Carbondale hopes sales tax revenue keeps pace with skittish economy
A recent report that found despite increases in its sales tax rate, the city of Carbondale is not bringing in additional revenue has sparked a debate about where the additional money is going.
Two possible scenarios exist. Either Carbondale has fallen victim to the same burden other cities are facing from pensions and infrastructure costs or the city’s declining population has outpaced the tax hikes.
The disparity between tax rates and revenue was pointed out in a Jan. 27 report in The Southern Illinoisan, Carbondale’s daily newspaper. Reporter Dustin Duncan explained that city revenue derived from sales taxes has remained virtually unchanged over the past decade, despite rate increases imposed by its local government.
According to the report, the city only gets 1 percent of the 6.25 percent state sales tax, with the state receiving 5 percent and the county retaining 0.25 percent.
But Carbondale augments its 1 percent share of state sales tax by adding its own surcharges, bringing the effective tax rate for purchases made in the city to 9.75 percent. Broken down, the city is getting 3.5 percent, with an additional 1 percent going to fund school facilities, the report said.
The figure of 3.5 percent includes a 2.5 percent Carbondale-levied tax surcharge, which it can legally increase from time to time in steps of 0.25 percent, Duncan explained.
The controversy surrounds an additional finding published in The Southern Illinoisan’s article. While the tax rate has fluctuated over the past 10 years, the amount of revenue the city receives has not changed: $1 million for every 0.25 percent levied in 2008 versus $993,987 in 2017.
Logic dictates that one possible reason the sales tax revenue is flat could be a population decline. However, U.S. Census Data shows the population for Carbondale has actually increased from 25,902 in 2010 to 26,179 in 2016. City-Data.com reports that the population since 2000 is actually up 27 percent.
In Duncan’s report, Gary Williams, the city manager, said although the enrollment decline at Southern Illinois University-Carbondale could account for some of the revenue drop, other factors are at work.
Williams is quoted as saying, “We are the retail center for the region. So, in spite of the enrollment declines, we continue to get sales tax because people come here to shop. It is also a lot of people that come in here to work every day due to SIU and (Southern Illinois Healthcare).”
The article blamed the 2008 economic downturn for making consumers bearish.
“People lost their jobs, there was uncertainty about the future, and banks quit lending money,” Williams told The Illinoisan. “People hunkered down and stopped spending money.”
Although Illinois has exited the recession, Williams said the state’s two-year budget standoff sapped consumer confidence.
“My gut tells me it is still the state climate,” he said in The Illinoisan. “We just got the budget passed in June.”
A growing -- or at least steady -- population in Carbondale is essential for the state’s future, Williams told The Illinoisan. Without at least 25,000 citizens, City Hall will be unable to increase taxes periodically by 0.25 percent, a tactic they have relied on to weather the skittish economy. It could cost the budget up to $10 million, he said.
“The only way we could take $10 million out of the budget would be massive cuts to personnel and services,” Williams was quoted as saying in The Illinoisan’s report. “Or it is a huge real estate levy … or a combination of the two.”