Charlie Gorney - Feature Story

Is the sales tax increase sending business elsewhere?

Can the one percent sales tax increase passed in Galesburg last November send business away from the city?

Voters in Galesburg approved on November 2 a one percent sales tax increase to partly fund the roughly $110 million Master Facility Plan approved by the Galesburg Schools District 205. This brought the city’s sales tax rate up to 8.5 percent, the highest in the region.

The plan’s skeptics raised their concerns during the debate over its merits. One such concern was that higher rates in Galesburg would encourage shoppers or homebuyers to go elsewhere. Advocates of the plan countered that it is still cheaper to buy at home after considering the cost of traveling to Peoria or the Quad Cities, for instance.

Illinois State Representative from Rock Island Patrick Verschoore agrees. He introduced the Illinois County School Facility Tax Act in 2007. It provided for the enactment of such tax increases, pending a vote by referendum.

“With the price of gas at three and a half dollars a gallon, they’d be biting their nose off to spite their face,” Verschoore said. “It costs more to travel there than what the extra sales tax would be. … I think that’s kind of a weak argument.”

Verschoore also described sales tax increases over property tax increases, given that Illinois has high property tax rates relative to the rest of the country.

“If we can get this sales tax, it would probably hold down the property tax,” Verschoore said, adding that “the state is not able to pay these schools what they have coming. They’re really in a crunch, so they could use this money.”

Galesburg Area Chamber of Commerce President Robert Maus said there were mixed feelings among the Galesburg business community as to whether the sales tax increase would be advantageous. He positively cited the exemptions from the tax, including groceries, prescribed medications and auto sales.

“From the chamber standpoint, we are huge advocates of buying local.” Maus said. “Anytime you possibly make that less competitive, that’s a cause for concern. … [But] it’s less of a burden than, perhaps, if it were done through property taxes, because all of our business owners, obviously, have property taxes as well.”

Maus explained that some more expensive purchases would be better made in Galesburg, even with the additional tax. He talked about “white goods” such as washers, dryers and refrigerators. While a consumer might save substantially in a county without the extra one percent tax, that consumer would still need to pay for gas to get elsewhere. And when a white good needs servicing, those who bought locally have an easier time getting that service in a timely manner.

School administrators and community members who supported the facility plan and tax increase also argued that while Galesburg’s sales tax rate is temporarily jumping above neighbors’ rates, our neighbors will soon follow in suit and take advantage of the new law. But it is not yet clear that this is the case.

Moline School District 40, which is in Verschoore’s district, was part of the impetus behind the original legislation allowing for these tax increases. However, Rock Island County rejected the measure in 2009.

District 40 Superintendent Cal Lee said that they encouraged the original bill. But while their first attempt did not succeed, they plan to give it another try in the future.

Chris Coplan, web and print content developer for Peoria School District 150, said that they have neither tried to make a sales tax increase, nor do they plan to do so. Coplan said that the Peoria electorate voted for a sales tax to support a Peoria museum, and the school district does not want to impose yet another increase.

Capital projects in Peoria schools, according to Coplan, have been funded for the last few years through the public building commission, but that source is not inexhaustible. He also said they are working on a space-needs facility study to be implemented in the future.

“We’re not necessarily looking at what we need to build and what we don’t need to build, but how we can use our buildings more effectively and efficiently,” Coplan said, but this project would be funded within their budget as it already functions.

Warren is the only county neighboring Knox which has passed a sales tax increase for school facility use, according to the Illinois Association of School Boards. Fulton tried and failed to do so in 2009, and Mercer has a ballot measure in the April local elections to make such a tax increase.

Overall, Maus said, there were many in the business community who ended up supporting the sales tax increase. To him, it was a matter of the facility plan’s value to the community.

“If the plan, as they saw it, made sense, they would still probably get behind it and support it. And I believe they did,” Maus said. “I think that if you can demonstrate to me that this has value, and that this will improve our community, then we will support this.”