West Chicago initiates it's first "New Tax" under Home Rule

Flexing their home rule muscle, West Chicago officials Monday established the city's first sales tax of its own.

The city council unanimously approved an ordinance that creates a home rule-imposed sales tax of .25 percent.

Consumers' pocketbooks will be largely unaffected, though, because the new tax will be canceled out by another being lifted: the .25 percent DuPage Water Commission sales tax.

A recently passed state law requires the commission to stop taxing the city on Dec. 31. West Chicago doesn't use the DuPage water services and lobbied for years to be released from the tax.

"There will be no impact on most goods," City Administrator Michael Guttman said.

Residents will pay less taxes on items like cars, trucks, and prescription drugs -- goods home rule taxes don't cover.

Two years ago the city council earmarked the gas and electricity use taxes as sources for the capital projects fund. But revenue from those taxes don't increase to keep up with the cost of materials necessary to complete capital projects, Guttman told aldermen.

As the capital project fund is currently structured, Guttman estimates that it will have a $802,745 deficit by fiscal 2011 -- and the problem will only grow from there.

A solution is needed, he said.

Home rule municipalities can enforce sales taxes in one-quarter increments, with no limit. The city's existing 1 percent tax brought in $3.5 million in 2006; Guttman predicts that the additional .25 percent tax will increase revenue by about $330,000.

Those funds will go toward facility improvements and will help maintain the street and pavement improvement programs. But they're not enough to put a street reconstruction program in place in the near future.

Guttman told the council that if they wanted to find a permanent solution, aldermen could direct staff to investigate a vehicle fuel tax or ways to tie the gas and electricity sales taxes to inflation. The council didn't discuss those options Monday.

The new tax will take effect Jan. 1, 2008. The change will keep West Chicago's sales tax rate at 6.75 percent -- one of the lowest in the area. Only Bartlett and Geneva have a lower rate, 6.5 percent. Wheaton has a total 7.25 percent rate; St. Charles' is 7.5 percent; and Warrenville's stands at 8 percent.