CHICAGO — The Cook County, Ill., Board of Commissioners this week voted to repeal half of a sales tax increase that was implemented last year and remains the most unpopular and controversial tax hike in recent county history.
If it stands, the rollback could mean the loss of nearly $190 million in annual revenue for Cook starting in 2011, said county chief financial officer Jaye Morgan Williams.
Standard & Poor’s analysts yesterday refrained from predicting how the move might impact the county’s bottom line. But generally speaking, “for any issuer, you take away that big of a revenue source and it’s significant,” said analyst Helen Samuelson.
Tuesday’s 12-to-5 rollback vote is likely not the end of the story. It’s the fourth time the board has voted to repeal or roll back the tax, with county President Todd Stroger vetoing the measure the previous three times. He said he would veto Tuesday’s move as well.
The difference this time is that a new Illinois law — passed, some have said, specifically to target the sales tax — reduces the number of commissioners needed to override a presidential veto to 11 from 14.
Stroger has said he might challenge the new law in court, and warned that a rollback would mean major cuts in county services, particularly for its massive health care system.
Implemented in 2008, the one percentage point tax increase had boosted the county’s sales tax to 1.75% from 0.75%, and pushed Chicago’s sales tax to 10.25%, among the highest in the nation. Tuesday’s vote would cut the county’s tax down to 1.25%. It would take effect in July 2010.
Williams said the rollback would mean a $32 million loss in 2010 and roughly $188 million in 2011.
Some Chicago-based groups, like the Civic Federation, a fiscal watchdog group, support the tax rollback, while others, like county union employees, criticized the move as politically motivated. The commissioners and Stroger are heading into an election season starting with a primary in February.
Credit analysts have generally praised the tax as strengthening the county’s fiscal position and warned that a rollback could pressure Cook’s balance sheet.
In an effort to offset possible revenue losses for the health system, three commissioners have sponsored an ordinance that would require that the county’s larger nonprofit hospitals to pay a fee if they fail to devote at least 4.5% of their annual expenses to charity care.
The fee is dubbed the Healthcare Access Protection Initiative, or HAPI, and would equal the difference between the amount of charity care a hospital has provided and 4.5% of its total expenses.
Standard & Poor’s rates Cook’s GO debt AA. Fitch Ratings rates the credit AA-minus, and Moody’s Investors Service rates it Aa3. Moody’s and Fitch downgraded the county one notch in July.
