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Buying blues hurt sales tax

Monday, January 19, 2009  
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By Jeff Kolkey
RRSTAR.COM
Posted Jan 19, 2009 @ 10:23 PM

ROCKFORD — Slumping sales-tax collections have put a squeeze on the city’s proposed 2009 budget and are playing a major part in creating a projected $5 million deficit.

Through the first 10 months of 2008, Rockford collected $23.4 million in sales taxes. That lagged original projections of $25.9 million by 9.7 percent, Rockford Finance Director Andres Sammul said.

Sammul said 2008 is likely to become just the fourth time in the last 25 years that sales taxes fell short of the previous year. He reduced his estimate of sales-tax collections for 2009 by $200,000 after the city received its sales-tax figures for October.

Sammul said people aren’t buying as many big-ticket items in Rockford, such as automobiles and boats.

“Obviously auto sales are down, and that’s having a major impact on the general sales tax,” Sammul said.

‘People are just buying less’
A national recession is being felt by many of the largest governments in the Rock River Valley including Rockford, where sales-tax collections were 3.4 percent lower than the third quarter of 2007 at $5.9 million. It marked the sixth consecutive quarter that sales-tax figures were lower than the same time frame the previous year in Rockford.

Overall, governments in Boone, Winnebago and Ogle counties saw receipts of general sales taxes in third quarter 2008 fall 2.1 percent compared with the third quarter of 2007. Loves Park — which relies heavily on sales taxes to fund city services — saw sales-tax collections fall 5 percent to more than $1 million in the third quarter. Collections of general sales taxes fell 8.1 percent in Cherry Valley to $821,112.

There is no question that rising jobless rates and a weakened economy are playing a role in the falling sales-tax figures, Rockford College political science professor Robert Evans said.
“People are just buying less because one of the first things they do when they lose a job or even fear losing a job is cut back on spending,” Evans said. “It’s not only retail sales but automobiles, refrigerators and appliances — those big-ticket items. The first thing people do is put off buying those.”

With the jobless rate rising to 10.4 percent in November in Boone and Winnebago counties, the economy figures to get worse before it gets better.

Where the money goes
Sales taxes account for nearly one-quarter of the $115 million in revenue in Rockford’s ailing general fund, which pays the salaries for most of the city’s roughly 1,200 employees including fire, police and public works employees. About half the city’s budget is tied to the general fund where city officials have identified a shortfall.

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