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Saint Charles committee votes to reenact 1% local grocery tax to maintain revenue stream
Summary
The Government Operations Committee approved an ordinance to reenact a locally collected 1% grocery tax that the state legislature eliminated for 2026 unless municipalities opt to retain it. City staff said the tax generates roughly $2 million annually for the general fund and is used to fund core services and economic incentives.
The Saint Charles Government Operations Committee voted to approve an ordinance to reenact the existing 1% grocery tax locally so the city can continue collecting that portion of retail taxes after a state law eliminates the statewide levy effective Jan. 1, 2026.
City staff told the committee the state passed legislation this year removing the statewide 1% grocery tax but included an option for municipalities to reenact that 1% locally if they file an ordinance with the Illinois Department of Revenue by Oct. 1, 2025. Staff recommended reenacting the 1% to preserve roughly $2 million in annual revenue currently allocated to the city’s general fund.
“the city currently receives, we estimate around $2,000,000 a year from this current 1% tax on groceries,” a city staff presenter said, adding the revenue supports police, fire protection, street maintenance and other core services. The presenter also said that, combined with a 0.75% regional transit authority (RTA) tax, the total on groceries is currently 1.75%.
Staff emphasized the revenue’s role in city budgeting and economic development: the city used grocery‑tax proceeds in incentive packages that helped attract Costco and, more recently, to structure incentives for Whole Foods, which staff said will open next week. Staff also presented Placer.ai trade‑area analysis indicating a significant share of grocery store customers and related sales tax revenue comes from non‑Saint Charles ZIP codes; the consultant’s blended estimate attributed roughly 65% of grocery sales tax revenue to non‑residents.
The presenter described the statutory process and timeline: the Illinois Department of Revenue requires municipalities to file an ordinance by Oct. 1, 2025, for a Jan. 1, 2026, effective date. Staff said as of June 13, 218 municipalities had filed ordinances to continue the tax.
Committee member Folks moved to approve the ordinance; Spellman seconded. The roll call vote was recorded in favor by all members present.
Staff noted the state will continue to collect and remit the 0.75% RTA tax on grocery sales separately and that the city’s reenacted 1% would be collected and remitted through state processes rather than becoming a locally administered tax storefront change. Staff said municipalities could not alter the rate — the state allows either 0% or 1% only — and discussed alternatives the city considered, such as a property‑tax equivalent increase (an estimated 14% property tax increase to replace the $2 million), sales‑tax changes or consumption taxes, which staff warned could have disparate effects on businesses and consumers.
