Oswego trustees direct staff to draft ordinance to continue 1% grocery tax; board debates rebate vs. general fund use

Village of Oswego trustees on Sept. 2 directed village staff to prepare an ordinance to implement a 1% local grocery (food) sales tax beginning Jan. 1, 2026, and debated how to allocate the roughly $1 million in annual revenue the village currently receives.

Andrea (staff member) told trustees that the Illinois General Assembly on Aug. 5, 2024, approved repeal of a state-administered 1% grocery tax effective Jan. 1, 2026, while authorizing municipalities to adopt a local 1% grocery tax by ordinance. Andrea said municipalities that want the tax in place for Jan. 1, 2026, must adopt an ordinance and file required paperwork with the Illinois Department of Revenue by Oct. 1, 2025. "Tonight staff is looking for direction from the board on bringing back an ordinance to continue the 1% local grocery tax at the local level," Andrea said.

President Kauffman acknowledged it is not a new tax and said residents will not see a tax increase from the proposal: "So no matter what action the board takes this evening, there is not going to be 1¢ of increase ... This is solely about keeping a tax that has been around for 35 years." Trustees expressed broad support for directing staff to return with an ordinance at the Sept. 16 meeting so the village can meet the Oct. 1 filing deadline.

Why it matters: The village received about $914,000 in grocery tax revenue in 2023 and about $967,000 in 2024, Andrea said. Staff and trustees said roughly half of grocery purchases in Oswego are made by nonresidents; keeping the tax locally would preserve an ongoing revenue stream that helps relieve pressure on homeowners and renters. Trustees and staff said the village is facing increased costs, including a growing required police pension contribution that has created pressure on the general fund and a draft 2026 budget deficit if the revenue is lost.

Budget trade-offs and options discussed: Trustees and staff outlined three main options for the revenue: leave the receipts in the general fund (the historical practice), divert some or all to the water and sewer fund to offset rising utility costs (President Kauffman suggested directing half to water/sewer and using that to provide an annual $50 credit to residential utility accounts), or rebate a share directly back to residential accounts. Andrea said directing the full $1,000,000 to the water and sewer fund could reduce a typical resident’s utility bill by about $100 a year, while a half-and-half approach could allow a $50 annual credit. Andrea also noted implementation would require billing-system setup and an annual manual step to apply a residential credit; she said there are just under 12,000 residential water accounts for planning purposes.

Trustees repeatedly emphasized timing and uncertainty. Multiple trustees said construction and water-project bids are coming in far over budget, increasing the need for predictable local revenue. Trustees cited a roughly $400,000 deficit in the current 2026 general fund draft (before using grocery tax revenue and assuming planned position additions), and staff said the police pension required contribution will rise and could require an additional roughly $231,000 from the general fund next year if levy rates remain flat.

Several trustees supported a partial rebate that would return nonresident-paid revenue effectively to Oswego residents. Trustee Carney (first reference as Trustee Carney) summarized an option advocated by other trustees: rebate about half of the grocery tax revenue to residential utility accounts while using the nonresident share for general fund needs. "If 50% of the grocery tax comes from outside of Oswego and 50% comes from within Oswego, by rebating 50% or so of the tax, you're essentially giving residents their money back and then using the nonresident money towards general fund expenses," Trustee Carney said.

Next steps and staff direction: The board gave staff clear direction to draft and return an ordinance for the board to consider on Sept. 16 so the village can meet the Illinois Department of Revenue filing deadline of Oct. 1, 2025. Trustees agreed the specific allocation (rebate amount, split to water/sewer, or leave in general fund) could be resolved later — at the Sept. 16 meeting if possible or during the October budget workshop — and that the allocation decision does not have to be made the same night as the ordinance vote if trustees are not ready.

Administrative vote earlier in the meeting: Trustees also approved by roll call a motion allowing Trustee Karen McCarthy Lang to attend the Committee of the Whole meeting electronically after she submitted required documentation to the village clerk. The motion passed with recorded "yes" votes from Trustee Hughes, Trustee Cooper, Trustee Koenig, Trustee Novy and Trustee Torres.

What was not decided: Trustees did not adopt or pass the grocery tax ordinance at the Sept. 2 meeting and took no final vote on allocation. The board’s direction was procedural — to return with a draft ordinance and more detailed budget information, plus options for how to apply revenue — not a final policy determination. Trustees asked staff to provide analysis and options before a final vote that would commit the village to a permanent allocation or rebate structure.

Public participation and board comments: No members of the public spoke during the public forum portion of the Sept. 2 Committee of the Whole; multiple trustees said they were disappointed at the low turnout given social-media discussion. Several trustees urged additional resident outreach — surveys or other feedback mechanisms — before finalizing the allocation of funds.

Context: The village has historically credited grocery tax receipts to the general fund; trustees and staff said those revenues in prior years were sometimes transferred to the capital fund and used for one-time projects such as the new public works facility. Trustees said they want to preserve service levels (police, snowplow response, pothole repairs, water maintenance) and that losing the revenue without replacement would likely require cuts or delayed hires and capital projects.

What to expect: Staff will prepare and return a draft ordinance for the Sept. 16 meeting and will present allocation options and budget impacts at either that meeting or the October budget workshop. The filing deadline with the Illinois Department of Revenue is Oct. 1, 2025, to have a local grocery tax in effect Jan. 1, 2026.

Ending: The board’s direction keeps the option to continue the local grocery tax on the table while trustees seek additional analysis and public input on whether to rebate part of the revenue to residents, divert it to water and sewer, or retain it in the general fund.