Critics: Tax would hurt more than just gas sales in Urbana
URBANA – There are different opinions on whether a new gas tax in Urbana would drive customers away.
Urbana Mayor Laurel Prussing is pushing for a local motor fuels tax rate of 2 cents per gallon to help the city cope with the rising cost of roadwork while the city's share of the state fuel tax is faltering. She points to nearby Danville, which adopted a local fuels tax in 2004, and argues there's no such problem.
Critics are sure that people will avoid Urbana if a local tax raises the price of gas.
Urbana Alderwoman Heather Stevenson, R-6, said if people can save money on gas by going across Wright Street to Champaign, they probably will and, while they are at it, might do other shopping, too.
Some gas station operators in Urbana share that concern.
"We hear from customers every time we raise gas prices," said Vicki Paris, manager of the Circle K convenience store and gas station at 1701 S. Philo Road, U. "We don't make a lot off gas."
Randy Meyer, president of Meyer Oil based in Teutopolis, which has 15 gas stations in central Illinois, said a 2-cent-per-gallon tax in Urbana will "absolutely be a huge impact on business."
"Gasoline prices are a very sensitive subject," Meyer said. "If they raise the price 2 cents in Urbana, the gasoline-buying customer is going to drive to Champaign."
That would mean less sales tax revenue for Urbana as well, Meyer said. In addition to the sales tax on gasoline, Urbana would lose the sales taxes on chips, soda or a pack of cigarettes that a customer would also buy in Champaign or Savoy, he said.
For most gas station operators, the business is not just in gas sales. There may be a repair garage or convenience store.
"If consumers are going to another city, you are not just missing gas sales, but all the other sales," said Robert Calmus, spokesman for Marathon Petroleum Co.
But others disagree.
Urbana Alderwoman Diane Marlin, D-7, said local gasoline prices fluctuate so much that people don't know the reason for an increase.
Urbana Alderman David Gehrig, D-2, said he doesn't think the price difference will be enough that "it will suddenly make Urbana a place that nobody buys gasoline."
People in Danville say it is not a problem that their city has higher gas taxes.
When Danville implemented a motor fuels tax in 2004 and raised it in 2008, there was some concern about motorists going elsewhere. Currently, Danville has a local motor fuels tax rate of 5.6 cents per gallon for gasoline and 2.7 cents per gallon for diesel.
"In the beginning, when it was new and on everybody's mind that Danville's gas would be higher, people were going to other towns," said Misty Cota, manager at the Colonial Pantry, 616 S. Bowman Ave., Danville. "It seems like it's coming back to normal now."
Danville Public Works Director Doug Ahrens said the fuel tax data there doesn't show much change in fuel purchases since that city increased its local tax.
Some people predicted that motorists would drive to Indiana to get lower gas and cigarette prices, Ahrens said.
"Most folks buy gas when they need gas – when the gauge gets down to a quarter-tank," Ahrens said.
He said the rationale for the local tax was that the state distribution of motor fuels funds is based on population. When Danville's population declined, the city still had the same roads to be maintained.
Of course, if Urbana, Champaign and Savoy had the same local fuel tax, consumers would be less likely to drive out of town to find a lower price.
Don Fullerton, a professor at the University of Illinois Institute of Government and Public Affairs and the Center for Business and Public Policy, said that generally it's better for a city to have comparable taxes with competing jurisdictions. A difference of 2 or even 3 cents per gallon is probably not enough to cause people to cross over jurisdictions, "but, bear in mind, this happens," he said.
If surrounding towns all raise their taxes equally and simultaneously, that removes that incentive, he said.
Fullerton – who contributes to a blog at http://www.cbpp.illinois.edu – said one reason for a gas tax may be to raise revenues, but a higher price of gas might also discourage gas use, which is "not necessarily a bad thing."
"Gasoline taxes in this country are incredibly low," Fullerton said.