The Oswego Village Board unanimously voted recently to locally extend a 1% state grocery tax set to expire at the end of the year.
Trustees as a committee of the whole will meet Oct. 25 to discuss whether the approximately $1 million expected to be generated annually by the grocery tax should remain in the village’s general fund or to transfer some of the revenue to the Water and Sewer Fund to help offset the costs associated with the project to bring Lake Michigan water to Oswego.
Oswego’s 2026 proposed budget would have had a $200,000 deficit had the grocery tax not been extended, village officials said
The Illinois General Assembly last summer voted to eliminate the state grocery tax. The repeal of the 1% state grocery tax will take effect Jan. 1, 2026.
Illinois first put in place the grocery tax in 1990 to help fund local governments. Communities have had an Oct. 1 deadline to ask the state to continue locally collecting the 1% grocery sales tax on their behalf.
“I wish the state would cut its own taxes instead of trying to cut taxes for municipalities. Now, we’re in the awkward position of needing to keep it. We have relied on the revenues for about 35 years,” Oswego Village President Ryan Kauffman said.
Many communities in the Fox Valley area have approved ordinances to implement a 1% municipal grocery tax to replace the state tax. Those municipalities include Aurora, Batavia, Montgomery, Yorkville, Sugar Grove, North Aurora, Geneva, St. Charles and Naperville.
Kauffman has proposed channeling some of the grocery tax revenues back to residents through the Water and Sewer Fund via an annual rebate on residential water bills, or to translate it into lower water rates to help offset the costs associated with bringing Lake Michigan water to the village.
“Normally the state hits us with unfunded mandates on the expense side. This time it is an unfunded mandate on the revenue side. Either way, it certainly impacts our community,” Trustee Jennifer Hughes said.
Hughes said while she supports sustaining the revenue stream from the grocery tax, she does want to review the impact of a possible rebate or transfer of money to the Water and Sewer Fund in the context of the whole budget.
“I would prefer to reserve a position on that until we review the budget. I am open to it, but I would like to see it in context of how it would impact property tax rates and other things in the overall budget presentation from staff,” Hughes said.
Trustee Karin McCarthy-Lange said she, too, would reserve a decision on where to allocate the grocery tax funds.
“I am definitely open to rebating some of this through our water bills, but I would like to know exactly where we stand on our budget for next year. I know we have increased costs in a few places,” McCarthy-Lange said.
Trustee Rachelle Koenig noted some of the grocery tax revenues from the local extension of the tax will come from out-of-town residents which lessens the burden on Oswego residents.
“This is one of the very few ways we can generate revenue that does not require residents to flip the bill,” Koenig said.
The impact of transferring some of the grocery tax funds out of the general fund needs to be considered before deciding to transfer money to the Water and Sewer Fund, village officials said in a report to trustees.
The two primary impacts would likely be delayed hiring for a new position in the police department, and pressure on the property tax rate. Other possible reductions to programs and services are being reviewed and will be presented at the Oct. 25 budget workshop, village officials said.
“One of the expenses we continue to see rise is the cost of the police pension fund,” Oswego Village Administrator Dan Di Santo said. “In years past, our tax levy was able to cover the entire police pension fund but in recent years the general fund has had to make up the gap. Last year, that gap was over $100,000.”
Based on the current equalized assessed value of property in Oswego, the general fund will have to contribute $231,000 to make up the gap, he said.
Di Santo said without the grocery tax revenue in the general fund, there would be pressure on the property tax to rise.
“One thing in passing the grocery tax and keeping money in the general fund is that it relaxes some of the pressure on the property tax,” Di Santo said.
A fund balance in the general fund is being used to finance the expansion of the Public Works facility rather than having to issue bonds for the project. However, the costs associated with the project are “significantly decreasing” the fund balance, he said.
In addition, there are other “significant capital needs” for the growing village, he said. A general fund surplus has been transferred to the capital fund to cover capital projects. However, the general fund will not be able to subsidize the capital fund in 2026 and beyond, he said.
Linda Girardi is a freelance reporter for The Beacon-News.
