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Council restores full 1% local income-tax credit after narrow vote
Summary
The Vermilion City Council voted to amend local tax code and restore the full 1% credit for taxes paid to other municipalities, a measure supporters said returns previously diverted revenue to local taxpayers while critics warned it could reduce funds available for streets and other projects.
The Vermilion City Council voted on ordinance 2025-12 Wednesday to amend the city codified ordinances dealing with credit for tax paid to other municipalities and to reestablish a full 1% credit for Vermilion residents who work outside the city.
Supporters said the change returns a tax credit that had been reduced in prior years; opponents said restoring the credit could reduce revenue available for street repairs and other projects. Councilman Holmes said he opposed the ordinance because it removed a layer of council oversight and would divert funds now used on infrastructure, saying, “I’m gonna vote no just for that reason.”
The measure was introduced on third reading as “an ordinance amending chapter 82.07 … and reestablishing full 1%.” Finance Director Amy Hendrick provided background earlier in the evening about prior ordinance language and receipts history; she and other staff later supplied figures to the council showing revenue and the possible shortfall if forgiveness rules change.
Councilman Drew Worley, who led discussion in favor of returning the credit to taxpayers, urged that decisions about additional tax levies or revenue for roads be put to voters if residents want a dedicated roads funding mechanism. Worley also noted the city is not in the same fiscal condition it was in when the credit was reduced in past years and said the council should restore the prior credit.
Council President Steve Herron called the roll for the adoption vote. The record shows the following responses when the ordinance was adopted: Jeff Lucas — yes; Drew Worley — yes; (Councilman) Drew — yes; (Council member identified as) Wes — no; (council member identified as) Erin — no. The ordinance was adopted and will go into effect according to the timeline prescribed in the ordinance text.
Why it matters: The restored credit changes how Vermilion residents who work in other municipalities are taxed locally and reduces a revenue stream the administration had cited for street and capital projects. Council members and staff repeatedly raised the tension between returning revenue to taxpayers and preserving funding for infrastructure.
Next steps: The ordinance was adopted on third reading; the city clerk will publish final language and effective dates. Councilmembers who argued for further study said they may bring forward proposals for dedicated levies or alternative funding for major street projects.
Ending: City staff told the council they will provide follow-up material about projected revenue impacts and timelines for implementation; council members said they expect more budget discussion at upcoming finance committee meetings.
