Diverse Tax Base Reduces Property Tax Burden for Residents

St. Charles residents benefit from having a diverse tax base. It helps to keep the property tax burden lower than it otherwise would be to fund the quality and quantity of services provided.

The City of St. Charles is extremely fortunate to have a diverse tax base that includes a variety of businesses in multiple economic sectors. The result is diversity in city revenue sources that keeps property taxes lower than what would otherwise be necessary to fund the quality and quantity of services provided.

The city's General Fund (the fund where most city operations are accounted for) benefits from a diverse composition of revenue sources. The largest source of revenue historically has been sales tax. Property taxes are the second largest revenue stream, with the remaining revenue sources comprised of state shared income tax receipts, charges for services, as well as hotel, utility, and telecommunication taxes.

In a recent report by Moody's Investors Service, the following statement was made regarding St. Charles:

"The city's financial operations remain sound despite significant revenue pressures, as they are supported by solid operating reserves, a demonstrated history of reacting to budgetary challenges, and a high degree of revenue raising flexibility inherent in being a home-rule municipality." 

For those that don't know, non home-rule municipalities (like the City of Geneva) must be given specific authorization in state law to take an action. Home-rule municipalities (like the cities of Batavia and St. Charles) can take any action, unless it is preempted or prohibited by state law.

Frequently, I hear residents or business reflect on what services they receive for the property taxes that they pay. Many residents believe that city services are provided in exchange for the property taxes that they pay. That is true, but doesn't tell the whole story. 

Property taxes actually cover less than 1/3 of the cost of the services that are provided. The city collects approximately $12 million annually in property tax revenue. This chart shows the items that property taxes are collected for.

The remaining 2/3 of the cost of city services comes from sources other than property taxes. These include:

  • sales taxes (2% on the purchase of most items; 1% on items like food, drugs, and automobiles)
  • electric franchise fees (5% on electric bills)
  • hotel taxes (5% of the room rate)
  • income tax (a portion of what you pay to the State of Illinois is distributed back to the city on a per capita basis)
  • alcoholic beverage tax (2% on purchases)


You can view a chart of city General Fund revenue here. You can view a chart of city General Fund expenditures here.

Currently, the owner of a $300,000 home in St. Charles pays approximately $800 annually in property taxes. If all city services were funded entirely by property taxes, that amount would need to triple to almost $2,400!

Other government entities in the community (e.g. school district and park district) have far less flexibility in generating revenue, so a greater percentage of their revenue comes from property taxes. Reliance on property taxes varies by agency so you should check with each for specifics.

St. Charles residents benefit from having a diverse tax base that includes a variety of businesses. It helps to keep the property tax burden lower than it otherwise would be. It also allows visitors and other non-residents to contribute tax revenue to our coffers, further benefiting residents of the community.


Scott Nowling December 01, 2011 at 03:45 AM
Brian: Interesting article! One question: property tax is a very predictable revenue stream while sales, hotel, alcohol and even income taxes fluccuate. How much volatility is there in the revenue the city receives year-over-year and how does the city manage it?
Brian Townsend December 01, 2011 at 06:59 PM
Hi Scott. There is some volatility in revenue sources that are dependent on consumer spending. The city addresses this volatility in 3 main ways: First, we use conservative projections when we compile the budget to minimize the risk of collections coming in less than expected. Second, we actively monitor the budget throughout the year and will make adjustments to forecasts, if needed. We will also ask departments to reconsider or postpone expenditures, if we see certain revenue sources faltering. Finally, the city has been fortunate to establish reserves to help keep the wheels of government turning, if revenue drops. Reserves are like a savings account that can be tapped for unplanned situations, like a major expenditure or drop in revenue.


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