Sterling to keep local grocery sales tax after state moves to nix it

STERLING — The Sterling City Council elected to implement its own 1% grocery sales tax during its meeting Monday.

The ordinance will replace the state’s current 1% grocery sales tax, which will be repealed on Jan. 1, 2026, as part of Gov. JB Pritzker’s $53 billion state budget proposal for the current fiscal year. In addition to repealing the tax, the new legislation grants all municipalities – including non-home rule units, which normally cannot raise sales taxes without voter approval – the power to implement their own grocery tax without requiring a public vote.

The tax applies to food meant to be consumed off the premises where it is sold, such as meat, dairy and produce. This does not affect the 6.25% general sales tax, which will still be applied to most goods and services, including non-food items and those prepared for immediate consumption, such as restaurant meals, takeout food and ready-to-eat items from delis and bakeries.

The city stood to lose between $600,000 to $750,000 a year if it didn’t pursue a replacement, Sterling City Manager Scott Schumard said.

The city also didn’t have the option to go with anything other 1% or nothing, Mayor Diana Merdian said.

“The State was more than happy to eliminate this tax and take all the credit for it and then leave the municipalities to figure out what to do with the loss of revenue,” Schumard said. “That money goes to the general fund, which is funding our police, fire and public works. We don’t have a good answer for not having $600 to $750,000 in our budget going forward.

“However, the State did allow municipalities to reinstate the tax so that it becomes us being the bad guys,” Schumard continued. “I just don’t know how else we live without that much operating revenue each year.”

Alderman Joe Strabala-Bright said while he understands taxes are never popular, the money it collects is vital to Sterling’s future.

“We’ve had an ambitious agenda so far with the riverfront redevelopment, trying to revitalize the downtown, conversations about housing, the needs of our police and fire departments,” Strabala-Bright said. “I understand it’s not popular to tax, but services have a cost. Growth has a cost, and we have to be willing to fund that growth as we’re looking at what Sterling is going to look like for the next 10, 20, 30 years.”

Other Illinois municipalities have made the same decision, including Dixon, which elected to implement its own grocery sales tax at a City Council meeting on Nov. 18.