O’Fallon is latest metro-east city to grapple with 1% grocery tax
O’Fallon shoppers aren’t likely to see any changes to their grocery sales tax receipts from Aldi, Schnucks, Sam’s Club and Walmart as most city officials favor preserving that revenue stream for the next calendar year.
Three aldermen opposed to retaining a 1% sales tax on groceries, but the other 11 want to keep it. On Monday, the O’Fallon City Council advanced the ordinance for final approval on July 21.
Aldermen supporting the tax’s retention cited maintaining city services that are financed through the $1.2 million tax revenue in the general fund.
Aldermen Dennis Muyleart, Todd Roach and Tom Vorce expressed concern about the impact on residents going through financial difficulties. They sought another way to make up the revenue.
Roach unsuccessfully motioned to delayed implementation so that they could have time to address other revenue sources. He said a sales tax increase affects less residents because O’Fallon draws shoppers from other cities. He also noted Meijer will be coming into town, and will contribute to the tax revenue.
If the council approves keeping the tax in two weeks, the city will join other Illinois municipalities that won’t be dropping it.
To date, 16 metro-east towns have voted to collect it, and others are still in discussions about it. They include Belleville, Shiloh, Fairview Heights, Swansea, Edwardsville, Glen Carbon, Lebanon, Freeburg and Highland. Granite City and Troy voted to cancel it while St. Jacob, Hartford and Roxana aren’t considering it because they don’t have a store.
Low-income residents who receive SNAP and EBT benefits are not taxed for groceries.
Finance Director Sandy Evans has previously reported that the $1.2 million collected through the tax are crucial to the city’s operations and would affect public safety, public works and community development projects if eliminated.
“This is drainage projects, street repairs, the Venita Bridge widening, Highway 50 improvements, adding a police officer, Downtown District streetscaping,” she said at the June 23 finance committee meeting.
Officially called Municipal Grocery Retailers’ Occupation Tax, the state will stop imposing the sales tax on Jan. 1, 2026. In May, the Illinois General Assembly approved repealing the state grocery tax, which was part of Gov. JB Pritzker’s fiscal year 2025 budget.
Pritzker noted its impact on low-income residents, and how he wanted to lessen the burden on families. A provision in the state budget bill, however, allows municipalities to implement their own local grocery taxes without voter approval. For 35 years, the state has distributed this revenue to the municipalities.
“This is not a new tax. It will be the same dollars on their grocery bill, there will be no difference,” Evans said.
Ron Zelms, a resident of Ward 6, commented that it was “time to do something for the residents.” He cited local school figures about the federal reduced lunch program, noting that District 90 had 25% students participating, District 203 had 24% and District 104 had 57%.
“That tells me that 25-30 percent of our residents are living paycheck to paycheck,” he said.
Zelms, who is a former candidate for city treasurer, mentioned figures from the city’s reserved funds, citing $38 million in reserved funds collected over the years, and noting $9 million was placed in the general fund.
“I simply don’t believe the city will see any irreparable harm,” he said.
Alderman Martha Stoffel said she was not in favor of tapping reserves to be used instead of tax revenues.
Both Ward 3 aldermen, Andrea Fohne and Roy Carney, said they talked with residents who were supportive of the reasons why, and that it wasn’t a new tax. Fohne brought up the crumbling sidewalks that would be fixed because of it.
O’Fallon’s ordinance is from a draft prepared by the Illinois Municipal League, which recommended keeping the tax.
The first reading was approved in a 10-3 vote, with aldermen Jim Campbell, Roy Carney, Andrea Fohne, Jimmy Ford, Aaron Hudson, Jessica Lotz, Curtis Newcomb, Nathan Parchman, Ross Rosenberg, Martha Stoffel, in favor, and Vorce, Roach and Muyleart opposed. Jim Blackburn was absent.
O’Fallon is a Home Rule community, and the city implemented a sales tax increase for the Build O’Fallon Trust Fund. That was two years ago, and they added 1.5% for the parks.
The Illinois Department of Revenue is requesting paperwork by Oct. 1 so there will be a smooth transition and no interruption on Jan. 1.
Besides police and streets, the general fund is used for MECOMM, pavement management, Management as well as unfunded capital improvement plan projects.