Despite the COVID-19 pandemic, DeKalb County residents still are spending money, although municipal leaders say it’s tougher than you think to pinpoint what’s driving it.
“There were quite a few months low last year,” Genoa Village Administrative Director Alyssa Seguss said of retail sales tax collection revenue, which is the amount of money municipalities collect from retail sales in Genoa. “It was surprisingly similar to previous years.”
Cities across Illinois are having a banner year in retail sales and, yes, it’s partly a bounce-back after infection controls kept shoppers and visitors home much of 2020. But the totals have climbed well past what city officials saw coming. They think the records are busting because cities now get a slice of online sales, too.
In Illinois, use tax rates are 6.25% of the purchase price of general merchandise and 1% of the purchase price of qualifying food, drugs and medical appliances.
The U.S. Supreme Court handed down a decision in 2018, South Dakota vs. Wayfair, Inc., that lets the states collect sales tax from out-of-state vendors that sell over the internet. It took a while for Springfield to work it out, but cities now are getting their share of online sales, too.
How much of the influx is because of online shopping such as retailer giant Amazon? City officials interviewed for this story say the problem is pinpointing which factor is most responsible for the influx of cash.
In Genoa, records show sales tax revenue averaged $54,500 for fiscal 2021, from May 2020 through April 2021, with the total sales tax revenue being $654,002.
For May 2021, Genoa collected $54,118, compared to $57,513 in 2020 and $61,573 in 2019. In June through September, Genoa collected an average of $56,133, more than the average of $55,986 during those months in 2020 and $58,189 in 2019.
“It’s been really great to see people downtown again, in businesses shopping and attending events,” Seguss said.
Many Genoa events, including Genoa Days and Celebrate the Season, were not held in 2020 or 2021 because of the COVID-19 pandemic.
“We expect 2022 to be even higher than in previous years due to the return to in-person shopping,” Seguss said.
Seguss said that the city of Genoa places the sales tax revenue collected into the city’s general fund, which prioritizes street maintenance and public safety. She said with this past year’s sales tax, the city plans on improving streets and hiring a new police officer.
In the future, Seguss said the city plans on expanding business east of Route 72, which will add sales and property tax to the city’s general fund.
“We are very thankful our small businesses were able to weather the storm and are still surviving through the pandemic,” she said. “It’s important to continuing supporting those local businesses, because they – and the sales tax they generate – provide critical services to our city.”
The city of DeKalb expects to see about a 3.7% increase in revenue from an uptick in spending in 2022, which DeKalb City Manager Bill Nicklas called modest amid a decline in city population over the past decade.
Overall, he said, the city is expecting a 4.2% increase in sales and use tax revenue – amounting to $16,735,273 more – for fiscal 2022.
“We continue to be up, but not as dramatically so in relation to the previous fiscal year,” Nicklas said.
Nicklas previously said all of the city’s funds are balanced within the $200 million proposed budget.
Nicklas said hospitality and brick and mortar sales tax revenues, along with restaurant and bar tax revenues, were severely impacted during the thick of the COVID-19 pandemic in 2020. However, he said the city saw a notable increase in online sales tax revenue then.
From fiscal 2021 to 2022, Nicklas confirmed the city is expecting $211,093, or 3.76%, more in state sales tax revenue; $245,518, or 3.6%, more for home rule sales tax revenue; a 30.5% jump, or $71,906 more, for hotel and motel tax revenue; and a 19.12% increase, or $313,506 more, in restaurant and bar tax revenue.
However, “as customers return to brick and mortar retail,” Nicklas wrote in city documents the city may possibly see a 9.4% decrease, or $164,358 less, of local use tax revenue, which includes online sales tax.
Nicklas said the numbers could be higher were it not for a dip in DeKalb city population, which saw a decrease of about 4,000 residents from 2010 to 2020, according to the U.S. Census Bureau.
“We probably would be up a little bit more in general revenue, except that the per capita revenues that pass through the state were affected by our population decrease,” Nicklas said. “So we’re off slightly on that.”
Where are people shopping?
Online retailers surely have given cities a boost, but they don’t get all the credit. Stuck-at-home shoppers were handed federal stimulus money that they happily went out and spent. Revenue spokeswoman Maura Kownacki cited a shift in spending during the pandemic: Money that would have been used on services (hair salons, restaurants) went to consumer goods, which boosted sales tax receipts.
Could the Illinois Department of Revenue provide the numbers to show just where the new money is coming from? The short answer is no.
Kownacki explained the new law pumping online sales into city coffers (the Leveling the Playing Field Retail Act) took effect Jan. 1 and implemented a series of structural changes to collect from remote retailers. Distinguishing internet sales from brick-and-mortar sales no longer is apples to apples.
“All brick and mortar and online sales are filed with IDOR on the same form,” Kownacki said. “As a result, tax disbursements made to local governments all come from the same bucket and no definitive distinction can be made.
“There is no way to break down which sales are online when they are all reported the same way.”
And cities have never been given line-item data showing what individual businesses pay in sales taxes. Municipalities can analyze their retail-sales shares to get a rough handle on how businesses as a whole are doing; but whether mom-and-pop stores are thriving or failing is a well-guarded secret.
The National Retail Federation forecast that holiday sales during November and December will grow between 8.5% and 10.5% over 2020 to between $843.4 billion and $859 billion.
The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a previous high of 8.2% in 2020 to $777.3 billion and an average increase of 4.4% over the past five years.
NRF expects that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion. That number was $196.7 billion in 2020.
‘Seeing quite a bounce back’
DeKalb County Administrator Brian Gregory said the county’s year to date trend analysis reports local use tax, where online sales are recorded, going up 30.9% from 2019 to 2021. He underscored the big jump in use tax revenue was from 2019 to 2020.
“Obviously there’s the impact of COVID-19, with a lot more online shopping,” Gregory said. “And so from there, it still went up [7.7% in 2021], but it hasn’t gone up quite as dramatically.”
Gregory said the regular sales tax revenue numbers are a little harder to compare due to airline fuel agreements the county had with United and American Airlines ending. Generally speaking, he said that number was down in 2020 but “we’re seeing quite a bounce back” in 2021, year to date.
“A lot of that is going to be related to, likely, a pent up demand during COVID-19, where people weren’t spending as much money,” Gregory said.
Gregory said the federal stimulus money Americans received is now in the economy. He also pointed to employers looking for labor help, resulting in an upward pressure on wages, and that the cost of goods are going up because of inflation. Because of the pandemic, Gregory said priorities may have shifted for workers and that could have resulted in on-time or even earlier retirement.
“I think that’s part of the employment issue, is that you’ve taken more workers out earlier,” Gregory said. “But in the end, it seems like there’s a variety of different reasons that have led to what we’re seeing.”
Gregory said the county is cautiously optimistic that it will continue to see economic strength.
“But all of these factors likely won’t be aligned year in and year out,” Gregory said. “So we have to be mindful of each of those factors as we go forward.”
Gregory also emphasized the importance of people understanding that whichever community or county they shop in is going to be the community or county that collects those sales tax dollars.
“It’s important to keep those dollars local,” Gregory said. “So I’d always encourage people to shop in DeKalb County and in their local community, for sure.”
Acting Sycamore City Manager Maggie Peck agreed.
Peck said that the city of Sycamore sales tax receipts suggest an increase in retail activity when compared with the same time period last year.
“We recognize that the cost of goods has increased and accounts for some of the increased sales tax dollars along with the impact of stimulus dollars in the economy,” she said.
The upward trends also suggest that while online sales tax is steady, “the majority of the increase seemingly is related to brick and mortar stores and restaurants,” Peck said.
Peck said despite loss of several businesses during 2020, Sycamore is growing,
“We have seen new businesses occupy vacant storefronts, the construction of new retail space, and continued interest in commercial business in Sycamore,” she said.
Shaw Local News Network reporter Tom Collins contributed to this story.