City Council learns about sales tax hit, approves Tuscola Commons

By Kayleigh Rahn
The Tuscola City Council, during its meeting Monday, April 8, approved the subdivision plat for the proposed Tuscola Commons Subdivision that is slated to become home to Love’s Travel Stop with hopes of additional development in the future.

And, quite honestly, there may be no better time for new development as City Administrator Drew Hoel reported, during a budget work session prior to the council meeting that the city owes about $210,000 in sales tax repayment to a local merchant who mistakenly overpaid over an unknown period of time.

“We received notice from the Illinois Department of Revenue about a sales tax–what they are calling–over payment,” Hoel said. “They cannot tell us who it is, and they cannot tell us what time period it represents. It’s obviously a very large number, and because of that, it’s likely a very large retailer. In fact, there are a limited number who are even in that stratosphere of local sales tax. We have very little right to review, but they are confident this is correct.”

The repayment will include about $140,000 out of the base sales tax and about $70,000 out of the home rule sales tax for a total of $210,000 the state will hold from sales tax distributions over the next 15 months, Hoel explained.

The other taxing bodies overlapping Tuscola included the county, school district and state, among others, Hoel said.

“The total number for repayment here is a big number, it’s more than $1 million that was paid mistakenly by a vendor,” Hoel said. “We don’t know what mistakenly means. It’s almost hard to fathom what that exact scenario could be. As troubling is that we have been watching sales taxes very closely. They have been declining, of course, and that appears to be accelerating. It’s not a secret that there have been significant closures at the mall. This amount has apparently masked some of that declining sales tax, so the situation is even worse than it has appeared for the last few months. We can accommodate this in the existing budget, because we have large cash reserves just exactly for a situation like this.”

Hoel noted that the upcoming Fiscal Year budget will include few capital projects excluding the 50 percent matching grant for the ballpark facilities, which is part of the state’s OSLAD grant.

“This is something we are going to watch very closely over the course of the next year to try to get a handle on a more accurate picture of sales tax forecasting with this new information,” Hoel said. “I think it’s likely this will impact our operations before long. This is not good news, and it comes in the midst of some negative trending in local sales tax generation.”

City Treasurer Alta Long said prudent planning by the council and city’s administration to bulk up the reserve funds will help weather the storm. The state office says the overpayment was corrected in the October sales tax payment, which was distributed in February, Hoel added.

“I’ve had a hard time imagining what possible scenario could result in this type of number,” Hoel said. “We’re talking somewhere in the order of $14 million in sales.”

Hoel suggested that the oversight could occur if the vendor applied a tax exemption incorrectly, for example tax exempt building materials in an enterprise zone or a change to the tax applied to leased vehicles.

The full story can be found in the Wednesday, April 10 edition of The Tuscola Journal.