Kane County residents may be voting on a referendum question this fall to let the county introduce a new 1% sales tax, which officials say would help fix the county’s budget deficit.
Kane County Board Chair Corinne Pierog said she will ask the board at a meeting next Tuesday to vote on putting a referendum question for a Special County Retailer’s Occupational Tax on the fall ballot.
If the measure is put on the ballot and approved by voters in the November general election, the county will not need to raise property taxes to deal with its deficit, she said.
“I think it’s a really important step for Kane County to take forward in allowing participation, true democratic participation by our residents, to decide whether or not they want to impose this tax upon themselves, upon all of us,” Pierog said in a phone call Wednesday afternoon.
Two Kane County Board committees, the Finance and Budget Committee and the Executive Committee, have discussed the potential sales tax referendum so far. Members of both committees in recent meetings appeared in favor of putting the referendum question on the ballot, but no official decision has been made.
“I happen to think that the sales tax is a path forward that generates a great deal of revenue and spreads it out in a fairly painless way,” District 14 Kane County Board member Mark Davoust said at the Executive Committee meeting on Wednesday.
“And, it includes people from outside of the county,” he said, since everyone purchasing items in the county, no matter where they are from, would pay the tax.
To balance its budget, the county has been dipping into its cash reserves, which officials say will be used up by 2027 or 2028 if there is not a significant cut to expenses or an increase in revenue.
A number of different sales tax rates have been discussed, with the highest being 1%. At that highest rate, those paying the tax would see an extra $1 tax on every $100 they spend or an extra penny for every dollar they spend.
Pierog said the version of the referendum question she will propose at the County Board meeting next Tuesday will include the 1% rate.
At the 1% tax rate, Kane County would have an extra $60 million to spend each year, according to Kane County Finance Director Kathleen Hopkinson. She gave a presentation on the budget process to the Finance and Budget Committee on March 27, then gave a shortened version to the Executive Committee on Wednesday.
Revenue from the sales tax must go towards public safety, according to state law, but since the county spends the majority of its funds on public safety already, it would free up a part of those funds to go to other departments and offices, Hopkinson said.
In 2024, for example, the county has $75 million budgeted for public safety, she said during her presentation to the Finance and Budget Committee.
The Kane County Board has until August to decide on putting the referendum question on the ballot, Pierog said at the March 27 Finance and Budget Committee meeting.
Kane County has found itself with a budget deficit after keeping property taxes flat, except for new construction, for the past 14 years, Davoust said at the Executive Committee meeting on Wednesday.
“Those are popular budgets to vote for. They all had my vote,” he said. “The problem is, and we’re facing it now, is that we’ve been digging a hole. We turned our back on one of the few revenue streams that are available to county government, and this is the result of that.”
The county is currently able to operate at a deficit because it built up its reserve funds during the COVID-19 pandemic by using federal relief funds to pay salaries, Hopkinson said.
Now with those funds expiring or used up, the county is having to use its reserves to pay the difference between its revenues and expenses, according to Hopkinson. At the March 27 Finance and Budget Committee meeting, she said that this spending down of reserves is “not a sustainable thing to do.”
In addition to discussing a possible sales tax referendum, the two committees also considered a number of other ways to balance the budget, including cutting positions, raising other taxes and changing how some taxes get allocated.
According to a presentation by District 22 Kane County Board member Vern Tepe, which he gave at the March 27 Finance and Budget Committee meeting, the county would have to cut around 15% of its total workforce to fully balance the budget.
The majority of those positions would need to come from the sheriff’s department, which would need to cut 58 positions, and the State’s Attorney’s Office, which would need to cut 32 people, he said.
To reduce the projected 2025 budget deficit, Hopkinson told county departments and offices that they should keep their budgets within 3% of their 2024 budgets and should limit the amount of vacant positions they budget for, she told both committees.
This will be “very difficult,” she said at the March 27 Finance and Budget Committee meeting, because contractual services continue to rise in price, leaving less money left over for everything else.
Even with those budget restrictions, Hopkinson said the county will likely need to spend roughly $11 million from its reserves to balance the 2025 budget unless another source of revenue is found or additional cuts are made.
The county used around $5.6 million from its reserves to balance the 2023 budget and is planning to use around $9.6 million to balance the 2024 budget, she said at previous meetings.
Property tax increases were also on the table at both committees as a way to raise revenue.
The county is only legally allowed to raise property taxes by either 5% or the amount of inflation each year as measured by the Consumer Price Index, whichever is lower, according to Hopkinson’s presentations to the committees.
Since inflation was measured at 3.4%, she said that is the most the County Board can raise property taxes for next year. That works out to about $2 million in extra revenue for the county, according to her presentation, which she said is not enough to balance the 2025 budget.
The proposed 1% sales tax, however, would provide enough funds to balance the budget, according to Hopkinson.
Another advantage of the proposed sales tax over a property tax increase is that it would allow the tax to be shared among residents of Kane County and visitors to the county instead of just on businesses and homeowners, according to Pierog.
She said that, although Kane County has not raised property taxes in over a decade, other governmental bodies within the county have, which has contributed to a high property tax rate.
The proposed sales tax, if approved by Kane County voters in November, would allow the county to do its part in keeping property taxes from getting even higher, Pierog said.
Another option Hopkinson presented to the committees was to raise the Local Option Motor Fuel Tax to eight cents per gallon, which would bring in about $7 million for the county’s transportation department. Currently, the rate is 4.7 cents per gallon, her presentations showed.
Funds currently given to the transportation department from the Regional Transit Authority Transportation Sales Tax could instead be used for public safety, which would help to lower the deficit, she said.
Any property tax, motor fuel tax and transportation sales tax increases and changes would not require a referendum.
rsmith@chicagotribune.com
