URBANA — Citing a $1 million budget gap "which can pretty much be attributed to Carle," Mayor Laurel Prussing is proposing a one-quarter percentage point increase in the city sales tax to match a move Champaign made earlier this year.
Prussing said the sales tax increase would bring in an extra $686,000 annually, new revenue it needs to cover losses from a Carle Foundation Hospital property tax exemption and rising costs of employee health insurance — which Prussing also blames on Carle.
She plans to make her proposal to the Urbana City Council when it meets at 7 p.m. Monday in the Urbana City Building, 400 S. Vine St.
The quarter-point sales tax increase would move the city's portion of the tax to 1.5 percent. Including the state and other county rates, the overall sales tax in Urbana would total 9 percent, up from 8.75.
"These are existing taxes," Prussing said. "They don't cover food and medicine."
Prussing said she will make her proposal to match the sales tax increase the Champaign City Council approved this summer. Both taxes would be effective Jan. 1, 2014.
Monday's presentation will be the first city council discussion of the increase, but the mayor is pushing to have formal approval soon, as it takes several months to get a new sales tax rate into the state collection system.
"It needs to be done quickly because the state takes some time to implement it," Prussing said.
City officials said they were jarred earlier this year when the state approved a nonprofit property tax exemption for Carle Foundation Hospital. That will erase $831,380 in property tax revenue for the city alone and millions more for taxing bodies throughout the county.
City officials expect the rest of Urbana property owners will need to cover Carle's portion in the future. But because of the timing of the state's decision on the exemption, that revenue will not be collected at all for this budget year.
Prussing said Health Alliance, a Carle affiliate, has proposed increasing the price of city employees' health insurance $344,060.
Because the sales tax increase would take effect halfway through the fiscal year, which runs July to June, the city would only collect half of the new revenue in this budget cycle. Even if city council members sign off on Prussing's proposed sales tax increase, they will still have to address a $660,000 budget gap.
"We will need to keep working on ways to bridge the remaining gap of approximately $660,000 and will offer more proposals shortly for your consideration," Prussing wrote in a memo to the city council.