Savoy
Tax abatement? About $45 for a $150,000 home
Student enrollment: 641
Estimated annual 1 percent sales tax income: $468,449
How they'd spend it: Junior high addition to the grade school
Tax abatement? Projecting about $45 for a $150,000 home
Student enrollment: 204
Estimated annual 1 percent sales tax income: $149,085
How they'd spend it: Building repair and maintenance, 92 percent on bond abatement
Tax abatement? $312 on $150,000 home
Student enrollment: 575
Estimated annual 1 percent sales tax income: $420,216
How they'd spend it: Complete current building project, parking lot
Tax abatement? $280 on $150,000 home
Student enrollment: 102
Estimated annual 1 percent sales tax income: $74,543
How they'd spend it: Replace gym windows, tuckpoint building
Tax abatement? No existing bond debt
Student enrollment: 2,757
Estimated annual 1 percent sales tax income: $2,014,843
How they'd spend it: Energy-efficient heating/cooling systems, windows, safety improvements, building maintenance and possible expansion
Tax abatement? $125 for $150,000 home
Student enrollment: 265
Estimated annual 1 percent sales tax income: $193,665
How they'd spend it: Install wind turbine and geothermal energy, bring buildings up to code
Tax abatement? No, but may save district from asking for more money in referendum
8) RANTOUL CITY SCHOOLS NO. 137
Student enrollment: 1,596
Estimated annual 1 percent sales tax income: $1,166,373
How they'd spend it: Replace windows and heating/cooling system with energy-efficient models
Tax abatement? No existing bond debt
9) RANTOUL TOWNSHIP HIGH SCHOOL
Student enrollment: 798
Estimated annual 1 percent sales tax income: $583,186
How they'd spend it: Repave parking lots, renovate for energy efficiency and update ventilation systems
Tax abatement? $80 for $150,000 home
10) ST. JOSEPH NO. 169
Student enrollment: 826
Estimated annual 1 percent sales tax income: $603,649
How they'd spend it: Continue K-4 renovation with energy-efficient replacements, possible building project in next few years
Tax abatement? $134 for $150,000 home
11.) ST. JOSEPH-OGDEN HIGH SCHOOL
Student enrollment: 460
Estimated annual 1 percent sales tax income: $336,173
How they'd spend it: Roof replacement on older part of building, other maintenance
Tax abatement? $98 for $150,000 home
Student enrollment: 184
Estimated annual 1 percent sales tax income: $134,469
How they'd spend it: Replace heating/cooling system, renovation
Tax abatement? $45 for $150,000 house
13) TOLONO UNIT 7
Student enrollment: 1,549
Estimated annual 1 percent sales tax income: $1,132,025
How they'd spend it: Build new high school, add new classrooms, bury electrical system
Tax abatement? $352 for $150,000 home
Student enrollment: 4,270
Estimated annual 1 percent sales tax income: $3,120,559
How they'd spend it: Build or renovate early childhood center, renovate existing buildings
Tax abatement? $67 for $150,000 house
NOTE: Income is approximate, as some students who live in Champaign County attend public schools outside the county, and take proportional Champaign County sales tax income with them. As well, some students from outside Champaign County attend Champaign County schools, and do not get counted toward this countywide sales tax income.
Sources: Student population based on 2006 fall housing report, promised tax abatement for $150,000 home and proposed projects – all based on 1 percent sales tax – provided by the Regional Office of Education. Sales tax income of $17,155,807 based on state fiscal year of July '06-June '07, based on projection of countywide 0.25 percent public safety tax sales provided by county Treasurer Dan Welch.