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Urich sees bright spots for Peoria in state budget, adds city will need to prepare for end of grocery tax

Peoria City Manager Patrick Urich responds to a question during an interview in the WCBU master studio.
Joe Deacon
/
WCBU
Peoria City Manager Patrick Urich says the city has some time to determine what steps to take to make up for lost revenue after Illinois ends the state grocery tax in 2026.

Illinois Gov. J.B Pritzker signed a $53 billion budget for the 2025 fiscal year on Wednesday, and Peoria leaders now have a clearer picture of how the spending plan impacts city finances.

“From the city’s perspective, the budget’s much better than what it could have been,” Peoria city manager Patrick Urich said in an interview with WCBU.

Lawmakers approved Pritzker’s proposal to repeal the 1% state sales tax on groceries as of Jan. 1, 2026. Urich says the elimination of the grocery tax presents the biggest concern for Peoria’s bottom line, with the general fund facing an estimated annual shortfall of $4 million.

“That’s a sizable amount of revenue for the city of Peoria, so we’ll look at different options,” Urich said. “There may be council members that don’t want to do anything; there may be council members that want us to look at different revenue streams, (and) there may be other council members that just want us to look at cutting expenses.”

Municipalities like Peoria will have the ability to establish their own grocery tax to recoup the lost state revenue. Urich says the delayed implementation date gives the city some time to decide on what steps to take.

“That’ll be a discussion that council won’t have to take up this year, but we’ll certainly have to discuss it in the following years,” he said.

Urich says some bright spots for Peoria in the new state budget come in reauthorized spending for several capital improvements, although he notes the funds haven’t been formally released yet.

“We’ve got some projects that we’ve been waiting on funding that have been reauthorized: $15 million for the riverfront, $25 million for Main Street, $2.5 million for some street lighting in the community, $3 million more for MacArthur (Highway),” he said, adding that the city will also put $800,000 of its remaining American Rescue Plan Act (ARPA) money toward upgrading MacArthur between Moss Avenue and Martin Luther King Jr. Drive.

“It’s in really rough shape as you come up the hill from MacArthur on to the west bluff, so that’s something that we’re going to look at replacing,” he said.

Urich said the state also reauthorized spending $6 million to reconstruct stretches of Lake and Gale avenues maintained by Peoria County as part of the Rebuild Illinois capital improvement plan. That project has been waiting for the state funds to be released for several years.

Urich says Peoria needs to decide how to spend all of its remaining ARPA money by the end of this year, and have it all spent by the end of 2026. He said there’s approximately $5 million left still to allocate and between $15 million and $18 million still to spend.

“Our team at the city is meeting on a monthly basis, making sure that the projects that the council has approved are going forward,” he said.

Additionally, Urich says they’re keeping an eye on trends with their other streams of state tax revenue.

“We get a share of personal property replacement tax revenues and the state has made some changes to that,” he said. “Then the amount of corporate income tax that has come in, we’re seeing some significant reductions there. So that’s a concern that we just have to watch and continue to watch.

“Our income tax share that we get from the personal income tax seems to be coming in at a good pace, and same with our sales tax dollars.”

Urich says it’s not clear when the state might release the $15 million allocation for the riverfront project, and that the city would still need to come up with about $11 million more to fully fund the current plan.

“We’re certainly going to look at corporate donations,” Urich said. “We’re going to look at how we can do some additional fundraising, and then probably bring in some additional local funds or recommendations to the council about that.

“At this point, we think the estimates are right at about the $26 million range is what we’re looking at. But we know that we’ve had some definite interest from some parties, some corporate entities that have said they’d be interested in talking to us about sponsorship opportunities. So we’re going to certainly take them up on that.”

Urich says the city still has a standing Request for Proposal open for the city dock space, seeking a possible riverboat or other attraction to replace the Spirit of Peoria.

“We haven’t had many takers right now, or any proposals,” he said. “The triggering event is really when that state funding gets released. Then we can start moving down this path of making it a reality. So that’s what we’re waiting on, and then we’ll start that process. I think once we’re in that process of construction, then I think we’ll start to see that we’re going to have more interest.”

Urich says another expense Peoria needs to monitor is its rising liability and property insurance costs.

“Really for the city, what we’ve got to look at and what we’re going to be exploring at a staff level is, at what point do we look at providing a certain level of self-insurance, right? How much do we carry and manage that, since it’s becoming almost too cost prohibitive for us to purchase insurance in the market,” he said.

Urich points out the city’s large amount of coverage needs presents a significant challenge.

“We have millions of square feet of building space. We have hundreds of vehicles, and we have hundreds of employees,” he said. “When you have that, that makes it a very difficult entity to insure.”

Urich says the self-insurance option would likely take the form of carrying higher deductibles to lower the premiums and then using city funds to cover the gaps remaining from those higher deductibles.

Contact Joe at jdeacon@ilstu.edu.