Question of 1% grocery tax looms over McHenry’s new city budget

McHenry’s new city budget includes plans – not yet approved by the City Council – for a 1% grocery tax to replace the state tax that is ending Jan. 1.

The Council last week passed its 2025-26 budget, though the question of the grocery tax is expected to come before the Council in August and raised some opposition during the spending plan discussion.

The state’s 1% grocery tax benefited local communities, but Illinois lawmakers rescinded the tax. That’s led many communities in McHenry County and beyond to implement their own grocery taxes to replace the lost revenue. In McHenry, city officials say that, without replacing the grocery tax, they would lose more than $1 million, “and these losses are not supplemented from other sources for local governments.”

“This would be a significant reduction to the City’s overall budget and would require significant expense reductions,” city documents state.

Council members Chris Bassi and Frank McClatchey spoke out against a local grocery tax.

“The only thing I do not like in the budget is proposing a grocery tax, when the state abolishes their tax. I know every other city in McHenry is doing it, but I would like McHenry to take the lead” and not replace the tax, McClatchey said. “Who knows? That might bring people to McHenry” to shop.

Bassi joined Alderman Andy Glab in voting against the spending document.

“There are a lot of things in there I kind of question why are they in there, as far as economic ideas ... for the future, some of the dollar amounts and projects that we put in there,” Glab said before the vote. “I can’t support it.”

Bassi also said she had concerns with the spending plan, including numbers relating to upcoming housing projects.

“I have concerns about some of the goals, specifically Redwood” and future rental development versus single-family home ownership, Bassi said.

Developer Redwood USA has pitched building 180 rental townhomes on the southeast corner of Chapel Hill Road and Route 120 on McHenry’s far northeast side.

“Like Alderman Glab, I will not be supporting the budget,” Bassi said.

The council went on to approve the 2025-26 budget, which includes a new contract with a new salary of $209,895 for City Administrator Suzanne Ostrovsky, who recently completed her first year as the McHenry administrator. The budget calls for total general fund expenditures of $31.2 million on expected revenue of nearly $32 million.

City documents said one of the city’s budget goals is to “continue to evaluate and identify alternative revenue sources, especially as the State of Illinois continues to threaten local government pass-through revenues. Examples may include implementing a replacement grocery tax and investigating use-based food and beverage or entertainment taxes.”

It was McClatchey’s last meeting, having lost his reelection bid this month. Bassi was unsuccessful in her run for mayor against incumbent Wayne Jett but retains her seat on the Council.