Local villages’ tax revenue continues to drop
State tax revenue collections took a dive in the first quarter of 2009, dropping 11.7 percent compared to the same period last year, according to an analysis conducted by the Rockefeller Institute.
This is the largest decline in the 46 years for which quarterly data is available.
State revenues dropped drastically due to a hard decline in income and sales tax collections, which are considered shared revenue, meaning the state collects the taxes and then reimburses a portion to local governments.
Unlike property taxes, which have remained relatively stable, income and sales tax revenue streams are heavily effected by shifts in the economy, particularly unemployment.
However, the dropping figures are not solely attributed to the recent economic recession.
State and local tax collections have been clearly trending downward since an unusually high 2005 growth, and growth rates that were more in line with historical averages in 2006, according to the Rockefeller study.
Area villages have been feeling the pinch of financial shortfall as well, as they have cut staff and pushed back projects until revenue picks up again.
Barrington
The Village of Barrington has reported heavy drops in sales tax revenue in 2008 and 2009, with overall revenues per month declining since 2005. The village’s sales tax revenues decreased about 16 percent this year, according to Jason Hayden, director of community and financial services for the Village of Barrington.
He also estimated that the village will only take in $825,000 in income tax this year, compared with the $970,000 it took in last year.
“It makes things much more difficult,” Hayden said. “We kind of projected that would happen in the fall of 2008.”
The village was forced to cut 13 full-time positions due to decreasing revenue.
“A lot of our property taxes are tied to the car dealers,” Hayden said. “Automobile dealers have been hit hard. If we had a Target or a Wal-Mart, that might set-off some of that.”
The decrease from 2008 has recently slowed, with Barrington reporting a decline of 8.43 percent in August, compared to a monthly decline between 25 and 35 percent since January.
The one bright spot is that now is a good time for a municipality to issue debt, he said, as interest rates are so low. The village is getting a rate of 3.5 percent, Hayden said.
Fox River Grove
Unlike other area villages, Fox River Grove’s numbers have proved inconsistent.
“We had two really good months in the early part of the year and then it’s gone down,” said Penny Toppel, village treasurer.
“Sales tax is really hard to predict. We once had a difference from one month to the next of $12,000.”
The most the village has collected in sales tax revenue is about $40,000, Toppel said.
Fox River Grove’s most recent sales tax reports available from the Illinois Department of Revenue show that revenue collected from the month of July is up nearly 30 percent from the same period last year.
Income tax is down 15 percent, Toppel said, which is less than what the village budgeted.
“When we did the budget, those weren’t the figures the state gave us,” Toppel said. “They’re going way down from what they predicted then.”
However, Fox River Grove has not been feeling quite as dramatic decreases compared to other villages.
“We always try to tighten the belt, so we haven’t had to let anyone go,” Topple said. “I don’t know if we’ll be able to say that at the end of this year.”
“We’re gonna have to be a little bit more frugal,” she said.
Cary
During 2009, Cary has logged consistent decreases averaging between 10 percent and 20 percent, with the largest coming in February. April and May, the last two months for which data was available had nearly identical drops at around 11.9 percent.
There’s “no doubt” about the village’s slumping numbers, said Village of Cary village administrator Cameron Davis. But he said he doesn’t think the downward trend will continue.
“I clearly think that the sales tax numbers are going to turn around in the long-term,” he said. “I think what we’re experiencing right now has a relationship with the national trend. If you see 10 years of steady increases, I have no reason to believe that [sales tax revenue] is going to drop 20 percent and stay there. The steady rate of increases will happen again—the challenge is getting through it.”
The Village of Cary has also had to cut personnel, reducing its staff by 20 percent.
“Times like these really encourage us to look for new ways, even smarter ways, to do business, and I don’t think that’s a bad thing, and certainly not a bad thing for the tax payers,” Davis said.
Palatine
Like other villages in the area, Palatine has seen decreases in tax revenue, but is only between 3 percent and 4 percent below budget estimates, according to Mike Jacobs, deputy village manager for the Village of Palatine.
“We were conservative in our budget,” Jacobs said. “We were looking that [the economy] would only get worse.”
Records from the Department of Revenue put Palatine’s sales tax revenue at an average of 10 percent less than 2008 on a month-to-month basis.
“We are behind,” Jacobs said. “But are we drastically behind in revenue? No.”
