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Why gas, alcohol and hotel stays will be more costly in St. Charles

A new gasoline tax, along with increases to St. Charles' alcohol and hotel tax rates, received a green light from the city council Monday, despite pushback from some aldermen who believe residents and businesses are being overburdened.

The additional revenue sources are expected to put about $1.38 million into the city's coffers annually, which will help fill an anticipated budget shortfall in future years, city officials said. Aldermen who supported the three user taxes said those funds are coming from a mix of residents and visitors who drive on the city's roads, use its services and visit its businesses.

Revenue from the new gas tax of 2 cents per gallon, for example, will specifically be earmarked for road improvement projects, Finance Director Chris Minick said. The tax, expected to generate about $400,000 annually, will go into effect Nov. 1 at the city's nine gas stations.

“This is how we pay for our roads,” Alderman Rita Payleitner said. “Anybody who uses our roads is therefore being taxed. I think that's fair.”

The measure initially was shot down 4-3 at the committee level in June, but three more aldermen cast votes in favor of the new tax at Monday's meeting.

Alderman Ron Silkaitis said he didn't feel he could support the gas tax in addition to two other tax hikes. “I think it's too much too quick,” he said.

Raising the alcohol and hotel tax rates each by 1 percentage point received a more favorable response from aldermen, who voted 8-2 for the hotel tax increase and 7-2, with one abstention, for the alcohol measure. Both tax hikes will go into effect Sept. 1.

Alderman Steve Gaugel, who opposed all three proposals along with Alderman Art Lemke, said he's particularly worried downtown bars and restaurants will bear the brunt of the alcohol tax hike. Several establishments have indicated they would absorb that extra cost rather than passing it on to customers, he said, thus affecting their bottom line.

“There's no question in my mind that we're doing the opposite of helping them be successful,” Gaugel said.

The alcohol tax will jump to 3 percent, adding about $600,000 to the city's coffers annually, according to city documents. The tax is placed on packaged liquor and alcoholic beverages sold at restaurants or bars.

The hotel tax rate is increasing to 6 percent of 94 percent of gross sales, which likely will bring in an extra $380,000 each year.

The city has held off on raising taxes for several years, Mayor Ray Rogina said, pointing to a nine-year freeze on the property tax levy. Meanwhile, operational costs are rising, and the city has several capital projects in the works.

“It costs money to run this city. We've been squeezing it and squeezing it, and we can't squeeze it anymore,” Alderman William Turner said. “This revenue has got to come from somewhere.”

  St. Charles officials are increasing the city's hotel tax rate to 6 percent. Rick West/rwest@dailyherald.com
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