Fox Valley sales tax rebound could be positive indicator
By Steve Lord firstname.lastname@example.org September 22, 2012 8:28PM
River's Edge Cafe manager Reese Boyd rings up a sale for customer Adrian Balderas on Friday, September 21, 2012 in Aurora. | Steven Buyansky~Sun-Times Media
Sales tax receipts
Chart compares sales tax receipts in area towns. Figures are in
millions of dollars.
City type of tax 2007-08 2008-09 2011-12
Aurora sales tax 19.7 18.8 19.9
Aurora home rule sales tax 18.4 17.6 18.7
Naperville sales tax 27.1 25.5 28
Elgin sales tax 11.8 10.7 11.5
Elgin Home rule sales tax 5.3 5 5.1
Geneva sales tax 5.1 4.6 4.7
Geneva non-home rule sales tax* 2 2.1
Oswego sales tax 4.6 4.5 5.1
Yorkville** sales tax 2.5 2.5 2.55
* Geneva voters approved a city sales tax that took affect for 2008-09
** Yorkville voters approved a city sales tax that is dedicated to paying off a sewer bond, so is not included in chart
Source: Illinois Department of Revenue
Updated: October 24, 2012 6:07AM
When Karen DeAngelis answered the phone, you could hear the uptick in her voice.
“I’m glad someone is doing a story on something positive,” she said. “This is exciting news.”
Exciting for DeAngelis, the Finance Director of the city of Naperville, for sure. But it’s also something that could be exciting for the area, and perhaps the entire state.
DeAngelis had just been preparing a report for the Naperville City Council on how sales tax, and almost all revenue sources for the city, are on the rise. That includes income tax, real estate transfer tax and permit fees.
For the four months of May through August, DeAngelis said those revenue items were up 40 percent from the same four months last year.
“The last time we had this number was the summer of 2007,” she said.
That’s a magic number, because it was after 2007 that sales taxes and other revenue sources started dipping for local government at a rate that prompted layoffs and delays of projects for roads and other infrastructure.
At the time, it was an indicator of a sinking economy locally and throughout the nation. So, with sales tax now on the rise, it could be an indicator of the economy getting better overall.
In Naperville, Aurora, Oswego and other area communities, sales tax receipts have bounced back and are now at a higher point than they were five years ago. And Elgin and Geneva are nearing that mark.
More to spend
While unemployment figures remain dismal, sales tax could be an indicator of increased sales, meaning people have more to spend and are spending it.
DeAngelis pointed out sales tax is up 9 percent in Naperville from last fiscal year — roughly speaking, that’s from about $25.5 million to $28 million — and she has seen a figure that retail sales are up about 6 percent across the country. Naperville’s local sales tax revenue of $28 million for 2011-12 is even higher than the $27.1 million it received in 2007-08.
She couples that with the fact that per capita income tax in Illinois is up, too — about 35 percent from May 2011 to May 2012.
That could indicate people have more to spend, and are spending it, DeAngelis said.
“I do think people are spending more,” she said.
Rebounding above ‘07
It bodes well for the local economy in Naperville. DeAngelis said she realizes Naperville is a little different than some other communities, with a strong local economy.
But a look at other area towns shows that sales tax is rebounding or at least holding its own in other Fox Valley towns.
In Aurora, 2011-12 sales tax was about $19.9 million, up from the about $18.8 million in 2008-09 and even above the $19.7 million from 2007-08.
All these numbers are based on distributions from the Illinois Department of Revenue. They are based on the state’s fiscal year of July through June, so they don’t always match up exactly with individual municipalities’ fiscal years.
Elgin received $11.5 million in local sales tax in 2011-12, compared to $10.7 million in 2008-09. But that is not quite back to the 2007-08 level of $11.7 million.
Oswego was up to $5.1 million for 2011-12 compared to $4.5 million in sales tax for 2008-09 and $4.6 million in 2007-08.
Coming back slowly
In Geneva, the city’s own sales tax report shows the city received about $4.6 million in 2011-12, compared to about $4.5 million in 2008-09. But it’s not back to the $5.1 million Geneva received in 2007-08 or the $5.3 million the year before.
Still, Mary McKittrick, Geneva city administrator, said city officials are “cautiously optimistic” about sales tax and the economy.
For the first five months of the 2012-13 fiscal year, the city has received more each month from the state than it did in that same month last year. For instance, for the most recent payment received this month, the state gave Geneva $423,485, compared to $409,812 at the same time last year.
“It’s up a little bit each month,” McKittrick said. “Is it a trend? Well, it’s a little bit early to say, but I’m hoping that it is.”
McKittrick pointed out that Geneva has experienced many of the same variables locally that make the economy hard to predict nationally, such as the drought, which affects the costs of almost every commodity, and stores closing while new ones open. So far, McKittrick said despite some high profile store closings, Geneva is ahead on the trade-off between stores closing and opening.
Gas price influence
Another cautiously optimistic official is Jeff Wilkins, Kendall County administrator. Kendall County received $828,484 in sales tax in its 2010-11 fiscal year, and optimistically budgeted $970,000 for the 2011-12 year, which ends Nov. 30.
Wilkins said after getting an $82,369 payment for from the state this month, the county “might just make” the budgeted amount.
He said the upturn in sales tax is “not necessarily” a sign of a better economy. It could be a sign of higher prices, he said. He pointed out that there is sales tax on gasoline, for instance, which keeps going up.
“That would be not such a good sign,” he said.
So, it remains to be seen if the upturn in retail sales is indicative of an overall economic upturn.
But Khan Mohabbat, a professor of economics at Northern Illinois University in DeKalb, called the rebound “a good bet.”
“It’s a good indicator that people are spending more money,” he said.
He said there are other good signs for the economy. The housing market seems to be better than it has for several years. And the Federal Reserve recently announced it would buy back mortgage securities. Mohabbat said the Fed usually does not act if it doesn’t see a chance to positively influence the economy.
“The interest rate is low, and they’re trying to push it down farther,” he said. “The economy is slowly moving upward. We just have to take it a day at a time.”