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Home My WebLink About8.2 Motion to Waive the Rules Requiring Two Readings of an Ordinance and Adopt AN ORDINANCE IMPLEMENTING A MUNICIPAL GROCERY RETAILERS’ OCCUPATION TAX AND A MUNICIPAL GROCERY SERVICE OCCUPATION TAX FOR THE VILLAGE OF MOUNT PROSPECTM+awn �'xytlts=e Item Cover Page Subject Motion to Waive the Rules Requiring Two Readings of an Ordinance and Adopt AN ORDINANCE IMPLEMENTING A MUNICIPAL GROCERY RETAILERS' OCCUPATION TAX AND A MUNICIPAL GROCERY SERVICE OCCUPATION TAX FOR THE VILLAGE OF MOUNT PROSPECT Meeting Fiscal Impact (Y/N) Dollar Amount Budget Source Category Type Information August 6, 2025 - REGULAR MEETING OF THE MOUNT PROSPECT VILLAGE BOARD NEW BUSINESS Ordinance In light of recent legislative changes and financial considerations, Village staff recommends the adoption of a 1% local grocery tax ordinance to preserve existing revenue streams and continue our long-standing practice of reducing the burden on local property taxpayers. Discussion In 1990, the State of Illinois restructured its sales tax system, eliminating the state - imposed grocery tax but replacing it with a 1% grocery tax for municipalities. Since that time, the Village has received this 1% grocery tax from the State of Illinois. Recent receipts include: ................................................................................................................................................................................ Fiscal Grocery Tax Revenue Yea r 2024 $923,437 2023 $886,522 2022 $806,056 Legislative Change: Under Illinois Public Act 103-0781, the State will eliminate the 1% grocery tax effective January 1, 2026. However, the Act authorizes municipalities to enact a local grocery tax of up to 1%. To maintain this existing source of revenue, the Village must adopt and file a local ordinance by October 1, 2025. Failing to adopt such an ordinance would result in an estimated annual loss of over $925,000, significantly impacting the Village's ability to continue funding essential services and property tax relief efforts. The following nearby municipalities have already passed a 1% local grocery tax: • Des Plaines • Elk Grove Village • Hoffman Estates • Morton Grove • Palatine • Schaumburg • Wheeling • Carol Stream • Buffalo Grove • Lake Forest . Lake Zurich Other communities are in the process of enacting similar ordinances to avoid revenue loss. Financial Rationale While the Village has experienced strong financial performance —reflected in $33.9 million of surpluses from FY2022—FY2O24—these surpluses have already been responsibly earmarked: • $13.0 million to the Economic Emergency Fund • $20.8 million to General Fund Reserves, which enabled the abatement of pension and debt service levies, the elimination of vehicle sticker fees, and also deploying the surplus towards crucial capital projects. Rather than being an additional tax, this ordinance would maintain an existing revenue source that has supported critical financial decisions enabling the Village to provide the lowest property tax burden in the area. Sales tax growth alone, while encouraging, is not guaranteed to continue at current rates. Preserving the grocery tax revenue gives the Village flexibility and stability, without needing to increase property taxes in the future. Furthermore, credit rating agencies may see not adopting the local grocery tax as a credit negative, as it suggests a willingness to forgo a predictable and recurring revenue source in a highly volatile time. Failing to preserve this existing revenue stream could signal reduced revenue discipline and adverse impact on the Village's credit outlook and borrowing costs. Recommended Use of Funds If adopted, all revenue from the grocery tax will be earmarked for pension levy abatements, directly relieving the pressure on property taxes and ensuring long-term fiscal sustainability. Conclusion and Recommendation Adopting the grocery tax ordinance is not introducing a new tax —it is maintaining a long- standing source of funding critical to the Village's fiscal health. Staff recommend that the Village Board adopt the 1% local grocery tax ordinance before the October 1, 2025, deadline to: • Prevent the loss of over $925,000 annually • Continue supporting pension levy abatements • Preserve low property taxes • Aligning with the proactive steps taken by peer municipalities Finance Commission The adoption of the grocery tax ordinance was discussed with the Finance Commission and the Finance Commission unanimously supported adopting the Grocery Tax Ordinance. Alternatives 1. Waive the rules requiring two readings of an ordinance and adopt the attached ordinance implanting a 1% local grocery tax. 2. Action at the discretion of the Village Board. Staff Recommendation Staff recommends waiving the rules requiring two readings of an ordinance and adopting the attached ordinance implementing a 1% local grocery tax. Attachments 1. MP Grocery Tax Ordinance ORDINANCE NO. AN ORDINANCE IMPLEMENTING A MUNICIPAL GROCERY RETAILERS' OCCUPATION TAX AND A MUNICIPAL GROCERY SERVICE OCCUPATION TAX FOR THE VILLAGE OF MOUNT PROSPECT WHEREAS, the Illinois Municipal Code, 65 ILCS 5/1-2-1, provides that the corporate authorities of each municipality may pass all ordinances and make all rules and regulations proper or necessary, to carry into effect the powers granted to municipalities, with such fines or penalties as may be deemed proper; and, WHEREAS, the Village of Mount Prospect is a home rule Illinois municipality pursuant to the Constitution of the State of Illinois of 1970, as amended; and, WHEREAS, Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24) provides that, beginning on January 1, 2026, all Illinois municipalities may impose a tax "upon all persons engaged in the business of selling groceries at retail in the municipality" (the "Municipal Grocery Tax") (65 ILCS 5/8-11-24); and, WHEREAS, the Municipal Grocery Retailers' Occupation Tax may be imposed "at the rate of 1% of the gross receipts from these sales" (65 ILCS 5/8-11-24); and, WHEREAS, any Municipal Grocery Retailers' Occupation Tax shall be administered, collected and enforced by the Illinois Department of Revenue; and, WHEREAS, Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24) requires any municipality imposing a Municipal Grocery Retailers' Occupation Tax under Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24) to also impose a Service Occupation Tax at the same rate, "upon all persons engaged, in the municipality, in the business of making sales of service, who, as an incident to making those sales of service, transfer groceries" as "an incident to a sale of service" (the "Municipal Grocery Service Occupation Tax") (65 ILCS 5/8-11-24); and, WHEREAS, any Municipal Grocery Service Occupation Tax shall be administered, collected and enforced by the Illinois Department of Revenue; and, WHEREAS, the Mayor and Village Board of Trustees believe that it is appropriate, necessary and in the best interests of the Village of Mount Prospect and its residents, that the Village levy a Municipal Grocery Retailers' Occupation Tax as permitted by Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24). NOW, THEREFORE, be it ordained, by the Mayor and Board of Trustees of the Village of Mount Prospect, Cook County, Illinois: Page 1 of 3 Section 1. Incorporation of Recitals. The foregoing recitals shall be and are hereby incorporated as findings of fact as if said recitals were fully set forth herein. Section 2. Municipal Grocery Retailers' Occupation Tax Imposed. A tax is hereby imposed upon all persons engaged in the business of selling groceries at retail in this municipality at the rate of 1% of the gross receipts from such sales made in the course of such business while this Ordinance is in effect. The imposition of this tax is in accordance with and subject to the provisions of Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24). Section 3. Municipal Grocery Service Occupation Tax. A tax is hereby imposed upon all persons engaged in this municipality in the business of making sales of service, who, as an incident to making those sales of service, transfer groceries as an incident to a sale of service. The rate of this tax shall be the same rate identified in Section 2, above. The imposition of this tax is in accordance with and subject to the provisions of Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24). Section 4. Illinois Department of Revenue to Administer Both Taxes. The taxes hereby imposed, and all civil penalties that may be assessed as an incident thereto, shall be collected and enforced by the Department of Revenue of the State of Illinois. The Illinois Department of Revenue shall have full power to administer and enforce the provisions of this Ordinance. Section 5. Clerk to file Ordinance with the Illinois Department of Revenue. As required under Section 8-11-24 of the Illinois Municipal Code (65 ILCS 5/8-11-24), the Clerk is hereby directed to file a certified copy of this Ordinance with the Illinois Department of Revenue on or before October 1, 2025. Section 6. Effective Date. The taxes imposed by this Ordinance shall take effect on the later of: (i) January 1, 2026; (ii) the first day of July next following the adoption and filing of this Ordinance with the Department of Revenue, if filed on or before the preceding April 1st; or, (iii) the first day of January next following the adoption and filing of this Ordinance with the Department of Revenue, if filed on or before the preceding October 1st. Section 7. Repeal of Conflicting Provisions. All ordinances, resolutions and policies or parts thereof, in conflict with the provisions of this Ordinance are, to the extent of the conflict, expressly repealed on the effective date of this Ordinance. Section 8. Severability. If any provision of this Ordinance or application thereof to any person or circumstances is ruled unconstitutional or otherwise invalid, such invalidity shall not affect other provisions or applications of this Ordinance that can be given effect without the invalid application or provision, and each invalid provision or invalid application of this Ordinance is severable. Page 2 of 3 Section 9. Headings/Captions. The headings/captions identifying the various sections and subsections of this Ordinance are for reference only and do not define, modify, expand or limit any of the terms or provisions of the Ordinance. Section 10. Publication. The Clerk is directed by the corporate authorities to publish this Ordinance in pamphlet form. This Ordinance shall be in full force and effect after its passage and publication in accordance with 65 ILCS 5/1-2-4. PASSED THIS day of 12025. AYES: NAYS: ABSENT: APPROVED THIS day of , 2025. ATTEST: Karen M. Agoranos, Village Clerk Paul Wm. Hoefert, Mayor Page 3 of 3