Lake in the Hills has raised its local cannabis dispensary tax from 2% to 3%, the most allowed under state law.

Village officials said Lake in the Hills was the only municipality in McHenry County that has a population over 5,000 and allows dispensaries that doesn’t have the maximum tax on the books.

In McHenry County, besides Lake in the Hills, Cary, Crystal Lake, McHenry, Richmond and Woodstock all have dispensaries. All have a 3% local tax, according to state records.

In addition, McHenry County has a 3% county sales tax on marijuana.

Huntley does not allow recreational dispensaries. The Huntley village board in 2020 voted to prohibit recreational marijuana dispensaries, with the board vote coming shortly after recreational marijuana became legal in Illinois.

Island Lake, Lakemoor and Fox Lake, which straddle the Lake-McHenry county line, also have dispensaries. Those municipalities have a 3% local sales tax as well.

The Lake in the Hills Village Board didn’t have much discussion on the proposal before unanimously approving the tax increase Thursday.

After the vote, Village President Ray Bogdanowski said, “We’re going to the max,” adding the board doesn’t want Lake in the Hills to be known as a cheaper cannabis destination.

Bogdanowski said the village purposely set the tax at the lower end when legal cannabis was new to Illinois and McHenry County and officials weren’t sure about how it would go.

The RISE dispensary opened in Lake in the Hills in 2021, making it the longest-running dispensary in the county. The village collected just over $500,000 from the tax in 2023, but officials said in a memo they expected the revenues from the tax to be $250,000 in fiscal year 2026. The higher local cannabis tax is projected to generate an extra $125,000 next year, assuming no decrease in sales volume, officials said.

Lake in the Hills officials discussed the proposal in a strategy meeting in August as one potential way to generate revenue. Other revenue-generating ideas for which officials showed support included adding a capital improvement fee to water bills and potentially raising the home-rule sales tax. Those proposals have not been formally taken up by the Village Board.

Illinois municipalities have until Oct. 1 to approve continuing the grocery tax, which lawmakers and Gov. JB Pritzker opted to remove. The tax went to local municipalities and Lake in the Hills voted Aug. 28 to continue the tax.