A 1% sales tax on groceries sold in Waukegan is under discussion by the City Council’s Finance and Purchasing Committee to replace the state’s 1% tax covering the same products currently remitted to municipalities, which expires at the end of the year.
No member of the committee expressed an opinion on whether to impose the tax or not, but they shared concerns over lost revenue. Both the committee and the full council will likely vote on whether or not to impose the tax on Sept. 15 at City Hall.
The City Council’s Finance and Purchasing Committee discussed the implications of levying a 1% sales tax on groceries during a regularly scheduled meeting on Monday at City Hall, and the impact of the lifting of the state grocery tax which will cost the city approximately $2 million in revenue.
Committee Chair Ald. Edith Newsome, 5th Ward, said the tax was first imposed in 1991. The state collected it and sent municipalities their 1% share. The revenue stream will continue if the city approves the tax.
“Nothing will change,” Newsome said. “We will possibly lose $2 million if we do not continue as is. The state will continue to collect it as they do now, and remit the 1% to the municipality.”
City Finance Director Juan Garcia said under the new state law, Waukegan must approve the 1% tax by Oct. 1 or it will lose the opportunity in the future. It will not impact shoppers who are already paying it to the state at the cash register.
“The state has put it in the hands of the municipalities to adopt their own local grocery tax,” Garcia said. “If they choose to do it, it would still be 1%.”
Ald. Victor Felix, 4th Ward, wanted to know the effect of no action since the current city budget of more than $292 million is based on all revenues generated. Garcia reiterated that the lost income will be approximately $2 million, but approving it will not mean a tax increase for shoppers.
“If you choose not to adopt it, (the) 1% would impact the budget up to about $2 million a year,” Garcia said. “This is on groceries. It’s currently being collected now, so it’s just collecting it at the municipal (level). The state will not be doing so.”
Felix also wanted to know if the city can try to do without the revenue but impose the tax later if the impact does not prove fiscally prudent. Garcia said a wait-and-see option does not exist for Waukegan or any other municipality in the state.
“This is the only window we have,” Garcia said, “If council chose not to approve this, it will be gone forever.”
Ald. Sylvia Sims Bolton, 1st Ward, asked Garcia which services would be cut. He said the council or Mayor Sam Cunningham will need to make the choice for the remaining portion of the city’s fiscal year, which ends April 30.
“We’re going to have to find a way to make it up,” Bolton said.
Cunningham said the matter was before the committee on Monday to make the council members aware of the choice they have to make in the next six weeks. He wants them to begin the discussion.
Some municipalities have already made a decision. Garcia said Gurnee approved a 0.5% home rule sales tax on all items rather than 1% on groceries.
Counties can also approve a 1% grocery tax on shoppers in their unincorporated areas. Lake County Board member and Finance Committee Chair Paul Frank, D-Highland Park, said he does not think the county will impose the tax.
