Listen to this article

URBANA — A proposal to raise the food and beverage tax from 1.5 to 2 percent in Urbana is drawing mixed reviews from aldermen.

And two residents are also speaking out against the increase, including Matt Riggs, manager of Riggs Beer Company in southeast Urbana.

“This is the third (increase) in less than three years that has targeted the core of our business,” Riggs told aldermen at this week’s meeting, referring to the 2018 hike of the food and beverage tax from 1 to 1.5 percent and an increase this year to the package alcohol tax, from 1 to 3 percent.

“That’s taking nearly $10,000 a year in additional dollars from our bottom line and sending it to the city,” he said. “I’m proud to pay taxes, and I really want to see a balanced budget ... but I wanted to put out there that it is extremely painful when new costs ramp up on a new business.”

Riggs said the uncertainty was as problematic as the tax increase.

“Help me plan. Where’s this thing going to end up at in order for us to balance the city’s budget? What is my ultimate tax rate going to be?” Riggs said. “I hope it doesn’t adjust all the time, because that makes it tough for us to plan financially.”

Mayor Diane Marlin wants to raise the tax to help close the city’s structural budget deficit.

The increase, which city officials noted would amount to an additional 12 cents on a $25 purchase, is expected to bring in $400,000 more annually.

“Over the last two-and-a-half years, we have systematically attacked our structural budget deficit. We started out in a $2.5 million hole,” Marlin said at Tuesday night’s council meeting. “So the past two years, we’ve focused mainly on spending reductions. We’ve reorganized departments. We’ve reduced staffing. We have reduced spending across the board.”

With the cuts, the city hopes to close the deficit by the end of fiscal 2021, Marlin said.

Ward 5 Alderman Dennis Roberts indicated he supports the tax increase, noting it’s still less than the 2.5 percent rate in Champaign.

“We’re not overdoing it, we’re still underdoing it,” he said.

The Champaign City Council raised its food and beverage tax from 0.5 to 2.5 percent, with that going into effect Jan. 1.

The 2 percent rate in Urbana would match those in Bloomington, Normal, Decatur and Peoria.

It would be higher than the 1 percent rate in Danville and the 1.5 percent rate in Moline.

Ward 7 Alderman Jared Miller said he shared some of the concerns Riggs had and was leaning against voting for the increase.

“I will probably vote against this because three in three years is a lot,” he said.

Marlin addressed the impact the tax increase would have on bars and said the city is also looking at lowering liquor-license fees.

“I do recognize that the liquor fee for Class A license holders, which are the bars, is high. So that’s one of the reasons we haven’t increased those fees for three years now,” she said. “There may be some relief there.”

“That’s good to know,” Miller said.

Ward 4 Alderman Bill Brown said he’s “not really sure how I’m going to vote on this next week.”

“I think we’ve raised enough taxes on food and beverage,” he said.

Toward the end of the meeting, Riggs said that he didn’t want to come across as anti-tax, but said that if the increase was tied to a tax freeze, “I think the businesses might be able to swallow this a little bit easier.”

Ward 2 Alderman Eric Jakobsson said he couldn’t speak for the whole council but thought that “this is the last piece on the revenue side that it seems as though we’re going to need to get to, to erase the structural deficit and get to a balanced budget. ... So I can’t foresee the need to come back to this well again.”