URBANA — City council members on Monday cast their final approval of a quarter-cent sales tax increase, meaning customers in both Champaign and Urbana will have to pay a total 9 percent surcharge on their purchases come Jan. 1.
Officials in Urbana have been deliberating over the increase for the past month or so after the Champaign City Council raised its city's tax this summer. The proposal in Urbana originated as Mayor Laurel Prussing's plan to recover revenue the city will lose from a state-imposed property tax exemption for Carle Foundation Hospital.
Prussing said the city faces a $1 million budget gap, and the sales tax increase is part of her solution. The extra quarter-cent is expected to bring in $686,000 annually; it is expected to generate only half of that in this budget cycle, as the tax will not be effective until the midpoint of the fiscal year.
"It is not the entire answer, but I can't figure out how to fill this hole in any scenario or by any strategy that doesn't include this," said Alderman Eric Jakobsson, D-Ward 2. "We have a great big uncertainty in our budget with respect to health care costs, and we have no idea how that's really going to come out."
The increase will bring the city's share of the sales tax to 1.5 percent, and it will total 9 percent including state and county taxes. That puts both Champaign and Urbana among central Illinois cities with the highest sales tax rates, and just below Chicago's 9.25 percent sales tax.
Plans to cover the remaining budget gap — estimated at roughly $640,000 — remained elusive on Monday night. Prussing is hoping city officials can come up with ways to reign in imminent increases in the cost of health care, especially with the Affordable Care Act going into effect.
Alderman Michael P. Madigan, R-Ward 6, has consistently opposed the increase since its proposal, and he remained unconvinced by the budget plan as he cast the lone dissenting vote on Monday.
"I find it frankly repulsive that people will vote for this not knowing the rest," Madigan said. "There's not even anything on the table to discuss. And that is beyond me. Absolutely beyond me."
Madigan said his Ward 6 constituency has been very opposed to the sales tax increase — especially in concert with other city-imposed charges like the new storm water utility fee.
"I think it is literally another pin prick. It's almost like Chinese water torture, I don't know how to explain it," Madigan said. "It's just one fee on top of another."
The sales tax increase in Urbana has not generated as much public discussion at city council meetings as it did in Champaign. Two people addressed council members on Monday night. Among them was Durl Kruse, who said he wanted a verbal commitment if city officials indeed plan to use the sales tax increase to forego a property tax increase.
"I would like to hear you say very clearly and unequivocally ... that you will not raise the property tax for at least another year," Kruse said.
University of Illinois graduate student Dan Elg said a property tax exemption at Carle should not be blamed for the million-dollar budget gap. Rather, he said, the city's spending is far outpacing its natural revenue growth.
"Urbana's problem is not a revenue problem," Elg said. "It's a spending problem."