Tax protest groups defeat city sales tax

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An established taxpayer advocacy group has become two. The 30-year-old Winnebago County Taxpayers Association spawned the Winnebago County Taxpayer Advocates a few weeks before the referendum. That “young” organization got a victory under its belt, after defeating the City of Rockford’s proposed 1 percentage point sales tax increase (from 7.25 to 8.25 percent).

Despite the connection, Association Board Member and Advocates Chairman Tim Emert said both groups are distinct.

“(The Association has) had a different mission,” Emert said, referring to the Association’s work on home assessments.

Emert, a national sales manager for telecommunications company Kairos Group, said the Advocates concentrate on fiscal oversight.

The Kairos Group Web site defines “Kairos” as: “…a Greek word for time. Specifically, a period of time characterized by good fortune, urgency and favorable opportunity; a Kairos moment is typically one of short duration which must be seized or it will be lost.”

Although the Advocates’ television ad campaign began March 10, according to state records, the group received its first donations March 13. Their campaign defeated Rockford Mayor Larry Morrissey’s push for a 1 percentage point sales tax increase March 21.

According to the Illinois State Board of Elections (ISBE), between March 13 and 16, the political action committee accepted $32,940 in donations.

Donors to the Advocate campaign were:

Chuck Allton—$5,065

Benson Stone Company—$5,000

Thomas Priola—$1,000

Diamond Enterprises—$1,275

Miller, Bradford and Risberg—$600

First Ranger Petroleum, LLC—$10,000

Reopco, Inc.—$10,000 (Road Ranger, LLC is the parent company of First Ranger Petroleum, LLC, and Reopco, Inc.)

“We’re pleased that it didn’t pass,” Emert said.

But he acknowledged the increase was the lesser of two evils. Home rule, Emert said, was the other evil.

“We’re gonna have a lot of people out of work and big potholes,” Emert said, referring to what road project cutbacks would mean.

City Administrator Jim Ryan said, “The next step is that we deal with the resources that we have available.”

He said Morrissey and city aldermen must now decide how to allocate the current funds. Ryan said they would, most likely, be used to leverage state and federal money for a few particular projects.

Ryan said those projects include repairing the Kishwaukee and Horace Avenue bridges, repairing West State Street near the Winnebago County Justice Center, and repairing Harrison Avenue.

But Ryan said neighborhood resurfacing projects would, in all likelihood, be on the chopping block. He said the city hasn’t decided whether to put a sales tax increase question on the November ballot.

“There’s certainly that possibility that’s being discussed. We need a longer dialogue before a decision is made,” Ryan said.

He acknowledged the effectiveness of the anti-sales tax campaign.

Sycamore-based Morning Star produced the commercials, which began running around March 10, Emert said. He said the commercials ran on WIFR-TV, WREX-TV and WTVO-TV. The Advocates also distributed yard signs.

“They hurt us at the ballot box,” Ryan said, referring to the television commercials.

The city, he said, still must learn exactly why the voters scoffed at the proposed increase.

Ryan also responded to some business leaders’ concerns about the increased sales tax’s impact on their bottom line.

“They have the luxury of looking at the increase as it affects their businesses. [The increase would have been] beneficial to taxpayers,” he said.

The increase, Ryan said, would have generated $1 million in property tax relief.

“It really is an argument over public good versus private benefit,” Ryan said, adding, the aftermath of the failed sales tax increase would divert the city’s attention away from the pursuit of home rule.

“Our No. 1 priority is to get our arms around the problem,” Ryan said.

Emert said the city should dedicate its motor-fuel tax revenue to road construction.

Contributor’s comments and background

Gypsum Supply Company Manager Charles Allton, according to the ISBE, contributed $5,065 to the anti-sales tax campaign.

Although he’s listed as the contributor of record, Allton said his employer, which sells commercial and home construction supplies, actually made the campaign donation.

“The sales tax, although it was beneficial in some ways, was detrimental to businesses that sold big-ticket items,” Alton said.

Benson Stone Company donated $5,000 to the defeat.

Andy Benson echoed Allton’s sentiments, saying the failed sales tax increase would have hurt businesses selling bigger ticket items. But Benson said it would have a chilling effect on business development. “We were concerned that it’s going to limit the ability to retain business,” he said.

Benson stressed it would have stifled the city’s capacity to retain and attract businesses to Rockford; and in turn, hamper the city’s attempts to widen its tax base.

He said the sales tax increase’s negatives outweighed the benefits of potential property tax relief, and keeping the current property tax is preferable to increasing the sales tax. “It would have been nice if there had been a choice on the ballot, so it wasn’t all or nothing,” he said.

But he acknowledged at least one benefit from the sales tax increase—road improvements.

“We realize the city needs funds for the city infrastructure, and we need to see the city do well,” Benson said.

The city must find a “less damaging” way to fund road projects, Benson said. “This isn’t a question of whether we need to spend money on roads. It’s a question of how that money is collected,” he said.

Speaking of funding road projects, the City of Rockford spent $379,000 in street and parking improvements on Railroad Avenue in front of Benson Stone.

City Administrator Jim Ryan said: “In 2000, the city spent $229,000 to resurface Railroad Avenue, and redo the curbs and gutters from 11th Street to 7th Street. In 2003, the city spent $150,000 to put on-street parking and to reconstruct the street in front of the Benson Stone business.” Ryan added, “We worked with Benson Stone to secure a State of Illinois grant in the amount of $25,000 to acquire additional public right-of-way for parking purposes for Benson Stone from the Union Pacific Railroad.”

Former L.T.’s Bar co-owner Thomas Priola is the contributor of record at $1,000. But Priola and Stateline Satellite President Eric Brostrom both said it was a company donation rather than a personal one.

“It was a check that I personally wrote,” Brostrom said.

He said Stateline Satellite was against the sales tax increase because it would have hurt business. “I want the ability to compete,” Brostrom said.

Any more attempts to raise the sales tax could spur the company to find a new location.

“If they keep passing things where I lose a competitive edge, we’re gonna think about relocating,” Brostrom said.

Priola, his father, Phillip M. Priola, and sister, Lynnann Gage, now of Carlsbad, Calif., pleaded guilty to federal tax conspiracy in September 2004, according to a U.S. Department of Justice press release. They admitted to defrauding the government of income, FICA, Medicare and employer taxes by skimming thousands of dollars from L.T.’s Bar receipts between 1992 and 1998.

The Priolas and Gage co-owned the bar. Gage’s husband, Todd, now owns the establishment.

Diamond Enterprises of Rockford donated $1,275 to the campaign. Its attorney, Bruce Ross-Shannon, said he was unaware of the donation and was unable to confirm it. Ross-Shannon also refused to name the owner of Diamond Enterprises or the nature of the business.

Sussex, Wis.-based Miller, Bradford and Risberg Inc., contributed $600 to the campaign against the sales tax. According to their Web site, the company is a distributor of equipment and supplies for construction, forestry, industry and municipalities, operating from six locations in Wisconsin, one in upper Michigan, and one in Rockford. Returning an initial
call, a company representative said Dave Bawinkle was unavailable for comment because he was on vacation until April 1.

First Ranger Petroleum, LLC, and Reopco Inc. contributed a total of $20,000, Road Ranger, LLC, President Dan Arnold said.

Arnold emphasized why he got involved: “I thought we had to defend our customer.” Arnold was confident the sales tax would be defeated again, if it’s put on the November ballot.

He said understanding why gas is cheaper in Belvidere than Rockford would give voters added incentive, asserting gas is cheaper there because Belvidere has a lower sales tax. If the sales tax increase had passed, he said, it would have added another 2.5 cents per gallon forever.

According to Arnold, First Ranger Petroleum, LLC, and Reopco Inc. are Road Ranger, LLC, subsidiaries.

Arnold also said prominent developer Sunil Puri is a silent minority stockholder, and the company made the donation without Puri’s request or permission.

Puri concurred.

“I don’t have any day-to-day control,” Puri said, describing himself as a silent investor.

2003 ‘Ranger’ efforts

Although Puri asserts he wasn’t involved in this campaign to defeat the sales tax increase, he did fight against the Rockford Park District’s request for additional revenue in 2003. Through his First Rockford Group, Puri contributed $11,000 to the Winnebago County Taxpayer’s Association, which used the money to place yard signs and conduct a direct-mail campaign against the Park District referendum. Arnold’s Ranger Enterprises contributed another $11,000 to defeat the Park District.

“The property taxes were exceptionally high to begin with,” Puri said, and claimed if the Park District had a dollar, it could only spend 40 cents because the remainder went toward debt service. Therefore, its request for 20 cents more equated to a proposed 60-cent increase in the 2003 referendum.

In contrast, Steve Reichensterger, Park District CFO, said, in 2003, the Park District had a total levy of 81 cents on $100 assessed value, and the District actually requested a 22.5 cents increase, which would have generated $4.5 million in revenue.

“There would have been zero paid on debt,” Reichensterger said. “We have fought hard to reduce interest costs. Our bonds are paid off almost immediately. It just tells you how far off that [Puri’s] claim was from the truth.”

Tim Dimke, Park District chief operating officer, said voters in 2003 seemed to say, “We appreciate what you do, but we don’t have any tax money available.” He noted 100 percent of the 22.5 cent proposed increase would have gone to benefit the community. Part of the money would have gone to repair and maintenance.

Dimke said the District only sought an increase in the operating fund, not debt service; and the Park District Board spent two years in planning, holding more than 40 community meetings and distributing surveys to get taxpayer input.

As to the Winnebago County Taxpayers’ last-minute efforts at the time, Dimke said: “It looks like they felt it was effective against the Park District. Everybody’s welcome to their opinion at any time. We would like to have an informed public, so everybody has a chance to give advanced information to the voters. We prefer, in the future, if there are groups that wish to enter the discussion, that they do so ahead of time so we can address their concerns.

Association history

“We started in 1976,” founder Cal Ferguson said. At that time, he said, the County lowered assessments on industrial and commercial properties, and shifted the burden to home owners to make up that loss through a higher property tax multiplier. The Association sued the County. As a result of a three-year legal battle, the court ruled the multiplier illegal.

In 1983, Ferguson said the Association opened its office at 130 N. Church St., and hired Jeff Jury to consult with the group. Coordinating efforts with home rule opponent John Gile, the Association and volunteers succeeded in removing the home-rule powers of the City of Rockford.

Winnebago County Board Member Pete MacKay (R-5) said the Association fought Winnebago County’s special service taxes in the early 1990s, and coordinated a protest at the courthouse, which resulted in the defeat of the measure.

MacKay said the County Board proposed a special services tax to fund the sheriff’s department. He said he was the one board member responsible for defeating it. But the taxpayers weren’t thrilled with the proposal either. “Nobody knows how many people showed up at the courthouse that night. The place was absolutely jam-packed. It was a beautiful thing to behold,” MacKay said.

The Association was largely inactive until the 2003 effort against the Park District.

They did not mount a campaign against the 1 percentage point increase in the sales tax by Winnebago County, nor did they mount a campaign to oppose the effort by Empower Rockford to have the Rockford City Council put home rule on the ballot without a petition drive.

Addressing the recent Rockford sales tax referendum, Ferguson said: “Sure, they want to rule at home. They want to raise taxes.” He also asserted there was no guarantee the city would lower real estate taxes.

However, the measure on the March 21 ballot read: “Shall the City of Rockford, Illinois impose a 1 percent Non-Home Rule Municipal Retailer’s Occupation Tax, Service Occupation Tax and Use Tax, for infrastructure costs and property tax relief?” (See chart provided by the City of Rockford, “PROPERTY TAX RELIEF FOR CITIZENS AND BUSINESSES” on page A1.)

The Advocates’ campaign excluded the sales tax exemption for groceries, and titled vehicles or boats, prescription and nonprescription drugs and medical supplies, giving an impression the sales tax would apply to all retail items. The Advocates’ campaign also downplayed total savings of the discontinuation of city stickers.

Ryan said: “The opposition failed to state in their TV ads that with sales tax Rockford would save $1 million per year, primarily in vehicle sticker elimination and property tax reductions. The thing that gets lost [is] that how many people don’t buy the vehicle sticker that use our roads, or those who stand in line to buy the sticker. It’s not an efficient or equitable way to generate revenues for the transportation system.”

Critics of both sides said the Advocates misrepresented the bond payoff, and the city’s proposal to pay off the bonds by 2016 was not rapid enough to gain taxpayer trust.

Final straws

Some final straws were tossed on the fire of the city’s defeat by state Sen. Dave Syverson (R-34). He voiced his opposition to the sales tax on WNTA 1330-AM’s Ken DeCoster Show.

Syverson said his comments were in response to a caller’s question.

“I was concerned with the size of the increase,” Syverson said. “I thought a smaller amount would have been more acceptable and easier to pass.

“Something has to be done,” he added. “Our infrastructure has to be rebuilt. We need to come up with a revenue stream to pay for that.”

Rockford attorney Dan Lewandowski, a Democrat challenging Syverson for his seat, said he didn’t take a position on the sales tax referendum, but could empathize with city officials.

“I can certainly understand the frustration of those supporting the sales tax,” Lewandowski said.

Though Syverson has been “hired” to represent the people in the district, Lewandowski said, Syverson has been a “road block” to money to fund road projects.

“I think it’s interesting that the senator is spending more time trying to shoot down a city initiative,” Lewandowski said.

“We need to work with the governor (and) fellow legislators, across party lines, to bring money back to this district.”

Ryan said of Syverson’s comments against the sales tax: “He had indicated to our administration that he was going to keep his opinion of the sales tax referendum to himself . Obviously, that did not occur. I would also add that we believe very strongly that in order to move forward as a community,
we need to reduce the local property tax burden on neighborhoods and businesses and provide a responsible revenue stream for investment. We thought that was consistent with the senator’s position on state capital investment.”

Rockford Apartment Association President Paul Arena said his organization supported the sales tax increase, because it was beneficial to the city to have a revenue stream to pay for road projects.

Arena also said the Association didn’t believe the increase would drive people to shop elsewhere. He said the sales tax increase proposal’s pledge to lower property taxes was a “step in the right direction.”

He explained why the proposition failed.

“(The opponents) had a lot of money to invest,” Arena said. “They did an effective job of getting their message out there.”

Arena said the proposal should be placed on the November ballot, and said the Association would support it.

Editor & Publisher Frank Schier contributed to this article.

From the March 29-April 4, 2006, issue

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