McHenry eyes grocery tax to replace state version that’s being eliminated

McHenry could join municipalities across Illinois and add a 1% local grocery tax, replacing income that will otherwise be lost when the state eliminates the tax it charges in January 2026.

City Administrator Suzanne Ostrovsky brought up the possibility of adding a local tax at the March 17 McHenry City Council meeting as part of a larger look at the city’s 2025-26 budget. The council is expected to vote on the budget at its April 21 meeting. The fiscal year starts May 1.

When the Illinois General Assembly removed the grocery tax, the law allowed all municipalities – whether they have home-rule status or not – to levy a replacement tax without a referendum.

Ostrovsky said all the municipal officials whom she has spoken to, and all in McHenry County, have indicated that their communities will approve the local tax.

“Most of the municipalities are going to pass this in a similar timeline so people can’t just go next door and shop” to avoid paying, she said. “Residents will not feel a difference. It is the same 1% they are currently paying, and it would come directly to the city versus going through the state.”

Without the grocery tax, McHenry would lose about $1 million annually that it would have to make up, Ostrovsky said.

“If not the grocery tax, something else [would] replace the revenue we would lose,“ 2nd Ward Alderman Andy Glab said. ”I would rather see it on grocery tax versus on the [property tax] levy.”

Overall, the upcoming general fund budget – the largest of the city’s funds – as presented is balanced, with revenues exceeding expenditures by just less than $800,000, Ostrovsky said. The total general fund expenditures currently in the budget come in at $31,211,977, compared with $31,960,421 in expected revenue. City staff has budgeted for revenue to come in 4.6% higher in the next fiscal year than in the current budget, Ostrovsky said.

The property tax levy, as approved in December, included a 1.2% increase to capture new equalized assessed value growth. That bump is expected to bring McHenry an additional $38,991, Ostrovsky said. Based on board discussion when that levy increase was approved, Ostrovsky suggested earmarking the increase for additional street resurfacing.

Residents are “more willing to pay taxes when they see roads and sidewalks in good shape,” 4th Ward Alderwoman Chris Bassi said in voicing her support for the suggestion. Bassi is running for the mayoral slot against Mayor Wayne Jett. He suggested that the additional funding should instead go to parks.

The budget is very conservative, 7th Ward Alderwoman Sue Miller said after the meeting, adding there is not a lot left for residents to want. “My concern is all of the things we wish to do but haven’t got the funding. How do we find alternative sources outside the tax bill?”