Council to Vote on Maintaining Sales Taxes

City council will vote on Tuesday to repeal the ordinance sunsetting the 1/4% sales tax enacted back in 1999 to fund bonds for construction of the Carbondale Community High School, as well as one enacted in 2014 to shore up city revenues against the potential loss of state revenue. The CCHS tax is scheduled to expire in October, the other on Jan. 1 of 2018. The repeal would eliminate the sunsetting in both instances.

This is wrong. These taxes were enacted for specific reasons and there has been little to no discussion regarding the need for them. Let the taxes expire and then make a case for enacting a new tax for the loss of revenue. If such a tax is needed, council should be able to make a strong case for it.

Here is the text of the proposed change in the ordinance:

On February 2, 1999, the Carbondale City Council approved Ordinance 99-06 which imposed an additional 1/4% home rule municipal retailers' occupation and service occupational tax.  The purpose of this additional tax was to provide additional revenue to fund the construction of the new Carbondale Community High School (CCHS). CCHS issued $16 million in bonds to finance the project and the City of Carbondale pledged the proceeds of the additional 1/4% home rule sales tax to provide annual debt service payments.  Annual debt service payments are approximately $800,000.  Ordinance 99-06 also directed the Carbondale City Council to "take action to repeal the 1/4% increase in the City's home rule sales tax" once the CCHS bond is retired in full.  The City of Carbondale will make the final debt service payment in October 2017.  Although Ordinance 99-06 directs Council to repeal the tax following the retirement of the CCHS bond, it is the opinion of Staff that a seated Council doesn't have the legal authority to direct a future Council to take specific action(s). As such, and to avoid any confusion, Staff recommends that if the City Council wants the 1/4% tax established in Ordinance 99-06 to continue, then affirmative action should be taken to confirm the continuation of the tax.  

On March 25, 2014, the Carbondale City Council approved Ordinance 2014-10 which imposed an additional 1/4% home rule sales tax.  This tax was imposed primarily to defend against the potential loss of shared State revenue that the Governor's office and legislature were considering at that time.  Ordinance 2014-10 contains a sunset provision which terminates the 1/4% tax automatically on January 1, 2018.  If the Council wants this tax to continue beyond the sunset date, then action to repeal the sunset provision should be taken. If not, then the tax will terminate on January 1. 

Currently, each 1/4% home rule sales tax generates approximately $1,023,000 annually that is used for general fund revenues. The FY18 budget was developed with the assumption that each of these home rule sales taxes and their associated revenues would continue.  As mentioned in previous City Council meetings, the loss of one of the 1/4% sales taxes would facilitate a budget shortfall of approximately $321,092 for FY18. Therefore, if revenue is reduced by this amount then additional cuts to personnel and/or services will need to be made to mitigate the loss of revenue or budget adjustments should be made to reflect that the City will produce a projected budget deficit for FY18.  The State of Illinois allows home rule communities to adjust their home rule sales tax rates in 1/4% increments.  Ordinances must be filed with the Illinois Department of Revenue by October 1 to begin implementation by January 1 or must be filed by April 1 to begin implementation by July 1.

Attached to this agenda item are 5-year budgets with 3 scenarios; one assumes that both home rule sales taxes continue, another assumes the loss of revenue from one of the 1/4% taxes, and the last assumes the loss of both sales taxes. Staff has spent considerable time analyzing the City budget and recommends that each of these taxes be continued if the City Council wants to maintain current service levels.  

Recommended Action:

It's recommended that the City Council Amend Title 7 of the Carbondale Revised Code to repeal the sunset provision in Ordinance 2014-10, maintaining the 1/4% home rule sales tax, and affirm and maintain the 1/4% home rule sales tax established in Ordinance 99-06.