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Carroll County Illinois 1% Sales Tax Referendum Facts and Fictions

March 30, 2011

[This is the UNEDITED version of an article I wrote that can be found here. It was, as I understand it, edited due to space concerns. Enjoy.]

By Mick Parsons, for The Prairie Advocate News

Ever since the West Carroll School District voted to go ahead and put the 1% sales tax referendum on next week’s ballot, the discussions have ranged from the statistical to the virulent, to the absurd. Area Chambers of Commerce – most notably the Savanna Chamber and the Lanark Chamber – have come out against the proposed sales tax, while the Mount Carroll Chamber is either unwilling or unable to come to enough of a consensus to say either way. West Carroll Superintendent Craig Mathers, who has become the reluctant but steady spokesman for the sales tax has been adding mileage and burning gas going from Chamber to Chamber, city to village, and once or twice to the Carroll County Board, trying to make the case that the sales tax will not only help the schools, but will be a benefit to home owners living in the West Carroll School District. The Chadwick-Milledgeville school district has said that, if the sales tax passes, it will use the money the same way West Carroll intends to – which, according to Mathers, is for future Health/Life/Safety and building repair and for the abatement of property taxes by paying down the bonded debt. Eastland has been sitting the fence on this issue since it was first brought up several months back and has made no official statement either way. But if it does pass, by statute, Eastland would be obligated to use the money in the exact same manner.

 

The problem is two fold, and the first one is fairly obvious. Whenever people hear the word “tax,” an interesting physiological and psychological event occurs – some people’s sphincters tighten and their brains go into a blind panic. This is usually accompanied by the usual fight or flight instinct responses – which means that blood flows away from the brain and other extremities, and the adrenaline kicks in. In more contemporary parlance, this is also referred to as General Adaptation Disorder. Simply put: people hear the word “tax” and they get ready to fight it out in whatever socially acceptable way there is – over coffee, at the bar, or in the voting booth.

 

The second problem is a bit murkier and more problematic. While the need for a quality education is generally accepted as a necessary component for success in America, the fact is, there are people who simply don’t want to PAY for public school. As a country, we were sold a bill of good several years back – The No Child Left Behind Act – that was supposed to fix all of our educational woes. All it did was hand down unfunded mandates to public schools, regardless of their ability to pay. The Obama Administration’s answer to this was Race to The Top, which Illinois schools ended up seeing nothing of in spite of several painful – and again unfunded – mandates from Springfield. Then, throw in the Walker’s falderal in Wisconsin over collective bargaining, and it’s spread to Michigan and Ohio, as well as the general misconception that teachers only work until 2:30 and have summer off.

 

What you end up with is a caustic environment in which teachers are branded failures if the students don’t pass the test but are critisized when they take a more holistic or comprehensive approach instead of teaching the test; an environment in which school administrators are called liars in open Chamber meetings, and in which parents, who remember with no small bit of nostalgia and the tempering of time what it was like “when I was in school” are susceptible to the massive amounts of misinformation available in the grocery store check-out, at church, at the coffee-shop, the salon, and the bar.

 

But the fact is that while these issues might be tangentially related, they are– to use a budgeting term – on different line items. The School Facilities Occupation Tax has nothing to do with any of things mentioned above; but when people talk taxes and schools and get their dander up, these are the things people throw in that tend to confuse and cloud the issue. So let’s begin with the facts.

 

The Facts: By Statute

 

As Mathers has stated – repeatedly – the money generated from the 1% School Facilities Occupation Tax is earmarked by law (Public Act 095-0675 enacted in 2007, if you care to look it up) for “the acquisition, development, construction, rehabilitation, improvement, financing and installation of capital facility projects.”

 

Also by law, the funds can also be used to pay down outstanding bond debt resulting from bonds sold for facility construction. The money to pay that debt back comes out of the property taxes West Carroll residents pay every year. So while a significant amount of your property taxes do go towards the schools, a fair percentage of that goes to simply paying off bond debt.

 

Mathers has said that in West Carroll, money generated from the School Facilities Occupation Tax – which could bring in between $650,000-$830,000 (53% of which will go to West Carroll since it’s the largest school district) depending on how and whether the county board decides to implement the tax would be split between rehabilitation/repair costs and to pay down the bonded debt. Reducing the district’s bonded debt would mean that property taxes within the district would go down.

 

Mathers calls this a “tax swap.” Funding for all three of the county’s districts come from a combination of property taxes and state funding which depends on the number of students. This is the twofold problem in funding schools – not only in Carroll County, but in the entire northwestern corner of the state. Populations are going down. Fewer people means fewer students, which translates to less money from the state – which is, at current count, more than $1 million behind in it’s payments to West Carroll ALONE for this academic year. Fewer people means fewer property owners and a shrinking tax base. At the bottom end, if the county board decides to implement the tax at 1/4% – that’s 1/4 of a cent out of every dollar spent on tangible items as described by the Public Act – West Carroll could see around $344,500… not a penny of which would go towards pesky things like teacher salaries, benefits, textbooks, computers, or kick balls.

 

As Mathers has explained, what it would go towards, besides paying down bonded debt, is the inevitable Health/Life/Safety repairs that will come up. West Carroll goes through a Health/Life/Safety inspection every ten years or so, and chances are good that issues will come up. And never mind that brick buildings always need tuck-pointing and that structural repairs are inevitable.

 

The list of so-called tangible items that will be impacted by the sales tax is also prescribed by the Public Act. Among the things EXEMPT from the tax: car, truck, and motorcycle registrations; groceries, except for alcohol and pop; and prescription and non-prescription medicines, drugs, insulin, syringes and needles used by diabetics. Manufacturers and wholesalers who do not market directly to consumers are also exempt from the School Facilities Occupation Tax, as are lottery tickets and insurance policies.

 

Food bought in a restaurant – including fast food – is NOT exempt, and neither is gasoline. Retail goods – those sold to directly to customers – are also not exempt and would be taxed.

 

What this means that anyone who eats at restaurant in Carroll County will be contributing to Carroll County schools. Anyone. If someone drives into Mount Carroll to see a show at Timber Lake Playhouse and then stops to eat a meal or go shopping, they will be contributing to Carroll County Schools. If someone drives into the region to buy antiques at, say, the Heritage in Mount Carroll, or at Pulfords in Savanna, and they stop to shop, to eat, or to buy gas, they will be contributing to Carroll County Schools.

 

The Fictions

 

Fiction #1: This tax will negatively impact local business

 

One of the things I’ve heard people say – from county board members to members of area Chambers of Commerce, to the coffee shop crowd – is that any new tax would discourage business; that, in effect, people would choose to spend their money in Stephenson, Whiteside, or JoDaviess County, or even go over to Clinton, IA, if the sales tax in Carroll County goes up one iota.

 

At a recent meeting of the Mount Carroll Chamber of Commerce, Chamber member Rich “Ozzie” Frey stated “Now is not a good time to take a chance” by raising the sales tax in Carroll County. (Mount Carroll City Council Candidates Speak To Chamber; Chamber Indecisive On Sales Tax Issue, 3/9/11) Paul Tobin, the WCHS Athletic Director, pointed out that when he travels, one of the questions he doesn’t ask is “What’s the sales tax?” At that time, when Chamber President Mike Lenz called the matter to a vote, there weren’t enough votes for the Chamber to be able to come out one way or other. Some have suggested to this reporter that one reason for this was that many of the businesses cater to teachers in the West Carroll School District, and they don’t want to have to explain a stance – any stance at all.

 

This clearly wasn’t the case in the Savanna Chamber of Commerce, which has come out heavily against the sales tax. They also came out against it two years ago, when it was first suggested; as a matter of fact, the Savanna Chamber came out so strongly that they cow-towed and intimidated the West Carroll School Board out of even bringing the issue before the voting public – which, one could argue, counters every Democratic idea the country is founded on.

 

Here’s another interesting tidbit. While Public Act 095-0675 has been around since 2007, there’s currently a bill working its way through the machinations in Springfield – Senate Bill 1737, sponsored by Mike Jacobs – which would allow each school district with a population less than 500,000 to do individually what Public Act 095-0675 allows the entire county and all three school districts combined to do – that is, add a sales tax within the individual district, not to exceed 1%, for the exact same uses as the currently proposed School Facilities Occupation Tax.

 

The only difference is that, if SB1737 were to become law, the power to tax would reside with the school board and not the county board. The question then becomes this: would people choose not to shop in Mount Carroll or Savanna if the West Carroll School Board had the power to tax? That would mean driving to the Quad Cities, to Sterling in Whiteside County, or to Freeport in Stephenson County, or crossing the river into Clinton. Given the current trend in fuel prices, this smacks of cutting off your nose to spite your face.

 

And if you’re going to spite your county and its students by crossing the river into Clinton, anything you buy there supports Iowa schools. The state of Iowa has had a similar tax for the past 20 years. If you drive through Clinton and pass the high school, you will see construction happening – construction supported by their School Facilities Occupation Tax. And, if that doesn’t annoy citizens of Illinois, I’ll go one better. One of the things they’re building there is a brand new swimming pool.

 

The question then becomes: Why is the Savanna Chamber of Commerce so vehemently against the sales tax?

 

Fiction #2: The School Facilities Occupation Tax will push businesses out of the county

 

There is a bit of fact to this particular fiction, but only at face value. Palatine Oil has threatened to move it’s office located at 421 1st Street – which is little more than a telephone relay station to it’s headquarters 62 miles away in Roscoe – from Savanna if the sales tax is passed. The advantage to Savanna is that with Palatine having a local office, the city does see some tax revenue as a result. Of course, half of that money is rebated back to Palatine Oil, which calls into question just how much money is brought in and what is actually kept.

 

And then there’s the fact that, according to the language in Public Act 095-0675, the only tangible goods that are subject to the tax are retail items – items to consumers. Business to business items are not subject to the School Facilities Occupation Tax. And while you may pump gas at a gas station that contracts with Palatine Oil and that gas station will end up increasing the cost at the pump as a result of the tax, Palatine Oil would not be paying a cent more in taxes.

 

This calls into question what the company’s motivation is for what amounts to a scare tactic that has set more than one jaw in the region on edge. There may be four people working in the Savanna office. And yes, to lose any jobs in this economy is tragic. And yes, the threat of losing potential tax money for a city that has it’s share of problems with no real solutions, is more than troublesome. Such a threat has been enough to convince some people in the midst of a fight or flight response that it’s better vote down the sales tax than it is to lower property taxes, redistribute the burden of the schools in a more equitable way, and ensure that West Carroll, if faced with Health/Life/Safety repair and rehabilitation issues, won’t be boxed into a corner with no choice but to accrue more bond debt in order to pay them.

 

Stranger Than Fiction

 

The general atmosphere of mistrust around this issue, generated in large part from what started out as serious concerns about the impact of the School Facilities Occupation Tax, has become so exaggerated that it might be comical if it were only the West Carroll School District that is impacted or if the Public Act weren’t so clearly worded – which is unusual for any piece of legislation coming out of Springfield. At a recent meeting of the Lanark Chamber of Commerce, West Carroll Superintendent Craig Mathers was straight out called a liar when he reminded the Lanark Chamber that the money could be used for tax abatement. It has been suggested that part of the reason that the Lanark Chamber came out so strongly against the sales tax is that they took their cue from the Savanna Chamber; and in fact, Mathers had not been out to talk to them prior to their vote to against the ballot item. Again, it begs the question: what are community leaders – which the members of any Chambers of Commerce surely are – thinking when, rather than read the Public Act and consider the full impact of their vote, they choose to vote based on what amounts to hearsay?

 

We’re back to that fight or flight response. But it would seem that in dealing with an issue that impacts schools and the education of the next generation of Carroll County leaders,voters, workers, and property owners, levity would reign rather than name calling. That vitriol – which, while it lacks forethought or maturity is at least honest – is part of what ends up dividing the electorate, who looks towards its community leaders for guidance as much as it looks to its elected officials to act in its best interest and follow its democratically established will.

 

Several months ago when the West Carroll School Board elected to go ahead with the sales tax referendum, the next step was to for the county board to sign off on allowing on the April 2011 ballot. And although Board Chairman Rod Fritz and county board member Annette Rahn, both expressed individual support for the sales tax – since it would mean lower property taxes – the general feeling among the board has been that even if the voters agree to the sales tax that the county board would not vote to implement it. This is other piece of the puzzle that people sometimes overlook when discussing the School Facilities Occupation Tax.

 

Calling the tax a 1% is something of a misnomer. Yes, it’s true that the county board could, if county voters give the referendum its stamp of approval, implement the tax at the full 1%. But going back to the language of the Public Act, the county board can vote to establish the tax in quarter percent increments ranging from 0% to 1%. At a full 1%, consumers can expect to pay an extra $10 for every $1000 spent on applicable items. If the School Facilities Occupation Tax is set at 1/4 %, consumers would be spend an extra $2.50 for every $1000. In real life terms, a pack of cigarettes – even a cheap pack – costs more than $2.50. So does a gallon of gas. By the best estimate, property taxes on a home valued at $50,000 would decrease by approximately $30, and on a home valued at $75,000 property owners could see their tax bill go down by $45.

 

Whether the county board would refuse to enact the sales tax remains to be seen; and depending on the outcome of next week’s election, it may be a pointless discussion anyway.

 

There is another thing to consider; and because it’s Craig Mathers out doing most of the talking, it’s often overlooked. Chadwick-Milledgeville would see, based on the percentage of county students in the system, 20% of that $650,000-$830,000, and Eastland would see 27%. One of the issues that tends to be on people’s minds when they talk about the School Facilities Occupation Tax is some of the bad taste left in people’s mouths dating back to the consolidation. There are no easy solutions there, since it’s clear that the promise of the consolidation hasn’t worked out the way people thought. But there’s also difference between learning from the past and living in it. And, as Mathers points out, the West Carroll School District has run on balanced budgets for the past three years.

 

What this means is, in spite of the misconception that Mathers is out beating the drum because the schools are in trouble, the schools aren’t in trouble. The sales tax isn’t about saving the district; from his perspective it’s about planning ahead and about making improvements that benefit everyone: students, their families, and Carroll County property owners alike.

 

The School Facilities Occupation Tax could even generate more than the projected amounts. With Thomson Prison looming somewhere on the horizon, along with initiatives by JoCarroll Electric and NIU and Blackhawk Hills to increase broadband internet access in the northwestern corner of the state, and with TCEDA’s regional approach to economic development maybe starting to see some positive impact in Carroll County, there’s a very real possibility that the tax could help fulfill some of the promises of the consolidation without having to ask property and business owners to pony up more than they already are. Mathers has also said that because the half of money generated would go towards tax abatement, West Carroll’s tax rate – 560 – could improve by 30 points or more. This would make the district and the county more competitive in attracting people to live, work, and do business. This would also help keep more local money… well… local. Taking the sales tax out of the equation, the price of fuel isn’t expected to drop anytime soon, which creates more of an incentive to buy local as much as possible. And knowing that one cent of every dollar spent in a restaurant or at the gas pump would be going towards the schools rather than being funneled through Springfield might make the referendum a bit more appealing to an electorate frustrated with the downstate mentality of state government.

 

In the end, though, it comes down to the voters: who they believe, what they choose as a priority, and what they do when it’s them in voting booth without the coffee shop, the beauty shop, or bar in there

whispering in their ear.

 

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