Businesses and residents may face a natural gas and electricity tax if a home rule effort fails
ROCKFORD — A utility tax that Rockford is poised to enact if an effort to restore home rule authority fails would cost Rockford University an estimated $34,000 a year.
That’s roughly equivalent to losing tuition revenue from two students or to the salary of an employee, university President Eric Fulcomer said. The university, with nearly 1,300 students, has spent $17 million in the last six years on campus improvements and “probably needs to invest that much more in the next five years,” Fulcomer said.
“Nobody wants a utility tax. It hits everybody — nonprofits, for-profit businesses and residents,” Fulcomer said. “We operate on a tight margin, so $34,000 is significant.”
Employers across Rockford have similar stories. But city leaders say a utility tax is likely if voters on Tuesday reject a proposal to restore home rule authority. And no Rockford resident or business would be spared.
Restoring Rockford’s home rule authority would give the city greater authority to solve its own problems, regulate businesses and properties, and impose taxes and fees without state legislation. Mayor Tom McNamara’s administration has proposed using home rule to enact a tax on hotel stays — to raise revenue from visitors instead of residents — if the home question is approved in Tuesday’s referendum.
Without home rule, the city would pursue a utility tax but still be unable to keep property taxes from rising without drastic cuts to public works and police and fire protection. The reason? Rockford faces a $78 million budget shortfall over the next five years and pension expenses, which the city is required to pay, are outpacing city revenues.
The city can adopt a utility tax without home rule authority. For years, though, Rockford aldermen have been loath to adopt such a tax because it would hit hardest small businesses and individuals with the lowest incomes.
“Failure to restore home rule will both perpetuate our dependence upon Springfield’s state government as well as a very likely 5 percent utility tax both for individuals and businesses,” SwedishAmerican CEO Dr. Michael Born said last week in a written statement to employees of the health system.
The impact of a utility tax on SwedishAmerican, a unit of UW Health, would be close to $200,000 a year, Born said.
More than 60 percent of Illinois’ municipal population is already subject to a utility tax, and many of Rockford’s neighbors charge one, including Loves Park, Machesney Park, Pecatonica, Winnebago, Belvidere, Poplar Grove and Capron.
If Rockford joins that group, it would charge the maximum allowed under state law: a 5 percent tax on natural gas bills and a per-kilowatt charge on electricity that declines as electrical consumption goes up.
City administrators said in December 2016 — when a utility tax was considered and never adopted — that the tax would cost the typical ComEd residential customer in Rockford $6.28 a month; the typical residential and small-business gas customer would pay $3.06 a month. Commercial ComEd customers could pay anywhere from $12.56 a month for a small business to about $3,590 a month for the largest users.
Electric bills amount to $250,000 a year at Specialty Screw, which manufactures precision parts for the auto industry at its 80,000-square-foot factory on Huffman Boulevard.
The company has expanded its customer base and “is bursting at the seams,” President Russ Johansson said. A 20,000-square-foot expansion to its northwest Rockford plant is on the drawing board, and the prospect of “any kind of tax or fee doesn’t thrill me,” Johansson said.
“We’ve got to get pension reform,” Johansson said. “We’ve got to get a handle on that cost. It’s the biggest issue that I see not only for Rockford, but for the whole state.”
Specialty Screw has invested more than $100,000 in recent years on photovoltaic panels and energy-efficient lights and air compressors to minimize its utility costs. And that’s the problem with a utility tax, city administrators say: With each passing year, residents and businesses are becoming more energy efficient.
If enacted as soon as possible this year, a utility tax would pour $3.5 million into city coffers for the remainder of 2018 and $9 million annually afterward. But before long, said Rockford Finance Director Carrie Eklund, a utility tax would provide Rockford diminishing returns.
“I would certainly say there is concern,” Eklund said. “The revenue source is shrinking, not growing. I assume it will bottom out at some point, but it will be a short-term solution to our budget problems.”
Isaac Guerrero: 815-987-1361; firstname.lastname@example.org; @isaac_rrs