Oswego trustees recently discussed options concerning a possible 1% local grocery tax to offset the loss of money from an expiring state grocery tax.
The Illinois General Assembly last summer voted to eliminate the state grocery tax and Gov. JB Pritzker signed it into law in August.
The repeal of the 1% state grocery tax will take effect Jan. 1, 2026, Oswego Finance Director Andrea Lamberg said in a report to trustees.
Municipalities can implement a 1% municipal grocery sales tax by ordinance as part of the state legislation, she said. However, municipalities have only until Oct. 1 to adopt an ordinance to ensure timely filing with the Illinois Department of Revenue, Lamberg said.
The state tax was a revenue generator for Oswego, Lamberg has said, saying that “using actual 2024 sales tax data received from businesses that sell groceries, staff estimates the village received $1 million to $1.25 million in (state) grocery tax revenue in 2024.”
“Implementing a 1% local grocery tax will maintain the village’s revenue base,” she has said.
If approved, options for the local grocery tax would include directing the money to the village’s general fund or to allocate the revenue to the water and sewer capital fund.
Trustee Kit Kuhrt has proposed an option to create a permanent fund from the grocery tax money where eventually the annual interest earnings would help offset increases in customer water bills.
The village’s water rates are due to increase as a result of the Lake Michigan water connection project.
The approach has pros and cons to consider, village officials said. On the upside, annual interest of more than $1 million could be possible in 11 to 15 years. However, a con is the “generational inequity” that is a result from using current revenues to benefit future generations, officials said.
Kuhrt suggested allocating a set amount to help with water rates until interest earnings catch up.
“It’s innovative,” Village President Ryan Kauffman said.
However, the village would have to develop “some sort of break-even” where the move would have enough of an impact for existing residents and simultaneously build the fund for the future, Kauffman said.
“The biggest downside is the obvious generational inequity,” Trustee Tom Guist said of the proposal. “I don’t think the grocery tax has anything to do with water rates. We all know why the water rates have to change. We have done a great job as a village for four or five years emphasizing why we have to get on Lake Michigan water.
“At the end of the day, a tax is being removed,” he said of the state getting rid of its grocery tax.
As of the first of the year, some 46 towns in Illinois had already passed ordinances for a 1% local grocery tax to offset the revenue loss from the state’s tax repeal, Oswego officials said.
Guist questioned the financial condition of the other towns.
“Our financial position for the past four years has been extremely strong,” Guist said. “We should let it sunset and deal with the water rates as a separate issue.”
“If towns around us pass the tax and we do not, then we are benefiting residents of other communities ahead of our residents,” Kauffman said.
Trustees decided to continue the discussion of a possible local grocery tax at a future meeting.
Linda Girardi is a freelance reporter for The Beacon-News.