Champaign council could finalize sales tax increase
CHAMPAIGN — City council members this week could finalize the sales tax increase they have already supported as a means to pay for police, fire and library services as they head into a new budget year.
They will vote on the one-quarter percentage point increase and are expected to approve a new budget when they meet at 7 p.m. Tuesday in the Champaign City Building, 102 N. Neil St.
The Champaign County Chamber of Commerce last week admonished the council for moving quickly on the sales tax increase, but council members said the decision was part of weeks-long debate.
If the city council affirms its 8-1 straw poll last week in favor of the increase, it would move Champaign's sales tax rate from 8.75 percent to 9 percent effective Jan. 1. The increase is expected to generate $2.8 million in new revenue, and $1.7 million of that would pay for six new police officers, for firefighter overtime necessary to keep an engine on the city's west side in full operation and to avoid a reduction in hours at the library.
City council members plan to discuss what to do with the remaining $1.1 million in the coming weeks.
Because of lag time in how the tax is collected and paid to the city, Champaign would not start seeing the revenue bump until May 2014. The city expects to collect less than $1 million in the coming fiscal year and city officials have suggested using cash reserves to cover the expenses in the meantime. They will need to use a portion of the tax revenue in future years to rebuild those reserves.
Raising the city-only sales tax from 1.25 percent to 1.5 percent would put Champaign's share of the tax roughly on par with most comparable central Illinois cities.
But the city's total sales tax — which includes all the sales taxes charged by the state, county and school districts — would be near the top of the list of comparable cities at 9 percent. Only Decatur (9 percent) and a special taxing district in Peoria (9.25 percent) would be as high or higher.
The sales tax vote is the first scheduled in a slate of budget-related ordinances the city council will see on Tuesday. The new budget year begins July 1.
Council member Deborah Frank Feinen was the only "no" vote during a straw poll last week on the sales tax increase. She said she wanted city officials to spend more time looking for budget cuts before tax increases.
Other council members said they have already put a lot of effort into cutting the budget — particularly during the recession years — and there is nothing left to cut.
The chamber of commerce has asked city council members for more time to allow feedback from the public. Chamber president Laura Weis said last week that repeated tax and fee increases are hurting businesses that are still struggling with the effects of the recession.