Though city officials say a proposal to increase a gas tax will make tax rates fairer for all customers, some business leaders and aldermen say the issue is not that simple.

The proposal being considered by Evanston City Council calls for increasing the tax rate paid by customers who buy natural gas from companies other than the city’s official provider, Nicor Inc.

Customers who now buy from Nicor pay a gas utility tax of 5 percent of their total bill. Customers who buy gas from other companies — known as wholesale brokers — don’t pay the utility tax but pay a gas use tax of just less than one cent per therm, a small unit of natural gas.

The proposal calls for increasing the gas use tax to 2.5 cents per therm, which would bring the city about $500,000 in additional revenue.

The difference in tax rates comes from the deregulation of the natural gas industry. All natural gas in Evanston is transmitted by Nicor, whose prices are regulated by the state, but customers can pay less for gas by buying it from unregulated wholesale brokers instead.

Because gas bought from wholesale brokers is taxed less, customers have incentive to buy from wholesale brokers.

Aldermen discussed the merits of the plan at the Nov. 10 Administration and Public Works meeting but did not reach any decision. They will continue discussion at the next meeting, slated for Monday night.

City management analyst Alison Zelms said the proposal is designed to bring the taxes on wholesale customers in line with those who buy from Nicor.

“It probably made sense at one time,” Zelms said, “but it’s not realistic anymore to have .95 cents per therm.”

She said the tax increase would not affect many residents because most of them buy from Nicor. She said residential customers don’t buy large enough amounts to benefit from wholesale purchasing.

But several local business leaders said this is not necessarily the case.

“It’s not just a business issue,” said Jonathan Perman, executive director of the Evanston Chamber of Commerce. “That’s one of the misnomers about this issue.”

Perman said many condominium associations and apartment buildings buy their gas wholesale. In those cases an increased gas tax would be passed on to residents in the form of higher rents or association fees.

About one-third of Evanston residents live in apartment buildings or condos, Perman said.

Dick Peach, president of the Chamber of Commerce, said the proposed increase will not help homeowners who buy from Nicor, either.

The proposal would not shift the tax burden, as some have suggested, Peach said, but rather would add to the tax burden for some businesses and residents without lowering anyone’s taxes.

“It’s a money grab, is what it is,” Peach said.

Peach, the owner of Dempster Auto Rebuilders, 2001 Dempster St., said he also was concerned that proposals such as the gas tax increase make Evanston unattractive to business — ultimately costing the city jobs and tax revenue. He said the proposed tax increase would raise the gas taxes for his business by 10 to 12 percent.

“They’re driving nails into coffins instead of opening up gateways,” Peach said.

At the Nov. 10 meeting, Ald. Lionel Jean-Baptiste (2nd) argued that the proposal was about raising money rather than making taxes more fair and said it should be discussed at budget meetings.

Ald. Edmund Moran (6th) said the proposal punishes customers for saving money on their natural gas.

“I take my hat off to them for having accomplished the better deal,” he said.