The state of Illinois will take a 2 percent “collector’s fee” from Forest Park’s non-home rule sales tax, which typically brings in between $1.8 and $2 million annually.
The provision, which is included in the state’s new budget bill passed on July 6, went into effect July 1. The Illinois Department of Revenue, which collects certain types of taxes on behalf of municipalities and then reimburses local governments, will now charge the 2 percent fee.
Forest Park Village Administrator Tim Gillian said Forest Park will lose between $36,000 and $40,000 in funding for infrastructure projects across the village.
That lost revenue will affect the scope of projects in spring 2018, Gillian said. Those projects have yet to be finalized.
The village’s current infrastructure work will not be impacted.
“Anytime there’s a reduction, we’ll have to look at the scope and amount of projects we take on,” Gillian said July 14. “… The moves they make in Springfield definitely impact the smaller communities.”
State Rep. Michael Zalewski (D-Riverside), who is chairman of the House Revenue and Finance Committee, said the 2 percent fee was an Illinois Department of Revenue initiative and a way to recover administrative costs for collecting and then returning the locally imposed taxes.
Gillian, as village administrator, was not too surprised by the new provision.
“Unfortunately … we are getting very used to it,” Gillian said. “The state, through this whole budget dilemma, has been threatening property tax freezes, which would hurt us. … They do that stuff all the time, not really understanding the impact it has, especially on smaller communities like us that are non-home rule.”
Gov. Bruce Rauner has called for a property tax freeze and suggested in 2015 that local governments receive a reduced share of the Local Government Distributive Fund (LGDF), which is funded through the state income tax, as part of his so-called “Turnaround Agenda.”
As reported by the Review, Gillian received an award from the West Central Municipal Conference (WCMC), in part, for his advocacy of the LGDF.
Gillian said Forest Park, through its membership in the Illinois Municipal League (IML) and the WCMC, will continue to lobby state government.
“This is just another effort by the state to reduce municipal funding, even when the funds are locally generated, to offset the state’s budget problems,” Brad Cole, IML’s executive director wrote in a July 15 email.
Local municipalities already get a 1.25 percent cut of the state-mandated 6.25 sales tax. That portion will not be affected by the new provision.
The 2017-18 state budget bill calls for a 10 percent reduction in the amount paid to municipalities from the Local Government Distributive Fund (LGDF). Zalewski, however, said municipalities can expect in 2017-18 to receive the same amount of LGDF revenue they collected in 2016-17.
But Illinois municipalities are still owed LGDF money from the last fiscal year. That revenue will be rolled into payments made in 2017-18 and the total will equal the amount of revenue towns collected in 2016-17.
Had the budget not included a state income tax increase, the impact to the LGDF would have been worse, Zalewski said.
“[State Comptroller Susana] Mendoza was going to be unable to make the 2017 payments, so that 10 percent cut to 2017 would have been much worse, or the towns may have never realized the payment. Things were that bad,” Zalewski said. “All that aside, I’d argue on the whole we did our best to hold LGDF harmless.”
The LGDF reduction is only for fiscal year 2017-18, according to the budget bill, and Zalewski said he will sit down with local mayors to make sure they are part of the conversation about these issues.
“I think the mayors have a very strong voice and we are going to have to revisit some of the things we did to make it less burdensome with regard to LGDF,” Zalewski said. “I don’t know that the book is closed on any of these things. The mayors remain a vital part of all of these discussions.”