Crystal Thomas
The State Journal-Register
The city of Springfield’s decision earlier this year to raise local sales and telecommunication taxes will begin to hit shoppers and residents on Sunday. In almost all areas of the capital city, shoppers will see the total sales tax rate go from 8.5 percent to 8.75 percent, with city government’s new share being 2.5 percent.
The total telecommunication tax rate increases from 11 percent to 13 percent. The city gets 6 percent, while the state takes 7 percent.
“What it means is if they go out and spend $100 on an item or going out to dinner, they will pay an additional 25 cents,” budget director Bill McCarty said of the sales tax increase.
Telecommunication excise taxes apply to bills for cellular and landline telephones, though not for cellular data packages or internet-based telephone communications.
Springfield’s new sales and telecommunication tax rates will reflect the same rates as similar-sized central Illinois towns like Bloomington and Normal. Decatur, Champaign and Peoria all have a 9 percent sales tax rate. All of those communities already take the maximum amount of telecommunication tax allowed under state law, which is 13 percent.
The city sales tax rate may change again if Sangamon County voters in November OK a 1 percentage point increase to pay for public school infrastructure needs throughout the county.
Mayor Jim Langfelder proposed raising the two taxes in conjunction with $3.7 million in cuts in response to two years of budget deficits. Going into the budget planning, the city predicted an $11.5 million revenue shortfall and attributed it to increased police and fire pensions and declining sales and income tax revenue.
All but one alderman rejected raising the sales tax at first, saying they wanted to cut the budget more. After finding about $365,000 in cuts, seven aldermen and the mayor came back and voted for the increase in February.
Bumping up the sales tax means more than $4.3 million in city coffers annually. The $1.2 million expected annually from the telecommunication tax hike will be dedicated to the city public library’s operating costs. However, even with cuts and additional revenue, the city council budgeted to spend $2.5 million of the city’s fund balance, often considered its rainy day fund.
Since the Springfield City Council passed a budget, the city’s finances have gotten generally better, according to McCarty.
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‘Wild cards’
McCarty said there were some “wild cards” that affect the city’s finances. Revenue from Lake Springfield property annexations came in sooner than expected and netted the city hundreds of thousands of dollars, McCarty said.
Plus, the state legislature cut an administration fee it charged cities for the first time last year for collecting sales tax from 2 percent to 1.5 percent. The city also expected the state to take 10 percent of income tax again this year, but lawmakers only chose to take 5 percent of the city’s share. The changes give the city $600,000 more annually to work with.
A recent U.S. Supreme Court decision that found larger online companies have to collect and remit sales tax to states could also mean a small bump in the city’s finances. If Illinois pulls in $200 million because of the court decision, Springfield is projected to receive about $300,000 to $325,000 in use taxes, according to McCarty.
McCarty said he’s hoping the state legislature will work on making online sales tax distribution to local governments based on an item’s point of purchase.
A still-unsettled contract with the city firefighters also could affect finances. Once the contract is finalized, the city mostly will need to pay firefighters three years worth of back salary and benefit changes.
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Joe McMenamin for Ward 7 