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City tax gains offset state cuts

Urbana income tax collections increase as jobless rate falls.

The city’s revenue is increasing because of improvements in income tax collections, but Urbana’s finance director said the majority of those gains are being offset by cuts to state funding and other sources of revenue.

Council members got a first look at the city’s appropriations budget last week, and revenues appear to be slightly higher than at the same time last year, said Lee Williams, Urbana’s finance director. The city’s total budget is expected to be about $15.9 million, compared to $15.4 million at this time last year, Williams said.

The city has seen an increase in the amount it collects from income taxes, in part due to additional jobs at Weidmann Electrical Technology Inc., which recently began operations at the former Neenah (Fox River) Paper Mill Site in Urbana. The unemployment rate has also dropped in Urbana, from 8 percent in January this year to 6.7 percent in August, according to figures released by the state.

However, those gains were largely offset by state cuts to Local Government Funds, along with the phase out of the tangible personal property tax, Williams said. In addition, a federal Staffing For Adequate Fire and Emergency Response grant recently expired. The city had been using that roughly $285,000 grant since 2011 to cover the costs to keep two firefighters on its staff.

“Those are all haunting us,” Williams said of those reductions.

The increase in revenue will allow the city to hold off on additional staffing cuts, and to possibly add personnel to the Urbana Fire Division, or to hire a firefighter and a police officer, Williams said.

About 25 percent of the income tax is directed to the city’s capital improvement fund, which is not affected by cuts to state revenue. But the remaining 75 percent of the income tax is directed to the operating budget, which is affected by those cuts, Williams said.

The city has two budget cycles each year. In the spring, the tax budget provides an estimate of the revenue that will be available throughout the year. The appropriations budget, reviewed in the fall, provides an estimate of the city’s expenses.

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