Town Hall Meeting to Examine Sales Tax Referendum

The title for a town hall forum next week tries to simplify the city’s debt woes into a clear choice for voters: sales tax vs. property tax; which is better?

Mayor Valerie Burd, who is seeking re-election April 5, is hosting a meeting at 7 p.m. Monday at the . The public meeting comes about five weeks before voters will determine whether city leaders can raise the local sales tax.

The meeting will start with a presentation from city staff on the history of the city finances and end with a question and answer period, Burd said.

“We’re going to explain how we got where we are and why you can’t cut the general fund to solve the problem in the sewer fund,” Burd said. “We’re trying to make people understand that even if we had $1 million sitting in the general fund that wouldn’t solve the problem in the sewer fund because it’s so big.”

Burd by 1 percentage point as an alternative for using property taxes for debt payments in the city’s sewer and water fund in 2012-2013. The City Council pushed those debt payments onto property tax bills for the 2011-2012 fiscal year, which will cost the owner of a $250,000 home about $320 more in property taxes.

The city will need to pay a total of $3.04 million in 2012-2013 on 10 different debt instruments, according to a Jan. 14 memo by City Administrator Bart Olson. Olson has estimated the 1 percentage point sales tax increase would generate about $2 million in revenue and bring the total sales tax in most of the city to 8.25 percent.

City leaders  then would have to decide if they wanted to refinance the sewer debt or rely on other revenue sources (such as fees from those connecting to the sewer) to cover the portion of the bond payments that the sales tax revenue doesn’t cover, Burd said.

City leaders balked at refinancing the debt earlier in light of the interest it would cost the city over the life of the bonds.

Before aldermen voted to increase property taxes this year, Olson that the city’s debt payments for 2011-2012 could be reduced to $1.5 million if leaders refinanced many of the bonds. A $30 sewer fee would have raised almost $1 million, but the city would have paid $11 million more in interest over the life of the bonds, Olson estimated.

Some aldermen candidates have supported the sales tax referendum, while at least one remains undecided.

Alderman Joe Plocher, who is seeking re-election in Ward 2, said the sales tax increase spreads the burden more evenly than increased property taxes. For example, some property owners own several rental properties and may have leases in place that prevent them from passing the added property tax cost onto renters.

“I’d rather not do either but, unfortunately, we have to pay the bills,” Plocher said.

He said he expected that if the sales tax referendum passed, the city would be able to refinance the bonds at a more favorable interest rate than banks had offered in earlier projections.

“We’re going to have to see what the banks come back with,” Plocher said.

For his part, Ward 2 Alderman Gary Golinski, who is running against Burd for mayor, agreed that the sales tax was more equitable – but it likely will be a hard sell for voters.

“How do you attract new business when you’re raising real estate and sales taxes?” Golinski said, adding that attracting new residents and businesses would mean more sewer tap-on fees.

Those tap-on fees were how the city originally planned to cover much of the debt payments.

Library board member Robert Allen, who is running against attorney Carlo Colosimo for Ward 1 alderman, said he was undecided on the referendum.

The sales tax increase would spread the burden to those who shop in Yorkville but live in unincorporated areas, while people can write off their property taxes when calculating their income taxes.

“It’s good people are being asked their opinions on this,” Allen said.