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, � <br /> ,� _ ` <br /> . LEGAL DEPARTMENT MEMORANDUM <br /> No. 2002-08 <br /> August 19, 2002 <br /> TO: Honorable Mayor Howley and City Council Members <br /> FROM: Steve Ga , ity Manager <br /> John W. o , Corporation Counse��j�j <br /> Beth B. ut , Finance Director <br /> RE: Telecommunications Tax <br /> SUMMARY: The City may realize new revenue of $700,000.00 per year by <br /> increasing the tax on telephone calls to 6%. <br /> BACKGROUND: The State of Illinois has passed the Simplified <br /> Telecommunications Tax, which will be collected for cities by the Department of <br /> Revenue effective January 1, 2003. This tax will replace the City of Decatur's current <br /> utility tax (5%) and infrastructure maintenance fee (1%) with a new single rate of 4.5%. <br /> Because the new tax applies to both in-state and out-of-state calls, unlike the utility tax <br /> which applies only to in-state calls, the new rate is estimated by the State (and the <br /> Illinois Municipal League) to produce the same revenue as the former taxes. <br /> The Simplified Tax statute permits the City to raise the new rate to a maximum of <br /> 6%. That rate would produce estimated new revenue of approximately $700,000.00, <br /> based on the statutory formula. By raising the rate to that amount, the City would retain <br /> the current tax rate on in-state calls at 6%, while increasing the rate on out-of-state calls <br /> by only 1.5% (from 4.5% to 6%) from that which the new legislation would otherwise <br /> impose without any City action. <br /> In order for any new rate to be effective by January 1, the City would have to act <br /> before September 30. <br /> STAFF REFERENCE: John Couter (424-2807) <br /> JWC:ps <br /> cc: Wendy L. Morthland <br /> Steven G. Jones <br />