Oswego village trustees debate whether to implement its own 1% grocery tax

Oswego village trustees are considering whether to implement its own grocery tax in light of the state’s 1% grocery tax expiring on Jan. 1 of next year.

Like other municipalities, Oswego receives a share of that tax. The village received an estimated $1 million to $1.25 million in grocery tax revenue in 2024.

That includes revenues from convenience stores. Municipalities that want to implement a 1% local grocery tax that would take effect on Jan. 1 must approve an ordinance and file it with the Illinois Department of Revenue by Oct. 1, Oswego Finance Director Andrea Lamberg said during a discussion on the issue at the April 22 Oswego Committee of the Whole meeting.

Neighboring communities Montgomery and Yorkville recently approved a 1% local grocery tax. Oswego’s grocery revenue currently goes to the village’s general fund, where it supports general operations and functions such as police service and public works divisions, Lamberg said.

Village officials are looking at different ways the 1% grocery tax could be used. One option would be to keep the revenue in the general fund.

“That would maintain the revenue stream and keep the service levels intact,” Lamberg said.

Another option would be to put the revenue in the village’s water and sewer capital fund. Keeping the grocery tax for water debt service would save the typical resident $8.33 month and $100 per year, she said.

Village Trustee Kit Kuhrt had previously recommended the village maintain the 1% local grocery tax and create a permanent fund where the tax revenue is not touched but instead allowed to grow.

“The annual interest earnings would eventually be substantial enough to have a meaningful offset to customers’ water bills,” Lamberg said.

Kuhrt said building up such a fund would take time.

“Nothing is built in a day,” he said. “Eventually this will pay the water bills.”

Water rates will have to be adjusted to help pay for the cost of bringing Lake Michigan water to Oswego.

Village Trustee Tom Guist did not think adopting a local grocery tax was a good idea.

“At the end of the day, a tax is being removed,” he said. “It’s not very often that you have the chance to alleviate a tax.”

Guist said he didn’t think the grocery tax really has anything to do with water rates.

“We all know why the water rates have to change,” he said. “We’ve done a great job as a village for four or five years emphasizing why we need to get on Lake Michigan water. So there’s a knowledge that it is coming.”

The village has been told that its aquifers are depleting and not replenishing.

“And by 2033, our wells will be in significant decline and we could have inoperability of our well system,” Oswego Village Administrator Dan Di Santo has said. “So we’ve known since then that we need to find an alternate water source.”

Village Trustee Karen Novy was concerned about the impact of not keeping the 1% local grocery tax.

“I know we’re in a really strong financial position now, but what will we look like five years from now without having this revenue come in?” she asked. “I’ll hate to see us having to lean on our surplus and start using that.”

Village trustees will take up the issue again at a future meeting. Three new trustees will take their seats on the board in May.