Municipal financial officials have taken up the mystery of why revenue from taxes on phones is dropping like calls on bad cellular service.
“It’s a fact there is a rapid decline in telecommunications tax revenue,” said Diane Lantz, executive director of the Illinois Government Financial Officers Association. “We’re trying to find a pattern of why that is.”
The association recently did a survey of municipalities across the state to document the drop in revenue. Analyzing that survey is the top priority of the association’s legislative committee.
According to Illinois Department of Revenue tax records, some 800 towns in Illinois lost about a total of $40 million from 2012 to 2014.
Looking at the bigger municipalities in the area, Aurora, Naperville and Elgin all reported noticeable losses in recent years.
Between 2010 and 2014, Aurora’s telecommunications tax revenue went from about $6.2 million to about $5.7 million, according to the Aurora Finance Office. The actual loss is $416,482. Going back further, to 2007, the loss is more like $1.05 million.
In Elgin, the city reported that the revenue went from about $4.3 million in 2010 to about $3.3 million in 2014, a loss of $1.02 million.
Naperville saw its income from the telecommunications tax fall by nearly 18 percent between its two most recent full budget years. The general fund took in $4.7 million from the source in fiscal 2015, the city reported, which was about $1 million less than what was collected the previous year.
Linda LaCloche, Naperville’s communications manager, said in an email that the decline was anticipated as Naperville residents increasingly drop their household phone lines and use mobile phones exclusively.
“We are monitoring these trends,” LaCloche said. “Unless the state re-evaluates the tax formula, the city expects these revenues to continue to decline.”
That is the obvious reason for the decline most often cited throughout the state – that lifestyles have dictated a drop in landlines.
But because the telecommunications excise tax is on all landline and cellular lines, some of that should be offset by more cellular lines.
The law, however, does not kick in on data packages or Internet-based telephone communications.
Brian Caputo, Aurora’s finance officer, said the mystery financial officers are trying to solve is just exactly what the law covers with its current wording.
“It appears maybe the way the law is framed, it may not be counting things — things that are not subject to the law that should be,” he said.
Caputo said part of the mystery is that, while the revenue decline has been steady over a stretch of time, from year to year, it is not steady.
For instance, from 2009 to 2010, Aurora’s revenue from the tax went down almost $400,000, but from 2010 to 2011, it went back up by about $20,000. It went up slightly again in 2012, then lost almost $400,000 again from 2012 to 2013.
LaCloche pointed out that in Naperville, while the loss from the 2014 and 2015 fiscal years was 18 percent, the tax has rallied this year to about $2.2 million in the first five months of the 2016 fiscal year, or a loss of only about 0.5 percent from the same time last year.
“That’s what needs to looked at,” Caputo said. “It rallies sometimes, it comes back.”
As it stands now, cities are limited in what they can do to capture more revenue from the tax. Suburbs are capped at taxing 6 percent, and most of them are there already.
Naperville is one of the few that is not at the cap, taking 5 percent. Algonquin increased its telecommunications tax in July from 3.75 percent to 6 percent, earmarking the new revenue stream for infrastructure needs, and La Grange officials last spring gave their blessing to a 1 percent hike in the excise tax there, bringing it to 6 percent as well.
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Consumer groups, such as the American Association of Retired Persons, are already on record as opposing any increase in the amount of the tax. Many consumer groups also oppose widening the tax to include Internet communications and data packages.
In both cases, opponents say any widening will cost consumers more money.
But almost anything is on the table with the recent expiration of the state’s telecommunications act.
Government financial officials said they are not necessarily calling for a tax increase – not yet, at least.
“We’ve got to analyze things first,” Caputo said.
Steve Lord is a reporter with The Beacon-News. Susan Frick Carlman is a reporter with the Naperville Sun. Mike Danahey is a reporter with The Courier-News.