With planning on next year’s municipal budget getting underway later this summer, Naperville decision-makers are wading into the murky waters of considering the city’s future in potentially implementing a 1% sales tax on grocery purchases to replace a statewide tax that’s being eliminated.
A preliminary debate about the matter occurred at a Tuesday, June 17, city council meeting, and further discussions are anticipated next month.
Several city staff members — including City Manager Doug Krieger and Director of Finance Raymond Munch — are recommending Naperville continue collecting the 1% grocery sales tax that has been in place statewide for approximately 35 years to ensure continuity of municipal services.
The city’s Financial Advisory Board, whose members reviewed the grocery sales tax, also gave the proposal a favorable recommendation recently, voting 5-1 in favor of staying the course.
The local debate follows the Illinois General Assembly’s passage of a bill that ends the state’s requirement of a 1% grocery sales tax. Governor JB Pritzker passed the bill into law last summer, handing the decision-making of the revenue source over to local municipalities.
Naperville’s grocery tax accounts for $6.5 million of general fund budget
The decision out of Illinois to eliminate the grocery sales tax has no impact on the state budget. From the get-go, grocery sales tax revenues were funneled directly to local municipalities to help shore up their general fund budgets that help fortify day-to-day municipal operations.
In a presentation at the recent city council meeting, Munch indicated Naperville receives $6.5 million annually from the grocery sales tax receipts. The city’s rich array of food stores has made the line item an important one to the revenue side of the financial ledger each year.
“For several years, Naperville has been the top municipality for grocery sales, outside the city of Chicago,” Munch said. “We are a destination for grocery shopping, with a wide variety and large volume of retail locations, including two Costco warehouses, various big box retailers, and specialty and ethnic grocers that can’t be found elsewhere.”
Munch added, “The result is that Naperville generates significantly higher revenue in this category than most other towns.”
If the grocery sales tax were simply eliminated and not replaced with another revenue source, Munch warned there would be “noticeable reductions to service delivery,” with corresponding staff cuts being a part of the equation as well.
Increasing the existing home rule sales tax a possible alternative
No formal action was taken at the June 17 council meeting, but the elected body did support Councilman Patrick Kelly’s proposal to have a staff-level report on the home rule sales tax option.
As a designated home-rule community, Naperville currently has in place a 0.75% tax as a funding source for capital projects and debt payments. The home rule sales tax is not applied to groceries, but is tacked onto purchases made within the city for general merchandise and food for immediate consumption.
The council’s recent discussion suggested increasing the home rule sales tax to 1% in 2026 as an alternative to the grocery tax.
“I would be interested in seeing that as an alternative option,” Kelly said of the home rule sales tax increase exploration. “I personally think it’s a relatively close call. I certainly understand where staff is coming from.”
Munch in his presentation indicated the grocery sales tax continuation would keep a familiar tax in place without any felt impact, while shoppers would feel the pinch of a home rule sales tax increase.
“When we looked at the home rule sales tax increase, we sort of viewed that as it would be a true tax increase because now those people don’t get a break,” Munch said.
Councilmembers share varied views on tax options during debate
Councilman Ian Holzhauer indicated he would be voting “no” if the question of keeping a grocery tax in place were ever to be taken up at a future meeting.
“I think an advantage of voting ‘no’ is there are many other options out there that can be considered,” Holzhauer said.
He later stated, “Taxing essential food items is a regressive choice, and I don’t believe it’s the right place that we need to be hitting people, particularly in this economy.”
Munch and other grocery sales tax supporters indicated that truly vulnerable populations within Naperville would not feel the impact of the tax since they receive benefits through the federal Supplemental Nutrition Assistance Program. A report on the anticipated number of SNAP recipients in Naperville is also planned for the next council meeting.
Councilman Josh McBroom, who sits on the Financial Advisory Board, indicated why he was among the supporters on that panel who was in support of continuing the grocery sales tax.
“Everyone who knows me, knows I’m a big critic of government, and I hate taxes,” McBroom said. “But you’ve also heard me say that I think Naperville is a rare form of good government. … Anyone up here who is going to be a hard ‘no’ on a replacement tax is essentially, in my mind, directing staff to fire cops and firefighters.”
McBroom added he views the home rule sales tax as “volatile” and not as dependable of a revenue source as the grocery tax.
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