Elmhurst aldermen Monday voted to put off any decision raising the city’s one percent home rule sales tax or adding a stormwater fee as they wrestle with how to pay the interest on the city’s growing bond debt.
In recent years, city officials have abated interest payments on general obligation bonds. With the abatements, the cost of the interest payments weren’t added to property tax bills for city homeowners. Instead those interest payments have been covered by other city revenue sources, including sales taxes.
This week’s 12-2 deferral vote came in response to an unusual split between the four aldermen on the city’s finance committee. Committee chair Ald. Noel Talluto and vice chair Ald. Kevin York recommended deferring a decision to further study funding options. The remaining two members, Ald. Michael Bram and Tina Park, recommended a one quarter of one percent increase in the home rule sales tax on July 1.
Both sides agreed the city has enough money in its general fund to pay debt service through 2020. But Bram said now is the time to take action.
“This is a need,” he said, noting that the council had already approved the bonds on which interest must be paid. He reminded council members that one quarter of the city’s current one percent sales tax is already designated for stormwater costs.
Bram also said the cost of any sales tax increase would be borne not only by residents, but by non-residents spending money in town. But he didn’t dismiss the possibility of some kind of stormwater fee in addition to a sales tax increase.
“We may need to look at more than one pot of money,” Bram said.
Talluto agreed a stormwater fee should be looked at, but said city officials don’t need to take immediate action. Funds are available for any debt service in 2020, she said.
“Any recommendation would be premature,” she said, calling for a “thorough review, which we have time to do.”
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Ald. Michael Honquest remarked that the current economic boom may not last forever and that the issue deserved further study beyond simply increasing taxes.
“I’m in complete support of the majority report (recommending deferral),” he said. “We need to take some time to consider expense reduction and tax increases.”
Ald. Scott Levin recommended consulting with the business community before taking any action on a sales tax increase, since that could affect their ability to compete with retailers in other towns. Elmhurst auto sales are an important city tax revenue source.
In past years, city officials have said taxes on vehicle sales account for about 35 percent of the city’s total sales tax revenues, which provide about 20 percent of general fund revenue.
Stormwater problems have driven much of the city’s bond borrowing, Levi reminded his fellow aldermen.
Total bond borrowing through the end of 2019 is about $90 million. Much of those funds have or will go to major stormwater projects. The city is likely to borrow another $9 million this year (2020) and an additional $25 million in 2023, according to Talluto and York’s report.
“Ten years ago we didn’t have all these stormwater projects,” Levin said. “We’ve taken a leadership role _ to respond to our community, to save our community.”
Talluto summed up the situation. “We have enough money in our checking account (general fund) to pay our debt service this year,” she said.
With Bram and Park voting no, the other aldermen voted to accept the recommendation to defer any decision on raising the city’s home rule sales tax.