By Susan Vela
Staff writer
Posted Sep 26, 2018 at 6:12 PM Updated at 4:52 PM
BELVIDERE — Officials are considering a proposal that would allow the city to tax natural gas purchased from out-of-state suppliers, a move that could generate $1 million a year.
“That’s a lot of road projects. That’s a lot of storm sewer work that could be done,” said Becky Tobin, the city’s budget and finance officer. “This has just been a loophole. It’s a loophole that we’re trying to close.”
The proposal would require natural gas consumers who buy from out of state to pay a certain number of cents per therm used. A therm is a unit of heat. Nicor Gas customers relying on in-state suppliers would continue paying a 5 percent tax.
Nicor Gas is the only natural gas distributor in Belvidere. The city collects a 5 percent tax from Belvidere addresses relying on in-state suppliers, a tax permitted by the Illinois Municipal Code.
Gas transported by interstate pipelines is considered interstate commerce, and the Illinois Municipal Code does not give Belvidere the right to tax out-of-state suppliers, said Michael Drella, the city attorney.
“There’s a loophole here,” Belvidere Mayor Mike Chamberlain said.
Belvidere officials hope they can use the city’s home rule authority to close the loophole. Home rule gives cities of more than 25,000 people expanded authority to tax and regulate themselves.
“We have to do our homework,” Drella said.
Rockford, a non-home rule community, hasn’t calculated the percentage of natural gas customers who choose out-of-state suppliers and how much the city is losing.
“We’re aware of this situation,” Rockford Finance Director Carrie Hagerty said.
Increasing revenues for capital improvements has been one of Belvidere’s priorities in recent months. Council members approved a new 2-cent-per-gallon gas tax and a sales tax increase.
Some city officials were shocked Monday to hear a report delivered by Scott Shamberg of Chicago-based Azavar Government Solutions, which, according to its website, ensures municipalities receive “every penny due to them from taxes, franchise fees and utility providers.”
Shamberg said there are a growing number of Illinois entities purchasing natural gas from out-of-state suppliers — perhaps 75 percent of Belvidere’s users.
“They’re not paying the same tax that their neighbor is,” Shamberg said. “That’s creating inequality.”
The state deregulated the natural gas industry in 2002, allowing purchase of gas in other states.
Susan Vela: 815-987-1392; svela@rrstar.com; @susanvela
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