Some Uptown business owners are criticizing a proposal to raise food and beverage and hotel-motel taxes in Normal. They’re also not happy about an accelerated timeline to a council vote Monday — just three business days after the proposal became public.
The town held a special council work session Wednesday evening on the underpass project. Staff proposed paying for a $12 million gap in the existing funding model for the $40.3 million project, with debt financed by the tax increases.
The food and beverage tax rate would go from 2% to 2.25%. The hotel-motel tax would rise from 6% to 8%.
What’s the rush?
“I think it's all very sudden, and more than anything in the community, typically, when you're looking at a sales tax increase, there's a period in which it's open for public discussion [and] consideration. A lot of them go to public referenda, so voters actually get a direct say in whether their taxes are raised,” said Ryan Fiala, of Fiala Brothers Brewery and of D.P. Dough, a calzone shop. “Regardless how you feel, the voters have their voice heard.”
Fiala said the tight timeline prevents full public debate over the proposal. Town staff said Wednesday the reason for the quick vote is to make it possible to complete the project in 18 months, ahead of a September 2027 deadline to spend federal grant funding for the project. Fiala said he did not find that argument compelling.
“The material nature of the discussion has changed substantially. What was once billed as a project almost entirely funded by state and federal grants — over 90% with a town commitment of $2 million to $2.5 million [*Actually $2.9 million] — is now an open-ended $15 million that can rise even higher,” said Fiala.
“I know these grant funds actually do have a hard expiration, but it's possible that this was delayed until they couldn't delay anymore. So now there's a justification for pushing it through in a matter of five days," said Windy City Wieners owner Steve Marifjaren. “I don't want to see a sales tax that's going to have lasting impact all proposed and passed in less than a week.”
Framing the tax increases
The town share of the project is now about 37% of the total cost. Fiala said the town is failing to consider the no-build or delay-build option with the idea that now is not the right time.
“Given that the current Uptown still has development projects that have yet to put a shovel in the ground and other vacant properties around Uptown,” said Fiala.
Supporters of the choice of food and beverage and hotel-motel levies to pay for the underpass have suggested out-of-town residents pay the lodging tax and that bumping food and beverage charges by a quarter-point would have a minimal impact.
Marifjaren runs locations in Uptown and downtown Bloomington. He disputed both the conclusion and the framing of the tax as a quarter of a percent. Marifjaren preferred calculating the increase as a share of the existing food and beverage tax customers pay.
“I look at this as 12%; 12% is the tax [increase] [actually 12.5%] that they will see on their receipts,” said Marifjaren. “I promise you that customers will notice this ... and they're not going to be happy about this.”
He also said it will bring his business an administrative headache because he would have to charge different prices in the Bloomington and Normal establishments that could confuse customers.
Marifjaren also objected to targeting restaurants.
“If cost is an issue, everyone should feel the same pain. If we're going to do this, just do it across all the businesses. Recoup the money as fast as possible. General sales tax,” said Marifjaren. “It just doesn't make sense to me. It's going to hurt us a lot more than some of these bigger businesses.”
It’s the economy…
Fiala and Marifjaren also cited an uncertain economic climate as a reason not to alter the tax structure in Normal right now.
“It just feels like customers are cutting back on discretionary spending. Historical comps have us down in various places, and the forecasts are ominous,” said Fiala. “And you talk to your customers, there's an apprehension in the marketplace of what happens next, politically, economically, etc.”
“Our customers work in Normal. They're the people that are cleaning the rooms in the Marriott and this,” said Marifjaren. “Can we just not add more cost to our customers?”
Sunset provision
At the work session, council member Karyn Smith suggested a sunset provision on the tax hikes pegged to full payment of the bonds for the underpass project. Fiala considered that idea to be cosmetic and unlikely to persist.
“What I've seen thus far, historically, when you implement a sales tax, even if you introduce it with a sunset clause, they tend to stay forever. That sunset gets overridden, and you end up with a sales tax forever,” he said.
What else may come
Proponents said the underpass will create valuable public space that will benefit Uptown, Uptown South, and the community quality of life. Fiala himself has benefited from town investment in Uptown. And he gave the council and Mayor Chris Koos credit for that.
“The current Uptown is fantastic. They've blended old and new, and we're at a great place with it, and I think it just needs to kind of take that next step before we look at going to the south. I know they have a plan. They like to work their plan, but they don't have to do this right now,” said Fiala.
He said the benefits of Uptown South are hard for him to see in the near term because the same economic forces that have stalled the Trail East and Trail West projects on Uptown Circle apply to south of the tracks.
“The town has had to invest millions of dollars to compel development on the circle,” said Fiala. “So, the underpass is just the start.”
He said Trail East and West and other keystone projects the town could conceivably offer incentives to advance can show a faster benefit than the underpass.
“This is $15 million of public money that goes to build a path to what's currently a parking lot. And again, the only bang for the buck comes if you further subsidize development in the years to come."
The build already has been substantially deferred, contributing to some of the cost increases for the project. If the council were to reject the staff proposals, costs could rise further.
Fiala is OK with that.
“Honestly, if this is not a proposition where federal and state entities want to fund the majority of this, not 60% but the 90-95% we were talking about initially, it's OK not to build it," said Fiala.
He said there is still a lot of work to do in Uptown north of the tracks, and he asks when government subsidies will stop.
“If we're already dedicating this quarter-point sales tax increase to just building the underpass, I know they've expanded the TIF and that can have some effect, but they're going to have to come to the table for developers to sweeten the deal enough to make them want to invest and build all these plans that they've laid out for Uptown South."
Fiala and Marifjaren said they would be OK with tabling the project.
“This may not be super accurate, but I feel like this is a problem they created, and so now they're trying to solve a problem they created by putting pressure on the community. And I don't really think that's fair. I don't think anyone's going to necessarily be that upset that you don't spend the money. I think you're going to have a lot more people upset that you spent money in this economy that we're living in,” said Marifjaren.
