Peoria City Council considers new grocery tax to offset $5M revenue loss

Peoria City Council is poised to make a significant decision regarding local taxation that could impact the city’s financial health and residents’ wallets. During the meeting on April 22, 2025, the council discussed options for implementing a municipal grocery retailer's occupation tax, which could generate approximately $5 million annually for the city’s general fund.

The proposed tax comes in response to the state of Illinois repealing a longstanding 1% grocery tax in August 2024. This repeal has left municipalities like Peoria with a potential revenue gap, prompting the council to consider local alternatives. Finance Director Kyle Cratty emphasized that without the grocery tax, the city could face a $5 million loss, which represents about 4% of the general fund revenue. This loss would significantly affect the city’s ability to maintain essential services and meet financial obligations, particularly for police and fire pensions.

Crucially, the grocery tax would not impose a new financial burden on residents, as it has been a part of the local tax structure for decades. Instead, it would maintain the status quo for consumers, with an estimated annual impact of $70 to $150 per household. Additionally, the tax would also apply to shoppers from surrounding communities, distributing the financial responsibility beyond Peoria residents.

The council explored alternative revenue options, including increasing the home rule sales tax and hotel, restaurant, and amusement taxes. However, these alternatives were deemed less viable due to potential negative impacts on the city’s competitiveness and the burden they would place on residents.

As the council prepares to vote on this crucial ordinance, the implications of their decision will resonate throughout the community, affecting both the city’s budget and the everyday lives of its residents. The outcome of this meeting could shape Peoria's financial landscape for years to come, highlighting the importance of local governance in addressing fiscal challenges.