The Peoria City Council on Tuesday unanimously voted to adopt a municipal grocery tax to replace a state tax slated for elimination.
Gov. JB Pritzker originally announced the legislation going into effect in January 2026 that gets rid of a statewide 1% grocery tax as part of a budget address. The revenue generated by the tax was redistributed to municipal governments for decades, meaning the dropping the tax leaves a gap in city budgets.
Peoria City Manager Patrick Urich previously told WCBU the estimated shortfall in Peoria is about $5 million annually.
Other cities and towns in the region already have adopted their own replacement grocery tax, with the state allowing for a decision to continue the tax locally ahead of an October deadline. East Peoria approved one earlier this month, with Mayor John Kahl critiquing elimination of the state tax as a “political stunt” by Pritzker.
Pekin also voted to approve a 1% municipal grocery tax, as has the Town of Normal.
City of Peoria Finance Director Kyle Cratty described a future budget full of cuts to city services at Tuesday night’s regular meeting. Possible targets for cuts include the fire department’s Rescue 1 emergency medical response unit, the police department’s traffic division, a neighborhood mini grant program and an estimated 10% of city staff across a variety of departments.
Cratty and other proponents of the tax argue, because the state does not officially eliminate it until 2026, there’s no significant change for residents' bottom line if it's continued.
“In terms of what it averages out to based off of, really ranging from an individual to families, we believe that we’re probably in the neighborhood of $70 to $250 per year would be the impact of this tax staying in place,” said Cratty.
Cratty explained the gap in funding also would mean a tighter timeline for the city to hit reserve levels in the general fund. The previous budget process modeling had estimated the city could hit reserve levels, or 25% of general fund expenditures, in late 2028.
“The city would be looking at hitting the reserve levels in early 2027, so we’re jumping almost two full calendar years earlier than we anticipated, which will affect our ability to use reserves for our police and fire pension obligations,” said Cratty. “So that’s really where some of that impact is.”
A few community members showed up to protest the tax and speak against it during public comment. One person held a sign reading, “No tax on groceries, tax the rich, not working people.”
During discussion, council member Andre Allen asked corporation counsel Patrick Hayes what agency a city council has over taxing income.
“Municipalities are preempted from imposing any sort of income tax and that’s a bright line that the states’ taken all that,” said Hayes. “That’s part of this bargain of home rule.”
The council considered other alternatives that would raise the retail sales tax instead to account for the drop in expected revenue. However, those options were not recommended by city staff. The agenda packet said they were not favored because of how much higher Peoria’s sales tax would be compared to surrounding communities.
Cratty shared a few other possibilities considered by the financial department, including increasing the hotel, restaurant and amusement tax, or adding the missing funding amount to the property tax levy.
“Doing that would add about a 15% increase to every homeowners’ tax bill,” he said. “And obviously, where the climate is around property taxes, staff just does not feel that was a good recommendation to make.”
Mayor Rita Ali said she doesn’t think the governor's decision to eliminate the tax was fully thought through.
“I think it was put out there without fully understanding the local impact that would impact services and impact jobs in local communities,” she said. “That’s exactly what happened here.”
Council members Michael Vespa, Bernice Gordon-Young, Timothy Riggenbach and Denise Jackson voiced similar sentiments on the matter: they did not like having to implement the tax, but felt any threat to city services made it a necessity.
Jackson compared the situation to cuts made by the city council in 2010.
“The only alternative to what we have before us is cutting staff, which would, in my mind, set us back in terms of the infrastructure and capital improvement map that we have created over the last two years,” she said. “I think we are doing the right thing by trying to just keep things the way they have existed.”
Outgoing council member Chuck Grayeb said the city had received more than 100 emails displeased with the governor's action and the local implementation of a tax. He said, like the signs held by a few protestors, many called for a state “billionaire’s tax” to fill the gap instead.
“What are the odds that even a democratically controlled general assembly in Springfield would adopt a billionaire tax to cover this? Sadly, it isn’t going to happen,” Grayeb said. “I wish it would, I really do. Especially when the governor, through his actions, determines all of a sudden [the grocery tax] is a regressive tax that hurts the little people.”
Council member Zach Oyler raised some additional questions for the city’s finance department as discussion was wrapping up to move to voting. He argued there was no reason to make the decision now, ahead of a budget cycle, a newly elected council and firmer numbers on expected revenue.
Other council members and the city’s attorney disagreed, pointing to the state’s October deadline for a decision.
“In effect, this is purely politically motivated, that we’re sitting here having this discussion tonight and taking this vote without the information that we need to make a decision, as well as without the people that will be responsible for making this decision,” said Oyler.
“So I wanted to be very clear to the public that I am going to vote yes on this, but that is only in an attempt to be on the prevailing side, so that I can push for a reconsideration on the next council agenda.”
The 1% local grocery tax passed unanimously. Council members Denis Cyr and John Kelly were absent.
The city council’s next regular meeting is May 13.
