A higher sales tax: Too costly for Galesburg restaurants or worth it for a community center?

GALESBURG — Galesburg City Council on Monday discussed raising the city’s sales tax in order to help fund a new community center and capital improvements.

The ordinance for the tax increase was on a first reading and so the council will vote on it during its next meeting on Dec. 20. If approved, the ordinance would increase Galesburg’s “home-rule” sales tax from 1% to 1.25%. The increase would become effective July 1, 2023, and bring in approximately $950,000 to the city in annual revenue.

Galesburg city manager Gerald Smith said during the meeting that the new revenue would be earmarked for the community center and for capital improvement projects, like improving the city’s roads. However, Smith said it is up to the council how the new funds would be allocated.

A total of 19 people from the audience shared their thoughts on the proposed sales tax increase and community center during the city council meeting’s public comment section. The council voted 4-3 to select the old Churchill Junior High as the site for the community center.

Some people questioned the need for the center and were adamantly opposed to increasing the city’s sales tax, arguing it will be “the straw that breaks the camel's back” for Galesburg restaurants in particular who already bear a 2% prepared food and drinks tax.

Others voiced support for investing in a “bold” new resource for the city’s public, particularly its youth, and argued the city needs a new community center in light of the fact the Carver Center burned down in 2016 and the building at 150 E. Simmons, which once housed a community center, was sold by the city in 2013 and now houses the Iron Spike Brewing Company.

More:Galesburg brewpub seeks facade grant on historic building. Here are the plans

Galesburg’s sales tax currently less than nearby cities

Galesburg Mayor Peter Schwartzman said he supported the sales-tax increase because, in part, the proposed ordinance would only add 3 cents to a $12 charge or add 25 cents to a $100 charge.

Schwartzman said the sales tax increase provides a way for the city to collect revenue from people who do not live in Galesburg and are just passing through. This is unlike a property tax increase, which would apply to all people who own homes and other property in Galesburg.

Schwartzman also compared Galesburg’s sales tax to cities that are nearby and roughly the same size, pointing out Galesburg’s rate of 1% is lower than others and said in an email that a quarter percent increase would not “put us at a competitive disadvantage from a tax perspective.”

According to data Schwartzman provided, Rock Island’s city sales tax rate is 1.25%, Moline’s rate is 1.25%, Quincy’s rate is 1.5%, Pekin’s rate is 1.75% and East Peoria’s rate is 1.75%.

That said, a city’s sales tax is only one portion of the total tax that residents pay. Galesburg’s general merchandise tax rate is 8.75%. The proposed ordinance would increase that general merchandise rate to 9%.

Galesburg’s general merchandise tax rate is 8.75% because it is the sum of various taxes collected and distributed to other bodies: including a 5% tax residents pay to the state of Illinois, the home-rule sales tax of 1%, a separate 1% tax that goes to the city, a 1% tax that goes to Education District 205, a 0.5% tax that goes to Knox County and a 0.25% tax that goes to the Knox County Jail.

In a similar comparison using state data, Rock Island’s general merchandise tax rate is 8.5%, Moline’s rate is 9.5% within certain business districts, Quincy’s rate is 9% within business districts, Pekin’s rate is 9% and East Peoria’s rate is 9.5% within certain business districts.

Moline and East Peoria’s general merchandise tax rate outside of business districts is 8.5%. Quincy’s general merchandise tax rate outside of business districts is 8%.

The city last increased its home rule sales tax in 2003 from 0.75% to 1%.

Council members say tax is worth it, or unsupported by public

Before the public comment section took place, Councilman White said he would support the tax increase despite the cost he and other taxpayers would incur.

"I still want to spend the extra money to make sure that we have a community center, not for my kids, but for the next generation, and the generation of kids after that,” White said. “When I go to any restaurant in town, I will be paying it just as everybody else does. Does it hurt my pocket? Maybe so, but the investment, to me, is worth it."

Councilman Wallace agreed that the tax would not amount to “throwing money away” but be an investment in a resource that could potentially help make the city more attractive and recoup its lost population.

Councilmen Hix and Dennis both said that the overwhelming majority of the feedback they’ve received from their constituents were against the ordinance.

“I think the timing is pretty bad. We all know that inflation has been pretty tough on everyone's budget, every business person's budget, every family's budget,” Hix said. “I agree that a lot of things need to be done to improve the city, but we have a lot of taxes.”

Public weighs in on challenge tax poses to restaurants

While Galesburg residents pay a 8.75% general merchandise tax rate, the tax Galesburg residents pay when they go out to eat or drink is higher. This is because in 2007, a previous Galesburg City Council increased the city’s prepared food and drink tax from 0% to 2%.

This 2% prepared food and drinks tax is layered on top of the city’s general merchandise tax rate of 8.75%, so residents who go out to eat in the city of Galesburg pay a total 10.75% tax on their food and drink orders.

If passed, the proposed ordinance would effectively increase the total tax people in Galesburg pay on prepared food and drinks from 10.75% to 11%.

Adam Vitale, the president of G&M Distributors Inc., said during the city council meeting that if this ordinance is passed, then the only other place in Illinois that would possess a higher sales tax than Galesburg for people going out to eat or drink is Chicago’s Metropolitan Pier and Exposition and Authority zone, where the total sales tax for restaurants is 11.75%.

Otherwise, the sales tax applied to charges made in Chicago restaurants and bars is 10.75% and equivalent to the sales tax that people in Galesburg restaurants and bars currently pay.

“How will this impact our local restaurants, bars and taverns? How will this impact the servers, the bartenders and workers behind the counter? And most importantly, what does this 11% tax look like to someone who's wanting to start one of these businesses within our community?” Vitale asked.

“I think one of our best amenities are our locally owned and independent restaurants and we've got more than most communities around us. Our goal needs to be able to make things easier for these businesses to succeed in our community.”

Brad Bernardi, co-owner of Sidetrax and Seminary Street Pub, argued that, more than customers, the tax increase would disproportionately impact food and beverage-based business owners.

“As you say, property tax is on citizens, sales tax is a tax on people coming into the town. That's pretty disingenuous, mayor, because the majority of people that are eating and drinking in this town, live in this town,” Bernardi said. “So we are being taxed, and us business owners are getting straight taxed because unless we increase our price, which we can't do in this economy as it is, it's going to come right out of our bottom line."

Deloris Buford, who said she moved from Peoria to Galesburg with her grandchildren eight years ago, argued the cost of the tax increases is worth it for the impact a community center could have on the youth.

“They were going to the boys and girls club before they left (Peoria), but they hate it here because they think there's nothing to do,” Buford said of her grandchildren. “Our kids is the future, if they don't have anything to do, they're going to do things destructive, they're going to get into things.”

“I work in a food restaurant,” Buford continued. “We went up I think three times in the last year, in our prices. Haven't stopped people from coming in. They still coming in. They complain, but they still coming. People drink, they still smoking, they still doing whatever they choose to do. And with the taxes, people get upset about it, but you live with it, that's what it is. You live with it, you keep going. But not to invest in the kids, I think, is detrimental.”

This article originally appeared on Galesburg Register-Mail: Galesburg considers raising sales tax amid adamant opposition