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Village budgets could be hurt by grocery tax drop

The Homewood and Flossmoor village boards recently passed balanced 2024-26 budgets, but elimination of the grocery tax would send administrators back to the drawing board.

Gov. J.B. Pritzker proposed eliminating the 1% tax on grocery sales as part of his proposed state budget. The measure is now before the Illinois Legislature.

Revenue from the tax goes to municipalities, not the state, so municipalities, including Homewood and Flossmoor, are expressing concern about the impact the loss of the tax would have on local budgets.
The state’s fiscal year starts July 1, but the budget is supposed to be approved by the Legislature before it recesses May 31.

At its April 1 meeting, the Flossmoor Board of Trustees unanimously approved a resolution asking the state to retain the tax.

Flossmoor’s interim financial management consultant, Brad Bettenhausen estimated the village would lose about $200,000 if the tax is eliminated.

The resolution states, in part, “at a time of rising pension costs, along with unfunded mandates placed on local units of government by the state, this proposed elimination of revenues would create an undue hardship on the village.”

Homewood would lose about $650,000 if the grocery tax is eliminated, according to Finance Director Amy Zukowski.

At the April 23 village meeting, Zukowski said the final budget assumes the tax will continue, but if it does not, the staff will present the board with options to compensate for the loss of revenue.
Mayor Richard Hofeld said at the board’s March 26 meeting that he has expressed concerns to legislators about the grocery tax issue.

“Most of us were caught by surprise when the governor made that announcement,” he said. “It’s consumer oriented. I certainly support it personally. There has to be an offset” to compensate muncipalities for the revenue loss. He suggested one option would be for the state to consider restoring the Local Government Distributive Fund, the share of state income tax that is returned to municipalities, to previous levels.

In her budget presentation April 23, Zukowski said if the grocery tax remains in place, the Homewood budget could have a $448,906 surplus.

During a preliminary budget presentation on March 26, Zukowski said the budgeted surplus comes from expected increases in sales tax as well as the first gaming revenue generated by the Wind Creek Casino, which is expected to open in November.

The budget estimates the village could receive $250,000 in gaming tax revenue, although that depends on when it opens.

She said the village reduced its sales tax projections last year after learning that Walmart was closing its store on Halsted in March 2023, but actual sales tax revenues were higher than expected, so this year’s budget includes a more optimistic estimate.

Flossmoor’s budget, approved April 15, will draw from fund balances to make up for projected operating deficits.

Village Manager Bridget Wachtel cited several reasons for the operating deficit, including cost increases due to inflation, increased capital equipment fund contribution, information technology costs, wage and step adjustments, contracted fire personnel costs and operating expense carryovers.

“The village has been in this position before and has taken thoughtful and successful measures to remain financially solvent,” she said. “The village will need to evaluate revenue opportunities to sustain our levels of service or re-evaluate our service/expense levels to match our revenues.”

The total budget including all funds projects $40.6 million in expenses, $30.3 million in revenue.
Wachtel noted that each fund with an operating deficit has adequate balance to compensate, in some cases because money was saved in previous years specifically for projects that will be done this coming year.

Flossmoor’s 2024-25 budget includes one big ticket infrastructure project, the storm water drainage improvements to relieve flooding in the downtown area and Heather Hill neighborhood. Phase 2 of the project involves installing a larger storm sewer line from the viaduct to a new detention basin near Heather Hill School.

The project will use more than $3 million in grant money from various sources plus money from the streets and storm water bond issue approved by voters in 2021. The total cost of the project is estimated at $7.8 million.

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