BATAVIA – The city of Batavia will lose millions of dollars in tax revenue if voters approve a referendum to revoke its home-rule powers.
Batavia Finance Director Peggy Colby told aldermen at a recent committee meeting that the city would lose between $3.3 million and $5.2 million a year in sales, liquor, gasoline and natural gas tax revenue. Moreover, the city’s bond rating would suffer, resulting in higher borrowing costs, the finance chief said.
Colby’s report came a day after a local citizen group filed the referendum petition Aug. 6. Batavia voters are expected to be faced with a Nov. 6 ballot question asking: “Shall the city of Batavia cease to be a home-rule unit?”
The city automatically gained home-rule powers in 2009, when Batavia’s population reached 25,000.
Home-rule communities in Illinois possess additional taxing and bonding power without having to resort to public referendum questions.
The petition to strip the city of its home-rule status was filed by the organization called Batavians for a Responsible Government. The group’s leaders include Sylvia Keppel, Yvonne Dinwiddie and Carl Dinwiddie, harsh critics of the city government in general, and the One Washington Place downtown redevelopment project and tax-increment financing districts, in particular.
After hearing Colby’s report, several aldermen quickly took to social media, posting information about the potential loss of revenue and pointing out that the city receives just 8 cents of every property tax dollar collected in Batavia.
Using its home-rule powers, the city currently collects a 4-cent-per-gallon tax on gasoline, producing $850,000 a year. There is a 2 percent liquor tax that takes in $380,000. These revenues, plus a portion of the tax on natural gas totaling $140,000, would be lost if the referendum were approved. But the biggest loss would be in sales tax revenue. The city collects $3.8 million on a 1 percent sales tax, Colby said.
The first 0.5 percent of that sales tax was imposed in 2006, before the city obtained home-rule powers, when voters approved a referendum to pay for fire station improvements. The second 0.5 percent was approved by the Batavia City Council in 2014, using its home-rule authority.
The 2006 voter-approved sales tax was converted into a home-rule tax in 2012, Colby said, in a maneuver that saved the city on interest costs. It remains unclear whether that half-a-percent portion of the tax and the $1.9 million in revenue that it produces could remain in place if the city loses its home-rule power, Colby said. That $1.9 million is the difference between the $3.3 million and the $5.2 million that Colby is forecasting in potential revenue losses for the city.
“I don’t know how you balance the budget,” Colby said later in an interview.
Replacing even a portion of those lost revenues would be difficult, Colby said.
The city could impose a tax on restaurant meals and resurrect the highly unpopular vehicle sticker tax that was abandoned two decades ago.
“Both options create an administrative nightmare for us,” Colby told aldermen.
The sales tax could be reinstated, Colby said, but only through approval by voters in a referendum, resulting in revenue losses during the interim.
The city could replace some lost revenue through an increase in the property tax levy, but this would be limited by a state formula to about $300,000, Colby said.