Woodstock shoppers might pay more in sales tax in exchange for a property tax cut.
The Woodstock City Council voted unanimously March 7 to reduce the city’s property tax levy 10 percent, a move that will lower the tax bill on a $150,000 house by about $94 and cut the city’s revenues by $924,000.
A proposal to raise the city’s sales tax rate one percentage point could be used to make up the difference and then some, raising an estimated $2.34 million in additional yearly revenue.
Council members said lowering property taxes and raising sales taxes would shift part of the tax burden from homeowners to shoppers, some of whom live outside Woodstock. High property taxes are among the biggest complaints city officials hear from residents, they said.
“I think the call for moderating property taxes in McHenry County and the city of Woodstock has been a paramount discussion and a loud, forthright conversation,” Mayor Brian Sager said. “People believe that the burden is too high.”
If approved, the sales tax hike, allowed now that the city has home rule, would go into effect Jan. 1, 2018. Woodstock’s total sales tax rate – state, Regional Transportation Authority and city combined – would be 8 percent. The home-rule sales tax would apply only to “nonessential goods,” exempting things like groceries and medications. Titled vehicles also would be excluded.
During the meeting, several residents said they were happy with the property tax reduction, but not everyone was convinced.
Jim Prindiville, a candidate for City Council, said increasing sales taxes could drive customers away from Woodstock’s retailers, particularly those that specialize in big-ticket home improvement products sold to out-of-towners.
“If we raise the sales tax on businesses like this, it could have catastrophic consequences to the city of Woodstock,” Prindiville said. “We need to really value and be thankful for what we have and not penalize them.”
“What has been catastrophic has been the lack of economic activity and the burden — the absolute, intense, unavoidable burden — of the 29th highest property taxes in the United States,” Councilman Mike Turner later countered.
Prindiville also questioned the timing of the property tax cut, which came close to the April 4 election.
“It sounds to me like this is for political reasons,” Prindiville said.
That claim drew vigorous denials from council members and the mayor, who said they had to approve the ordinance before a state deadline expired.
“You’re standing here before us tonight and you’re saying … ‘Don’t reduce property taxes by 10 percent tonight.’ That message is coming out loud and clear,” Sager said to Prindiville.
“You’re lowering the taxes less than a month ahead of the election with no cuts to offset the loss in revenue,” Prindiville later responded.
Turner, who is up for re-election along with Sager and Councilman Joe Starzynski, said the property tax reduction had nothing to do with the election and added the discussion of raising sales taxes could be “political suicide” for candidates.
“I’m not happy about the concept of a 1 percent sales tax, OK? I’m not,” Turner said. “But I’m less happy with the property taxes I pay on a business and a home. I’m less happy with home values crashing because people can’t afford to move here, and now taxes take up almost as much as a mortgage in some cases. We’re trying to fix that, our piece of that.”
If the council doesn’t approve the sales tax increase, the city has enough in reserves to cover a reduction in tax revenue next year, City Manager Roscoe Stelford said. Council members will vote on the matter in late spring or early summer after holding a public hearing, he said.
As for the property tax cut, Councilwoman Maureen Larson said she wants other local governments to take their cue from Woodstock.
“It is bold and I’m glad we’re doing it responsibly,” Larson said. “… I hope we start a trend.”