For cities, population growth leads to more tax income
By MIKE MONSON
News-Gazette Staff Writer

   The population of Champaign and Urbana has slowly but steadily risen over the last three decades, with Champaign seeing more rapid growth.    And continuing that growth is of more than passing interest to city officials - as some key income sources for city government are based on population.
   Federal census figures compiled since 1970 show modest growth in Champaign-Urbana's population.
   Champaign had 56,837 residents in 1970, 58,133 in 1980 and 63,502 residents in the 1990 census.
   In comparison, Urbana saw its population at 33,976 residents in 1970, 35,978 residents in 1980 and 36,344 residents in 1990.
   City officials in Champaign-Urbana believe the population growth continued during the 1990s, with Urbana estimating the city's population at 38,555 and Champaign estimating 66,000 residents.
   Those estimates are at odds with census projections, which estimate that Champaign had 64,280 residents in 1998 and Urbana had 34,872 residents.
   The 2000 census is set to begin this spring.
   Richard Schnuer, Champaign's finance director, said many residents might be surprised to learn how small local population growth is, given the boom in new subdivisions in southwest Champaign and elsewhere.
   "In general, the population is not increasing as much as people think, for a couple reasons," he said. "One reason is the geographic increase of the city has far surpassed the population increase. We're seeing residential growth, but they're large homes with relatively few people per building.
   "Plus, some areas just outside the city are not yet annexed."
   Schnuer said a challenge for cities is finding a way to pay for expanding city services to new outlying developments when overall population growth is lagging.
   "When we get an increase in geography beyond an increase in population, the increase in revenues may not keep up," he said.
   For cities, there is a direct link between population growth and income.
   State income tax and motor fuel tax dollars - major sources of city income - are directly based on population.
   State income tax dollars are distributed based on census figures, unless a community pays out of pocket for a special census if it disagrees with the federal count, said Mike Klemens, an Illinois Department of Revenue spokesman.
   Klemens said the state sets aside 10 percent of all state income tax dollars it receives from individuals and corporations, after income tax refunds are deducted, for distribution to cities and counties. Illinois keeps the remaining 90 percent for state government.
   For Champaign, the state income tax generated $4.5 million during fiscal 1999, and is expected to bring in $5.1 million this budget year, according to Schnuer. That's 9 percent of the total city budget of $61 million.
   For Urbana, the state income tax payment was $2.58 million in fiscal 1999 and is expected to jump to nearly $2.9 million this budget year. That represents 11 percent of the city's total $27 million budget.
   City officials particularly like the state income tax because it has been a rapidly growing income source.
   "People are making more money, corporations are making more money – and they're paying more in taxes," said Urbana Comptroller Ron Eldridge.
   The motor fuel tax is also based on population. It is mainly generated through a statewide 19-cent tax per gallon of gasoline and 21 cents per gallon of diesel fuel.
   Motor fuel taxes are generally restricted for improving streets.
   Champaign expects to receive about $1.6 million this budget year in motor fuel taxes, while Urbana expects to collect about $940,000. That's about 3 percent of Urbana's overall budget, and about 2.6 percent of Champaign's budget.
   Cities have been seeing slow growth in motor fuel tax income in recent years, because sales of fuel have been growing only about 1 percent a year, said Martha Schiebel, a spokeswoman for the Illinois Department of Transportation.
   But cities, townships and counties across Illinois will see an infusion of motor fuel tax cash for each of the next five years due to Gov. George Ryan's Illinois FIRST program. Illinois FIRST is adding $125 million annually into the motor fuel tax pot for local governments, using bond proceeds. The bonds are being paid off from an increase in state license plate fees, which were hiked from $48 to
   But cities, townships and counties across Illinois will see an infusion of motor fuel tax cash for each of the next five years due to Gov. George Ryan's Illinois FIRST program. Illinois FIRST is adding $125 million annually into the motor fuel tax pot for local governments, using bond proceeds. The bonds are being paid off from an increase in state license plate fees, which were hiked from $48 to $78 per vehicle annually.
   Another population-based income source is the local use tax collected by the state on out-of-state catalog sales and on some Internet sales, when the company making the Internet sale has an Illinois presence. The local use tax is 6.25 percent, with 1.25 percent going to municipalities and counties.
   Urbana received $373,000 from the local use tax in 1999, and Champaign collected $651,000. That's about 1 percent of Champaign's budget and 1.3 percent of Urbana's budget.
   Illinois also distributes to cities, based on population, a photo-processing tax it collects on photos. Urbana received $72,000 last budget year from this tax. Champaign received $126,000.

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