St. Charles City Council eyeing increase in home rule sales tax to generate more street funding

St. Charles alderpersons on Monday began discussions on whether to increase the city’s home rule sales tax to generate more revenue for street funding and whether to increase utility rates through 2027 to keep up with the cost of operations, capital projects and debt service.

City staff sees a 0.50% increase in the local home rule sales tax as the most effective option to address the funding gap for streets and related infrastructure. Finance Director Bill Hannah told alderpersons the option would generate the most amount of funds to address the gap in funding needed to repave and rebuild neighborhood streets.

The increase is estimated to generate about $4.4 million a year.

“In our estimate, it’s possible that this local homes sales tax is paid 40% to 60% by nonresidents,” he said. “So that was an attractive attribute of this option as we thought about this going forward.”

The city’s home rule sales tax was established in 1994 at 0.25% and increased in 1997 to 0.50%. It was increased again in 2004 to 1.00% in combination with the repeal of the food and beverage tax.

“A 20-year-old road can last 30 years if you maintain it properly,” St. Charles Public Works Director Peter Suhr said.

A majority of alderpersons spoke in favor of the idea, including 5th Ward Alderperson Steve Weber.

“I think it’s fair to spread it around to multiple people, not just St. Charles residents,” Weber said.

Fourth Ward Alderperson Bryan Wirball said he generally supports the idea.

“For me, it comes down to the language,” he said. “I really want to focus on the streets. We’re at 52% poor or very poor [street condition] and it affects the quality of life for the people who live in our community.”

Second Ward Alderperson Ryan Bongard did not support the proposal.

“I’m concerned that we’re going to be in the same spot eight years from now with other budget concerns and now looking around for what lever can we pull and feeling like maybe there was something we could potentially have done differently to get to where we ultimately want to go,” he said.

Regarding the potential of increasing utility rates, alderpersons said they wanted to see the utility rates of neighboring communities as part of the discussion.

As part of its recommendation, staff has recommended that water rates be increased 12% this year and sewer rates be increased by 8% this year. Smaller increases in water and sewer rates are being proposed in subsequent years.

In addition, a 2% increase in electric rates is being proposed starting next year and continuing every year until 2027. St. Charles owns its own electric utility.

Wirball said he would like to see the increases spread out over time.

“Maybe it’s not such a shock to the residents when they get their 20% increase,” he said.

City staff said they could study it.