City’s sales tax settlement nears as more favorable deal reached

August 23, 2018

KANKAKEE — Kankakee appears set to enter into an agreement with the state’s revenue department on a repayment schedule for $824,000 of sales taxes the city erroneously received during the course of several years.

The Illinois Department of Revenue had set an 18-month repayment schedule, which would have cost the city just more than $45,000 per month. The tax deduction could begin by November or December.

However, through negotiations, the city was able to stretch the payment schedule to 10 years, thereby reducing the monthly payment to $6,866.

Mayor Chasity Wells-Armstrong informed the Kankakee City Council on Monday of the negotiated plan. The council still must formally adopted the IDOR agreement.

It is likely that the city’s first payment will be taken out of its monthly sales tax disbursement from IDOR, meaning the city will not be forced to send a monthly check to IDOR.

City comptroller Elizabeth Kubal noted the $824,000 incorrectly received by Kankakee had nothing to do with sales-tax sharing agreements, which once produced millions of extra revenue for the city in recent years. Some of the tax money sent to the city were from companies the city never had sales-tax agreements with.

Kubal said the money simply was sent to Kankakee in error, and it was not noticed until IDOR audits showed Kankakee receiving tax revenue from companies not located here.

The originally-proposed payment plan would have been a significant hardship on city resources, Kubal said.

“Public services would have suffered,” she said. “This is a much more acceptable (repayment) level.”

She noted in the recently adopted city budget, she had dedicated $180,000 for repayment this year. Now, the money recaptured by IDOR will be closer to $40,000.

The city’s budget year concludes April 30.

“It was just a mistake,” she said. “We owe it and we have to pay it back.”

In July 2017, the city filed suit against IDOR as they sought repayment. The city was notified only months earlier of the error and IDOR telephoned Kubal to inform her it would regain the money by withholding sales tax money.

The two sides had been negotiating a settlement since then and came to this proposed agreement only recently.

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