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Turning To Sales Tax Hikes

Mon, 22 Jul 2013 03:55:50 CDT
By: Charlie Schlenker

Turning To Sales Tax Hikes There are at least four potential sales tax increases under discussion in Bloomington Normal. WGLT's Charlie Schlenker reports it is unclear how the public will respond to this passel of possible taxes.

Every day tens of thousands of McLean County residents buy something, including this breakfast for me on the way to work.

"Thank you for choosing McDonalds, How may I help you? Yes I'd like a sausage burrito and a large diet doctor pepper. Do you want hot sauce with that burrito?"

On top of the price, people pay sales tax to the state, the county, and either Bloomington or Normal. The current rate is seven and three quarters percent for the area.

"Okay, if your order is correct on the screen that's gonna be 2.20 at the first window. Pull up please. Thank you."

These are the current groups with their hands out. School districts led by Unit Five are considering asking voters next year for a county wide sales tax to benefit school facilities and maintenance in the county. Connect Transit planning documents call for exploration of a sales tax hike in the twin cities to support the bus system. The Prairie Cities Soccer League and the YMCA are finishing up a proposal for new facilities they argue would benefit the public. And down the road, McLean County Government leaders might decide they need a sales tax bump to fund law enforcement and or jail operations or renovation.

"I think there is a sales tax trend and it's statewide largely driven by tax caps."

McLean County Board Chairman Matt Sorenson says areas that have caps on property tax increases have no other option to raise new revenue for programs and services and that has started the ball rolling even for places like McLean County that do not have caps.

"I obviously am concerned about that and you know we already are in a situation in McLean County in our metro area I mean we've got fairly high sales taxes from a lot of people's standards."

Certainly, twin cities sales tax rates are high compared to rural areas which have very little local sales tax. But, compared to other mid sized cities in the region, McLean County is actually between a quarter percent...and a point AND a quarter LOWER than other places. David Hales is the City Manager for Bloomington.

"From an economic development standpoint we need to be very conscious about what might happen to our competitive position."

Hales says for example, sales tax in the city of Chicago is so much; the city loses substantial revenue to the suburbs. Hales says even in central Illinois people are willing to travel for a deal.

"No I don't think it is a captive market because the Champaigns, the Peorias, the Decaturs, they are not that far away. And we already know based on our retail sales analysis that there is still leakage."

Opinions vary on how much higher sales taxes can go without hurting the McLean County business climate. Mark Peterson, the City Manager for the Town of Normal, says he thinks only a disparity of more than three or four percent would change consumer behavior.

"I don't think most people are aware of the difference from one community to the next. I don't think most consumers are that sophisticated. I don't blame them. I deal with these things every day and I can't remember what Champaign is versus Peoria, versus Galesburg."

Economists say that's true for everyday items, but for single purpose purchases consumers can be price conscious. For instance, Mayor Chris Koos of Normal points out auto buyers make up a big chunk of sales tax revenue.

"You know I think if we got a percent above...as you deal with higher ticket items the impact and differentiation of taxes is more profound."

If the sales tax difference is too much, City leaders say they could count on Chambers of Commerce in nearby communities to advertise the discrepancy in trying to woo Bloomington Normal buyers elsewhere.
Complete tax skeptics might be wondering whether the public can stand the burden of even a little more sales tax for fear it will suppress consumer spending. Economist Michael Seeborg at Illinois Wesleyan University says there's a wealth of data, largely related to income tax levels, showing there IS a point above which taxation kills off individual incentive to produce economic activity. But he says that's not a great worry.

"I think in most economists argue that in most areas it's quite a ways off."

Of course real economic hardship is a different question than the perception of pain and what the public is willing to put up with. Leaders we spoke to for this story agree the community would not tolerate passage of all four potential sales tax hikes in a year and a half period.

"And I think the public has to be the traffic cop on this."

Mayor Koos of Normal says even though the YMCA and Prairie Cities Soccer proposal could be decided by simple majority votes of each city council, the actual hurdle needs to be much higher. He says he needs to know that the public wants it.

"And profoundly know that. Not just a couple of e-mails coming my way. I want to see community organization. I want to see people talking about it in forums. I want to hear from the public and more so than we normally do."

Bloomington Mayor Tari Renner has said he thinks it will require an advisory referendum to convince the council to change the sales tax.
It is still early for all the groups eyeing sales tax hikes. They have cases to publicize. Unit Five leaders say their schools are bursting at the seams and they need to build more. The Federal Aviation Administration has told the soccer league to get out of the airport glide path. The YMCA building that serves key parts of the community is aging. Federal support to transit systems looks like it will fall off the table in a few years. Bus service could get really ugly without local help. And county coffers are tight even though leaders have taken public pride for years in making each nickel scream.

Each entity may also have weaknesses as their campaigns proceed. County Board Chairman Matt Sorenson worries the YMCA and the Soccer League proposal could set a dangerous precedent.

"I feel like when you start putting taxes in to support non government entities, as good as the cause is, they are still not government entities. At what point in time do you then have to deal with dozens and dozens if not hundreds of not for profits around the state of Illinois that all have worthy programs. It just feels like a dangerous step."

The School district proposal could upset existing revenue structures. As much as schools have depended on property taxes in the past, municipalities have turned to sales taxes. City Manager Mark Peterson of Normal says sales tax revenue is now more attractive to school districts than a traditional property tax referendum.

"One percent in Mclean County would raise probably about 16 million a year and that's every year forever and there is no need to go out to public referendum every time you want to issue bonds for a school improvement or a new building."

Opponents could argue they prefer the strict limits and sunset that a traditional property tax referendum requires, and that the only accountability for the sales tax money would be at the school board ballot box.

All the groups considering asking for sales tax money know about the others. Peterson and others muse they could combine their approaches.

"There is some sort of a limit that will be imposed by the electorate. There is a keen awareness of the need to...let's work together so we don't spoil this for everyone."

But, he says talks have not yet progressed to the point of accepting a division of revenue or even a unified proposal.

Of course, voters might decide that in the words of one significant political grouping...they are Taxed Enough Already. If that happens there is an old saying in politics...you get the kind of government you pay for. And Bloomington City Manager David Hales says the community should not want to let its guard down on quality of life issues.

"Because Bloomington is still a growing metro area we're going to continue to have those cost pressures to provide greater services."
"Anything else for you? No thanks. $8.77"
I'm Charlie Schlenker, WGLT News.
(Cash register jingles / tape rips/ drawer shuts)

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