Adoption of a municipal grocery tax to replace the upcoming elimination of the state’s tax will go before the Peoria City Council at its next meeting Tuesday.
Legislation repealing Illinois’ statewide 1% grocery tax takes effect Jan. 1. Revenue collected by the state from that tax had been redistributed back to the municipalities, meaning the impending end of the tax leaves a funding gap for local governments.
City Manager Patrick Urich says Peoria’s gap amounts to approximately $5 million annually.
“From a staff perspective, that would be a significant reduction of funding in the general fund that pays for almost all of our staffing,” said Urich.
“As we started to look at the revenues and our sales tax collections, we’d originally thought it was about $4 million. But based on 2024’s collections, and the number is closer to $5 million.”
Gov. JB Pritzker pushed to have the state grocery tax repealed as part of the state’s 2025 fiscal year budget, calling it a “regressive” tax that disproportionately impacts lower-income households. Only 12 other states have a grocery tax.
Urich said the four-part agenda item includes an initial step to clarify language in the municipal code related to sales tax collection. The second step is adoption of the 1% grocery tax itself, which would go into effect when the state grocery tax ends.
“If this is denied, we would have to see some service reductions going forward in terms of simply adjustments to the budget to try and live within our means,” said Urich. “We’d be seeing reductions in the fire department, the police department, public works, community development, and across all of our administrative departments.”
East Peoria approved enacting its own 1% grocery tax earlier this month, with Mayor John Kahl describing Pritzker’s move as a “political stunt” that forced local governments to assume the taxation burden.
Pekin also approved a 1% grocery tax of its own, and it’s under consideration by other municipal governments across the Tri-County area.
“We’re trying to be consistent with other communities around us,” said Urich.
The two other portions of the agenda item give the council options to consider increasing the retail sales tax from 1.75% to either 2% or 2.25% instead of establishing the local grocery tax. The agenda document says the staff does not favor these options based on how Peoria’s tax rates would then compare to surrounding communities.
Urich says the average Peoria household pays between $72-$144 in grocery taxes each year. Since the new city tax replaces a state tax that’s going away, that figure is expected to remain largely unchanged.
A breakdown of Peoria’s anticipated service reductions without the grocery tax revenue include cutting the fire department’s $2 million Rescue 1 emergency medical response; reducing the police department traffic division to save $1.04 million; dropping $653,000 for environmental code enforcement; more than $500,000 each toward a preventative maintenance program and customer service staffing cuts; and $200,000 in community development neighborhood mini-grants.
“As we look at our administrative departments here at City Hall, we’d be looking at a probably a 10% reduction across the board,” said Urich. “A $5 million reduction in revenues to the city would be devastating from a service delivery standpoint.”
