Normal Mayor Chris Koos is pushing back on the position that natural revenue growth can make up for the upcoming loss of grocery sales tax revenue, after the town council on Tuesday narrowly approved creating a local grocery tax to replace the state tax when it sunsets in 2026.
Koos said the town would have to cut its budget in unacceptable ways to make up the $2.3 million revenue reduction from losing the grocery tax. City of Bloomington leaders have expressed the hope that natural revenue growth would make up the stagger over time and have shown no interest in creating a local tax.
Opponents of the tax in Normal claim the estimated annual grocery tax revenue is about 1% of the town budget and can be absorbed. Koos said that 1% framing of the issue minimizes the real impact to the budget because it supposes there is more discretionary spending in the budget than is the case.
“You’ve gotta break that down," Koos said on WGLT's Sound Ideas. "You can’t put water in that. You can’t put sewer in that because those are enterprise funds [supported by user fees]. You can’t put pensions into that because they are what they are [mandated payments]. Its capital projects that come out of the general fund that are affected. So maybe $60 million,” said Koos.
That potentially lost $2.3 million would be roughly 3.8% of the $60 million general fund remainder.
“Can we make that cut? Sure, we could make that cut," said Koos. "Then it’s a matter of what services do we cut. Do we cut our road resurfacing budget? Do we cut our parks investment? Do we cut personnel? The entire budget for the Children’s Discovery Museum with 22 full-time equivalent employees is $2 million. So, those are the kind of cuts we would have to make.”
The drop in revenue would stall making good on long deferred investment in the town that was delayed by 12 years of recession, a slow recovery, and then COVID, he said.
"Where we fell behind on our capital projects, our road investments, things like that. We're doing those things now and we're very robust about doing that. People want those services in the community, so we've got to pay for them somehow," said Koos.
At Tuesday's meeting, council member Andy Byars wondered whether consumers will change their spending habits to shop in Bloomington where the grocery tax would be lower, and whether Normal would regain all the lost revenue by imposing a local sales tax on groceries.
Byars joined council members Kathleen Lorenz and Scott Preston in voting "no" on the local tax ordinance. Koos voted in favor of the plan, along with council members Chemberly Harris, Kevin McCarthy, and Karyn Smith.
Koos said history show that possibility is unlikely when there were temporary disparities between Bloomington and Normal sales taxation.
"Bloomington initiated a gas tax before we did, and there was no difference," he said. "People will shop on price, but the prices that they are looking at are not what the local tax is, the 1% tax. They are looking at the cost of the product and what they spent on that product six months or a year ago.”
Koos also said he sees no disconnect between the significant emphasis past councils have spent on containing property tax increases for more affluent homeowners and sustaining the grocery tax that has a more pronounced effect on lower income residents.
He said the estimated $57 average annual effect on grocery shoppers would have little effect on residents, and noted those who most need a break — people who qualify for SNAP benefits — already do not pay grocery sales tax.
Zoning text amendment
Town of Normal planners have said a zoning text amendment now approved by the town council will make it easier to address the housing shortage by allowing higher density housing.
Koos said it could ease restrictions on some kinds of housing that have proved popular on the national scene.
"Accessory dwelling units, sometimes referred to as mother-in-law apartments or things like that, currently can't be done in Normal. If you have a two-story house with a full attic, you're really not allowed to remodel that into a full living space now," said Koos.
Another goal of the text amendment is to eliminate conflicting language and duplication in existing zoning rules that favor traditional suburban housing development over higher density mixed use or multi-unit housing.
Such an approach also would cut against the traditional suburban model of housing common to much of America for the last three quarters of a century, and returns to previously common sensibilities of urban areas.
“Everything old is new again, they say, right?” said Koos.
There are signs the housing shortage and the affordable housing crisis have risen to national attention. Both major party presidential candidates have promised policies to address the shortage, and it's also on the radar of most congressional candidates, regardless of region of the country or party.
Koos was hesitant to say whether federal help will come in time to prevent loss of potential economic growth in Bloomington-Normal.
“Ask me that in the third week of November. There are a lot of promises that get made in campaigns. We’ll see what develops afterwards,” he said.
Koos said he’s pleased there is national acknowledgement there is a need for affordable housing and workforce housing for starting workers. He said if federal political leaders remain so motivated, there is a basket of federal tools available.
“It could be tax credits. We have used community development block grant dollars for first-time low-income buyer grants to help. It’s going to take these kinds of things to [incentevize] and help get this housing done for startup housing and low-income housing,” said Koos.
The mayor said he is unsure whether there is a federal solution for the problem of high materials and labor costs that make construction of multi-unit housing so expensive that rents are not affordable.
“Let’s say we take somebody at Rivian who is making $60,000 a year. An appropriate rent for an apartment for somebody like that would be about $1,200 a month. And it’s hard to find right now,” said Koos.
Another side of the issue that state and federal leaders are looking at is a lot of private equity money going into buying existing housing and placing it on the rental market, he said. Even Airbnb can constrict the availability of single-family housing by acquiring units for short-term rentals.
“There’s a lot of pressure on that…It’s here…I don’t think I’m too far off with this number — there’s probably about 40 or 50 Airbnb’s in Normal,” said Koos.
