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New sales tax could offset increase in property taxes

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By Dave Bell

Representatives of Fayette County’s four school districts met Monday to hear a presentation about the benefits of enacting a county school facility tax to improve the financial position of the districts without raising property taxes.
“This is a tremendous opportunity to bring new funds into your districts, and it needs to be discussed,” Tim King, a financial advisor from Monticello, told school board members and administrators from Vandalia, St. Elmo, Ramsey and Brownstown. Also in attendance was Steve Knebel, chairman of the Fayette County Board.
Though the legislation authorizing the tax was passed by the Illinois General Assembly nearly three years ago, only six counties in the state have enacted it so far. Several others are considering it. The concept was introduced in Iowa, where nearly every county in the state has adopted it.
In essence, the legislation allows counties to increase the tax rate in .25 percentage increments up to 1 percentage point on items currently taxed at 6.25 percent. The countywide Retailer’s Occupation Tax (sales tax) must be proposed by the county board and approved by the voters.
It does not apply to titled or licensed vehicles, food, drugs, medical supplies, resale items or specifically exempted items (such as farm supplies and services).
Currently, the Illinois sales tax base rate is 6.25 percent. Of that, 5 percent goes to the state, .25 percent goes to the county and 1 percent goes to municipalities.
The proposed tax revenues would be distributed to school districts, based on the number of students residing in each district.
Generally, the school facility sales tax revenues are designed to help districts raise funds for construction projects. They also can be used for other purposes, such as fire prevention, safety, energy conservation, disabled accessibility and school security.
And finally, the revenues may be used to make payments on existing bonds that were used for capital purposes.
The funds may not be used for computers, furniture and equipment with a limited life.
“This represents potentially big numbers if you go the full 1 percent,” King told the school officials. “This is serious money – about three-quarters of a million for Vandalia. That’s not chump change.
“It could keep your districts going for many years to come.
“And the thing that makes this unique is that you can use these funds to pay off existing bonds – which can give you an immediate reduction in property taxes. Using this tax, you are spreading the burden over a much larger tax base.”
Following the 45-minute meeting, Vandalia Superintendent of Schools Rich Well said he assembled the representatives of other county schools because he wanted them to decide if they want to pursue the tax.
“We wanted everyone to hear the same story,” Well said. “We’ll all have to decide whether to put it on the ballot or not.
“Our board is looking at it to lower property taxes. We will make our decision in November or December.”
King told the group that if they wanted to put the tax question before voters in the April 5, 2011, consolidated election, the county board would have to pass a resolution in support of the tax by Jan. 17, 2011, and file it with the county clerk by Feb. 3, 2011.
Well noted that Montgomery County is voting on a school facility sales tax in next week’s election and Shelby County will vote on it in the spring of 2011.     
Several area counties and municipalities currently have tax rates higher than the state minimum of 6.25 percent. Those mentioned by King on Monday include Effingham (6.50 percent), Flora (7.50 percent), Clay County (7.00 percent), Fairview Heights (7.85 to 8.35 percent), Belleville (7.85 to 8.85 percent), Collinsville (8.10 to 9.10 percent) and Greenville (6.75). Others include Champaign-Urbana (8.75 percent) and Chicago (more than 10 percent).
“It’s a great way to start shifting part of the tax load to other sources,” King said. “These are locally generated monies coming back to your localities.”
After the meeting, Well noted that monies generated annually by a 1 percent tax would be about $750,000 for the Vandalia district.
That would represent about half of the money the district pays each year toward retiring its bonds. As a result, the district could reduce its property tax rate considerably and still have enough money to make the bond payments.