Several members of the city’s Finance & Budget Committee expressed interest Tuesday in exploring alternatives to replacing an expiring state grocery tax with a local one, considering other places to make up the lost revenue.

Raising property taxes, as unpopular as it may be, may be a “cleaner” more upfront way of making up the state tax’s revenue, Seventh Ward Councilmember Parielle Davis suggested during discussion.

On a grocery tax, “it’s hidden and it hits you at the cash register after you’ve bought everything.”

The city receives approximately $2.5 million per year from the state grocery sales tax, making it a stable source of revenue “as grocery sales do not tend to fluctuate with gains or losses in the local economy,” said Hitesh Desai, the city’s chief financial officer/treasurer, in a memo to the committee.

The state last year eliminated the tax effective Jan. 1, 2026, allowing jurisdictions to impose their own grocery tax to avoid loss of revenue.

Since then, more than 160 municipalities have adopted local grocery taxes, Desai said, including many of the city’s neighbors. Skokie is expected to pass a local grocery tax ordinance by summer’s end.

Chicago, on Evanston’s southern border, and Wilmette, to the north, meanwhile, are still in the undecided category.

The state’s deadline for cities to adopt an ordinance for a local tax is Oct. 1. If they do so after, the tax revenue will be interrupted for at least some amount of time after the new year.

Destination shoppers?

During public comment at the start of Tuesday’s meeting at City Council chambers, 909 Davis St., Dylan Sharkey, a Northwestern University graduate, and an assistant editor at the Illinois Policy Institute, a conservative think tank that advocates for reduced government spending and lower taxes, argued the $2.5 million hole the city is looking at could be looked at just as well as “a two and half million dollars in savings on food for residents,” if city officials were not to replace it with a tax of their own.

Based on the city’s population, he estimated that not moving to replace the tax would result in an annual saving of about $33 per resident or more than $130 for a family of four.

Before coming to the meeting, Sharkey said he spent roughly $30 at Aldi, making note of the paper bags he had brought along with him to the meeting.

“It’s a decent amount of food,” he told committee members. “Imagine if you could give that amount of food to every family of four in Evanston every year. I don’t think they would tell you it’s insignificant.”

He argued such a move would attract shoppers who might travel to Wisconsin to escape paying a grocery tax.

“Maybe while they’re here, they stopped to get gas, they stopped to get coffee, they stopped to get a bottle of wine or dinner,” he told committee members. “Now your other sales taxes are starting to offset that two and a half million dollars.”

In committee discussion, however, Councilmember Tom Suffredin (6th Ward) noted that nonresidents make up a large portion of those paying the grocery tax, buying items at Evanston stores.

Shoppers from outside Evanston make up about 50% of the city’s sales at local grocery stores, according to figures gathered by Paul Zalmezak, the city’s economic development manager.

The percentage of visits from nonresidents range from 35% at Valli Produce, 1910 Dempster St., to 82.9% at the Jewel-Osco at 2485 Howard St.

Credit: Bob Seidenberg

Turning to an alternative revenue replacement, such as an increase in property taxes, would fall strictly on Evanston citizens, Suffredin said.

“I don’t know what is gained by raising property taxes to make up for it,” he explained after.

Consulting fees a potential target: Kelly

But in further committee discussion, Councilmember Clare Kelly (1st Ward) suggested “the landscape is changing.” She referred to an article in the RoundTable, suggesting that cuts in the new federal budget and tax bill to the Supplemental Nutrition Assistance Program could impact students at both School District 65 and Evanston Township High School.

With the city already taxing a lot in other areas, “I’m leaning now more toward working harder on cutting back on discretionary expenditures on high consulting fees,” she said as a way to make up the $2.5 million.

Davis, one of the new councilmembers elected in April, said she viewed the grocery tax as a classic example of a regressive tax, a category she was not in favor of.

She would be willing to consider property taxes as an alternative, she said. But beyond that, she suggested, “maybe we should stick to our budget, not make large one-time expenses.”

(In an unplanned budget move, the city spent $2.6 million in June 2024 to buy the former Little Beans Cafe in south Evanston to be repurposed into a community center.)

“When we’re talking about the budget, if I had to choose between providing for our city to make sure that groceries were a little bit cheaper and balancing that against a rec center … I think that when we talk about our priorities as a city, food should come first,” Davis said.

Eighth Ward Councilmember Matt Rodgers, like Davis a first-term councilmember, said he understood both sides of the issue.

As the city sees new tax cuts for the wealthy at the federal level, “and tax increases coming on those people who are just about the benefit level,” officials should be looking at anything that will help them.

“There are ways to find cuts,” he said. “I mean this (the $2.5 million) is a big number but it’s not a big number in our overall budget,” he said. “So I think it’s definitely worth looking at — where are we spending our money, and if there’s something that’s nice to have as opposed to a necessity. Food is a necessity.”

Where ‘the rubber hits the road’

The council’s decision on the issue will precede discussion on the 2026 budget but could have a direct bearing on it.

Dealing with a structural budget deficit — with the city’s expenses outpacing revenues— the previous council tapped excess reserves and one-time revenues, such as permit fees from the Ryan Field rebuild, to close the gap.

In addition, councilmembers approved a historic policy drawn up by the Finance & Budget Committee in 2023, committing to put the city’s long underfunded public safety pensions on a 100% funding track by 2040.

The “rubber is going to hit the road next year,” predicted committee member and former chair David Livingston.

“We’re probably going to get through the budget process but we likely will be in a position where we have expended our excess reserves at the end of next year.”

On top of that, there are some “big unknowns,” he said. One has to do with actuarial changes to the pension process that could result in the city contributing “even more than the $30 million that we’re putting in today.”

For that reason, he told staff, “we really need this indicated pension contribution as quickly as we can get it because that will be very informative.”