Highland council weighs local 1% grocery tax after state repeal that would cut about $330K–$350K a year

City Manager Chris Conrad told the Highland City Council on Aug. 19 that PA-103-0781, which eliminates the state's 1% grocery tax effective Jan. 1, 2026, will likely reduce the city's sales-tax revenue by an estimated $330,000–$350,000 a year, roughly 10% of Highland's unrestricted sales-tax receipts.

Conrad said the city has prepared departmental action plans should the revenue not be replaced. For Public Safety, the plan relies on known upcoming retirements to reduce personnel costs, reallocating portions of the Public Safety director's salary across divisions and limited deficit spending for two to four years to bridge the gap. "We anticipate the elimination of the grocery tax to impact our sales tax revenues $330-$350K per year," Conrad said.

For Streets, Conrad said the city would rely on deficit spending and freeze equipment purchases, relying more on maintenance and, where necessary, rentals. For Parks and Recreation, he recommended staffing reorganizations tied to the pending retirement of Director Rosen, modest fee increases of about 4–5% at the recreation center and pool, and asking the cemetery board to raise perpetual-care fees to cover full cemetery operating costs; he said the cemetery is currently subsidized by about $20,000 annually.

Conrad outlined three options for council action: (1) do nothing and implement departmental cuts beginning Jan. 1, 2026; (2) pass a local ordinance to continue the 1% grocery tax prior to Oct. 1, 2025 so collections do not lapse; or (3) wait to assess the impact and, if necessary, enact a follow-on local tax later, which would create a break in collections until either July 1 or the following Jan. 1 depending on timing. He noted the new law appears to allow only a full 1% levy rather than fractional rates.

Council members voiced differing preferences. Councilman Frey cautioned that while he prefers lowering costs for residents, cutting services may be more harmful: "I like to save citizens money; however, what they are going to lose in services will have even more of an impact on them," he said, and added an estimate that 50–60% of groceries sold in Highland are purchased by nonresidents. Mayor Kevin B. Hemann quoted Governor Pritzker's comment on municipal authority to impose a grocery tax: "If municipalities want to impose a grocery tax on their local residents, they should be able to go do that." Councilwoman Bellm, Councilwoman Sloan and Councilman Frey said they were inclined to act now; Councilman Napper said he preferred to gather public feedback first.

Conrad provided a simple consumer example for scale: the change "equates to $10 per $1,000 of grocery," he said. He also noted the fiscal impact is highly dependent on whether a community is a regional shopping hub; the packet included Illinois Municipal League estimates showing widely varying local impacts.

No ordinance or formal vote was taken at the Aug. 19 meeting. The council would need to pass an ordinance and have it postmarked to the Illinois Department of Revenue before Oct. 1, 2025 to avoid any lapse in collections; choosing to wait could create a temporary break in the tax revenue stream. The council will decide whether to pursue an ordinance, accept the projected budget impacts and implement departmental adjustments, or seek more public input before deciding.