G-866 - 08/26/2008 - TAX - Ordinances Supporting Documents•
ITEM 10.13.1)
AGENDA ITEM
Regular Board of Trustees Meeting
of
August 26, 2008
SUBJECT: Increase in the Simplified Municipal Telecommunications Tax
FROM: Darrell Langlois IVV
BUDGET SOURCE/BUDGET IMPACT: Increases General Corporate Fund Revenue by
$475,000 annually
RECOMMENDED MOTION: I move that the Village Board approve Ordinance 2008 -
TX- TELECOM -G -866, "An Ordinance Establishing a Simplified Municipal Telecommuni-
cations Tax and Amending Title 5, Chapter 3 of the Village Code of the Village of Oak
Brook, Illinois ".
Background/History:
For the last several years, the Village has been faced with significantly increasing operating costs
during a period of time in which overall revenues have been flat to somewhat declining. The
current economic recession, as well as declines in the investment markets, is having a negative
effect on operating revenues for 2008, with sales tax revenue and interest income alone being
projected to be $1.1 million below budget. For 2009, with minimal increases in the day -to -day
operating expenses of the Village, expenses would once again be projected to exceed operating
revenues, possibly by as much as $1 million. In addition to this deficit, the 2009 Village Budget
will likely include as much as $500,000 in new costs related to significantly higher gasoline
prices, increased Fire and Police Pension Fund contributions (due to low investment returns and
changes in some actuarial assumptions), and needed outlays related to technology.
For the last several months, management staff and the Village Board have been meeting to
discuss various strategies for balancing the long -term budget of the General Fund. As staff
begins preparation of the 2009 budget for the General Fund, the following expense reductions
are expected to be included:
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• Elimination of $100,000 in various subsidies to the Sports Core (primarily polo and open
fields).
• Savings of $245,000 by deferring replacement of 1 Lieutenant and 1 Detective in the
Police Department for at least one year.
• Reorganization of Village departments that will reduce the size of the Village staff.
• Increasing the employee share of health insurance through higher contributions and
higher deductibles. Further increases in cost sharing remain a goal as we negotiate
collective bargaining agreements for both the Police and Fire Departments.
• Mandating a 20% reduction in travel and training is expected to save $40,000 annually.
• A large number of reductions in many different line items in all operating departments
are expected to save at least $200,000. Some of the more material reductions include
elimination of the lobbyist and public relations consulting, lowering legal expenses,
reduced part time hours and lower outlays for books and materials in the Library, and
reduced overtime costs in many departments.
• Savings of $90,000 due to refinancing the installment contract issued to finance a portion
of the Village Hall addition. Savings are expected to come by taking advantage of lower
interest rates and extending the remaining seven year term to ten years.
• While not a cost savings, the Village Board has formed a committee to revise the
Village's compensation programs with a goal towards keeping annual increases in
compensation cost more in line with operating revenues.
As you can see, the Board and staff have outlined a plan for significant cost saving across all
operating areas of the Village, most which will have little or no effect on the residents or service
levels. That being said, due to the size of the expected budget deficit as well as the new costs
expected, it is nearly impossible to balance the long -term budget of the General Fund without
additional revenue. For 2009, it is recommended that the Simplified Telecommunications Tax
be increased from 5% to 6% (the maximum rate allowed by law) effective January 1, 2009.
The current Simplified Telecommunications Tax (STT) applies to most telecommunications
services (land telephone lines, cell phones, long distance, pagers, etc.) that originate in the
Village. Based on data from the late 1990's when the Village collected the tax (the State now
collects), commercial accounts paid 70% to 80% of the tax. For 2007, receipts from the STT
amounted to $2.3 million. The 1% increase in rate to 6% will amount to an additional $475,000
annually in revenue. Although admittedly a tax rate increase, it should be noted that this revenue
source has declined steadily over the last several years. To illustrate this point, in 2003 the
Village received $2,658,000 in collections from the STT, which is over $300,000 more than in
2007. Based on 2007 full year collections, the increased rate would generate total revenue of
$2,816,000. Thus, the rate increase will only result in additional taxes paid of $158,000, or 5.9%
cumulative since 2003.
When evaluating the merits of this tax rate increase, it may be helpful to review the tax rates paid
in neighboring communities. Attached is a survey of comparative tax rates for all Du Page
County municipalities as well as a selection of Cook county communities. Of the 38
communities on the survey, only 7 have a STT rate below the 6% proposed for Oak Brook. It is
also important to note that in assessing the "tax burden" in a community the telecommunications
tax is only one of a number of taxes paid by residents. Included on this survey is also current
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sales tax rate information. As you can see, of the seven communities having a lower
telecommunications tax rate, only Bloomingdale, Naperville, and the DuPage portion of
Hinsdale ( the Cook County portion is higher) have a sales tax rate equal to or lower than Oak
Brook. Another factor to consider, which is not shown on the survey, is real estate taxes. All
three of these communities levy property taxes, as well as every other town on the list except
Schaumburg. Even with the 1% increase the tax burden in Oak Brook will still be well below
other municipalities.
The "mechanics" of the proposed Ordinance require some clarification. From its inception until
the end of 2002, telecommunication taxes were collected, administered, and enforced by the
Village. In 2002, the enabling statutes were changed to the "Simplified Municipal
Telecommunications Tax ", with the State taking over collections and enforcement. At the time
of the change the law did not require the Village to adopt a new ordinance, it implemented what
we had on the books at that time. Since we are now recommending changing the rate, the new
ordinance repeals everything presently in the Village code related to this tax and simply enacts
the STT at 6 %.
Finally, there is an issue as,to timing of the increase. While in many cases it may be desirable to
defer a decision on this until we are further along in the budget process, now that the State is the
collection agent there is a firm deadline of September 20, 2008 to increase the rate effective
January 1, 2009 (collections would begin in April, 2009). If we miss this filing date, the earliest
we could increase the tax would be July 1, 2009, which means collections would not begin until
October, 2009. This delay would have a negative impact of approximately $240,000 on the 2009
budget. Action is requested at this meeting so that the first meeting in September would be
available if there are any revisions required by the Illinois Department of Revenue.
Recommendation:
I recommend approval of Ordinance 2008 -TX- TELECOM -G -866, "An Ordinance Establishing a
Simplified Municipal Telecommunications Tax and Amending Title 5, Chapter 3 of the Village
Code of the Village of Oak Brook, Illinois.
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ORDINANCE 2008 -TX- TELECOM -G -866
AN ORDINANCE ESTABLISHING A SIMPLIFIED MUNICIPAL
TELECOMMUNICATIONS TAX AND AMENDING TITLE 5, CHAPTER 3
OF THE VILLAGE CODE OF THE VILLAGE OF OAK BROOK,
ILLINOIS
WHEREAS, the Simplified Municipal Telecommunications Tax Act creates a simplified municipal
telecommunications tax and repeals the municipal tax on transmitting messages under 65 ILCS 5/8 -11 -2,
the municipal telecommunications tax under 65 ILCS 5/8- 11 -17, the optional municipal infrastructure
maintenance fee under 35 ILCS 635/15 and the municipal infrastructure maintenance fee under 35 ILCS
635/20 effective January 1, 2003, and
WHEREAS, the Illinois Department of Revenue was required under Sections 5 -25 and 5 -30 of the
Simplified Municipal Telecommunications Tax Act to publish a list and calculate a rate for the imposition
of a simplified municipal telecommunications tax for each municipality that had in place one or more of
the following, a municipal tax on transmitting messages under 65 ILCS 5/8 -11 -2, a municipal
telecommunications tax under 65 ILCS 5/8- 11 -17, or a municipal infrastructure maintenance fee under 35
ILCS 635/20 as of July 1, 2002; and
WHEREAS, the Village desires to impose a Simplified Municipal Telecommunications Tax
pursuant to the Simplified Municipal Telecommunications Tax Act
NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS, as follows
Section 1 Section 5 -3 -1 of the Village Code is repealed
Section 2 Section 5 -3 -2 is renumbered as Section 5 -3 -1 and amended to read as follows
A simplified municipal telecommunications tax is hereby imposed upon the act or privilege of originating in
the Village or receiving in the Village intrastate or interstate telecommunications by a person under the
provisions of the Simplified Municipal Telecommunications Tax Act (35 ILCS 636/5 -1, et seq ), at a rate of
6 0% of the gross charges for such telecommunications purchased at retail from a retailer
Section 3 The following is added as Section 5 -3 -2
The simplified municipal telecommunications tax shall be collected and enforced
by the Department of Revenue of the State of Illinois The Illinois Department of
Revenue shall have full power to administer and enforce the provisions of this
ordinance
Section 4 Section 5 -3 -3 through 5 -3 -8, inclusive, are repealed
Section 5 If any section, paragraph, clause or provision of this ordinance shall be held invalid,
the invalidity thereof shall not effect any of the other provisions of this ordinance
Section 6 All ordinances in conflict herewith are hereby repealed to the extent of such conflict
Section 7 This ordinance shall be in full force and effect from and after its passage, approval
and publication as required by law
Section 8 This ordinance shall be in full force and effect from and after its passage, approval
and publication in pamphlet form provided, however, that the simplified municipal telecommunications tax
shall tax effect for all gross charges billed by telecommunications retailers on or after January 1, 2009
APPROVED THIS 26th day of August, 2008.
Ayes
Nays
Absent
Abstain
John W Craig
Village President
PASSED THIS 26th day of August, 2008
ATTEST
Charlotte K Pruss
Village Clerk
Ordinance 2008 -TX- TELECOM -G -866
Establishing a Simplified Municipal
Telecommunications Tax
Page 2 of 2
Village of Oak Brook
Telecommunication and Sales Tax Rate Survey
* Cook County
All others are DuPage County
Source: Illinois Department of Revenue Website
TELECOMMUNICATIONS
TELECOMMUNICATIONS
12 Mo. COLLECTION
SALES TAX
MUNICIPALITY
TAX RATE
MAY 2007 - APRIL 2008
RATE
Addison
600%
1,976,516
800%
Bartlett
600%
1,584,463
700%
Bensenville
600%
1,572,740
825%
Bloomingdale
000%
-
775%
Bolingbrook
600%
3,044,810
850%
Brookfield*
600%
714,592
1000%
Burr Ridge
600%
880,204
725%
Carol Stream
600%
1,937,111
775%
Chicago*
700%
Not Available
1025%
Clarendon Hills
600%
373,643
725%
Downers Grove
6.00%
3,720,575
800%
Elmhurst
600%
2,516,665
750%
Glen Ellyn
600%
1,344,051
725%
Glendale Heights
600%
1,311,744
800%
Hanover Park
600%
1,355,798
750%
Hinsdale
500%
1,075,790
725%
Itasca
600%
1,291,753
7.75%
LaGrange Park*
600%
431,762
900%
LaGrange*
400%
616,363
925%
Lisle
6.00%
2,455,464
725%
Lombard
600%
2,985,648
825%
Naperville
500%
6,569,105
725%
Oak Brook - Current
5.00%
2,274,610
7.75%
Oak Brook - Proposed
6.00%
7.75%
Oakbrook Terrace
600%
650,203
825%
Orland Park*
100%
426,277
975%
Riverside*
600%
356,004
1000%
Roselle
600%
1,396,728
725%
Schaumburg
600%
6,477,135
800%
St Charles
500%
1,467,573
800%
Villa Park
600%
1,081,798
775%
Warrenville
400%
592,962
850%
Westchester*
600%
864,794
900%
Western Springs*
600%
507,149
900%
Westmont
600%
1,441,165
725%
Wheaton
600%
2,450,668
775%
Willowbrook
600%
622,839
725%
Winfield
600%
427,141
725%
Wood Dale
600%
1,354,820
825%
Woodridge
600%
1,515,190
775/6
* Cook County
All others are DuPage County
Source: Illinois Department of Revenue Website
Of 04
O
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O - y
G � O
�OUNTV
Village of
Oak Brook
1200 Oak Brook Road
Oak Brook, IL 60523 -2255
Website
www.oak - brook.org
Administration
630 368 5000
FAX 630 368 5045
Community
Development
630 368 5101
FAX 630 368 5128
Engineering
Department
630 368 5130
FAX 630 368 5128
Fire Department
630 368 5200
FAX 630 368 5250
Police Department
630 368 8700
FAX 630 368 8739
Public Works
Department
630 368 5270
FAX 630 368 5295
Oak Brook
Public Library
600 Oak Brook Road
Oak Brook, IL 60523 -2200
630 368 7700
FAX 630 368 7704
Oak Brook Sports Core
Bath &'Tennis Club
700 Oak Brook Road
Oak Brook, IL 60523 -4600
630 368 6420
FAX 630 368 6439
Golf Club
2606 York Road
Oak Brook, IL 60523 -4602
630 368 6400
FAX 630 368 6419
August 28, 2008
Illinois Department of Revenue
Local Tax Allocation Division
101 West Jefferson Street 3 -5 00
Springfield IL 62702
Dear Sirs:
At the Village Board meeting on August 26, 2008, the Village of Oak Brook
adopted ordinance 2008 -TX- TELECOM -G -866, An Ordinance Establishing a
Simplified Municipal Telecommunications Tax and Amending Title 5, Chapter 3
of the Village Code of the Village of Oak Brook. The purpose of the Ordinance
was to increase municipal share of the rate of the Simplified Municipal
Telecommunication Tax to 6 %, the maximum rate allowed by law. The new tax
rate of 6% is effective for all billing after January 1, 2009.
In compliance with State law, we are filing a certified copy of this ordinance with
your Department in advance of the September 20 deadline in order to make the
change effective January 1, 2009. At your earliest convenience please review the
attached ordinance for compliance with your rules and regulations and confirm
your acceptance of this change for the January 1, 2009 implementation.
Thank you for your cooperation. Please feel free to contact me at (630) 368 -5070
if you have any questions or need further information.
Sincerely,
Darrell J. Langlois
Finance Director
Cc: David Niemeyer, Village Manager
Mark Sterk, Village Attorney
Official Files
STATE OF ILLINOIS )
} SS.
COUNTIES OF COOK AND DUPAGE )
I, Charlotte K. Pruss, do hereby certify that I am the duly elected and acting
Village Clerk of the Village of Oak Brook, DuPage and Cook Counties, Illinois.
I DO FURTHER CERTIFY that on August 26, 2008 , the corporate
authorities of the above municipality passed and approved
Ordinance G -866 , An Ordinance Establishing a
Simplified Municipal Telecommunications Tax and Amending Title 5,
Chapter 3 of the Village Code of the Village of Oak Brook, Illinois
I DO FURTHER CERTIFY that the original document, of which the annexed
copy is a true copy, is entrusted to my care for safekeeping and I am the keeper of the
same.
I DO FURTHER CERTIFY that I am the keeper of the records, journals, entries,
resolutions, ordinances and documents of the said Village of Oak Brook, DuPage and
Cook Counties, Illinois.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of the Village of Oak Brook this 28th day of August -52008.
t"y ►' �f�rr r r �� v
' " r it
•c►
'00UNVI
FS
Charlotte K. Pruss
Village Clerk
Ilk-
Village of Oak Brook
DuPage and Cook Counties, Illinois
Illinois Department of Revenue
g . Legal Services Office 5 -500
101 W. Jefferson St.
Springfield, IL 62794
September 8, 2008
Darrell J. Langlois
Finance Director
Village of Oak Brook
1200 Oak Brook Road
Oak Brook, IL 60523 -2255
Dear Mr. Langlois:
This is to acknowledge receipt of the Village of Oak Brook's Ordinance No. 2008 -TX-
TELECOM -G -866 increasing the Village's Simplified Municipal Telecommunications Tax rate
to 6 %.
The Illinois Department of Revenue shall collect, administer, and enforce the increase in
the Simplified Municipal Telecommunications Tax to the rate of 6% effective January 1, 2009,
in accordance with the provisions of 35 ILCS 636/5 -1 et seq.
If you have any questions regarding this matter or if I can be of any assistance, please feel
free to contact me at the number listed below.
Sincerely,
aAssociate
el
(217) 782 -2844
Cc: Cecil Denton, Local Tax Allocation Division
Page 1 of 1
Carol Harty
From: Darrell Langlois
Sent: Monday, September 15, 2008 11 57 AM
To: David Niemeyer, Mark H Sterk, Charlotte Pruss, Carol Harty
Subject: Telecom Tax Increase
Just to follow up, I received confirmation from the State that they have approved the telecom increase ordinance
to 6% effective 1/1/2009
Darrell J Langlols
Finance Director
Village of Oak Brook
dlanglols @oak -brook org
Phone(630)368 -5070
Fax (630) 368 -5071
"This communication, along with any documents, files or attachments, is
Intended only for the use of the addressee and may contain legally
privileged and confidential information If you are not the intended
recipient, you are hereby notified that any dissemination, distribution or
copying of any information contained in or attached to this communication
is strictly prohibited If you have received this message in error, please
notify the sender immediately and destroy the onginal communication
and its attachments without reading, printing or saving In any manner
This communication does not form any contractual obligation on
behalf of the sender or the Village of Oak Brook As it may apply, the opinions expressed here are my own and do not necessarily
represent those of the Village "
9/15/2008