Finance Committee

AGENDA FINANCE COMMITTEE MEETING August 26, 2024 - 6:30 PM Mundelein Village Hall - Board Room 300 Plaza Circle Mundelein, IL 60060 I. CALL TO ORDER II. ATTENDANCE III. MINUTES APPROVAL A. Motion to approve the Finance Committee Meeting Minutes from June 24, 2024. IV. PUBLIC COMMENTARY V. GROCERY TAX DISCUSSION A. Grocery Tax Law and Home Rule Sales Tax Options VI. ADJOURNMENT A. Motion to Adjourn the Financial Committee Meeting. The Village of Mundelein, in compliance with the Americans with Disabilities Act, requests that persons with disabilities who require certain accommodations to allow them to observe and/or participate in this meeting, or who have questions about the accessibility of the meeting or facilities, to contact the ADA Coordinator at 847-949-3200 to allow the Village to arrange accommodations for those persons. Page |1 Page 1 of 20 Finance Committee Meeting Minutes lune24,2O24 I. CALL TO ORDER CALL TO ORDER Trustee Schwenk called the meeting to order at7lL2 PM. Trustees Schwenk, Juarez, and Ross were present. II. ATTENDANCE ATTENDANCE Board Attendance PRESENT: Trustee Schwenk, Trustee Juarez, Trustee Berman Ross, Mayor Lentz ABSENT: Trustee Meier Village Attendance Village Attendance: Public Works & Engineering Director Boeche, Village Administrator Guenther, Assistant Finance Director Limperatos, Fire Chief Lark, Police Chief Seeley, Community Development Director Orenchuk, and Assistant Village Administrator Monroe, Attorney Cahill Absent: Building Director Sellas PUBLIC COMMENTARY PUBLIC COMMENTARY Therqwas no public commentary. IV. PUBLIC HEARING A^f PUBLIC HEARING A. FY2O25 Budget Appropriation Ordinance PUBTIC HEARING Committee Chairman Schwenk read the report: A legal notice was published as required by state statute in a newspaper with general circulation in Mundelein (Daily Herald) on June L4,2024. The draft of the ordinance has been available in the Customer Service Office at the Village Hall for public review. APPROPRIATIONS CORPORATE 46,010,000 SPECIAL PURPOSE 29,935,000 WATER/SEWER 20,935,000 Page 2 of 20  96,880,000 1. Appropriations are the legal limits for Village Expenditures. For FYE 2025 the amount is Sg6,88o,ooo. 2. To date, there have been no written comments received by the Village with respect to the proposed ordinance. 3. The prior year total appropriation was 583,390,000. V. FINANCE CHAIR'S COMMENTS FINANCE CHAIR'S COMMENTS None. VI. TRUSTEES'COMMENTS TRUSTEES' COMMENTS None. VII. ADJOURNMENT ADJOURNMENT The Finance Committee Meeting adjourned at 7:14 PM. Village lerk Page 3 of 20 To: Mayor and Board of Trustees From: Linda Miller, Finance Director For: Finance Committee Meeting of August 26, 2024 Subject: Grocery Tax Law and Home Rule Sales Tax Options Financial Impact: N/A Attachments: 1. Grocery Tax Law and Home Rule Sales Tax Options Presentation Background: The meeting is to discuss the options related to the State of Illinois Grocery Tax Law signed into law on August 5, 2024, and our Home Rules Sales Tax Rate. During our Fiscal Year 2025 budget, information was available that the State of Illinois was going to eliminate the 1% tax on groceries as part of the State of Illinois' next fiscal year budget, which would begin July 1, 2024. In order to compensate for this loss of revenue, an ordinance was passed by the Village of Mundelein to raise the Home Rule Sales tax .25% effective July 1, 2024, which raised the total Mundelein Sales Tax Rate from 8.00% to 8.25%. The State of Illinois did sign into law the elimination of the 1% tax on groceries effective January 1, 2026, and under this new law allows municipalities to impose their own local grocery tax by ordinance. The statewide repeal of the grocery tax will occur later than we expected during our Fiscal Year 2025 budget. We were expecting this elimination to occur July 1, 2025, but the recent law indicates the repeal will be January 1, 2026. Also, at the time of the Fiscal Year 2025 budget, it was anticipated the grocery tax would be completely eliminated, but the new law does allow for municipalities to impose their own grocery tax by ordinance. The attached presentation provides three options to consider regarding our Home Rules Sales Tax Rate and the Municipal 1% Grocery Tax. Page 4 of 20 Recommendation: The Board will consider the three options in the presentation. Page 5 of 20 GROCERY TAX LAW AND HOME RULE TAX OPTIONS Presentation to the Village Board August 26, 2024 6:30 PM Village Hall Page 6 of 20  GROCERY TAX LEGISLATION 2  House Bill 3144 was signed into law on August 5, 2024. This new law will eliminate the state’s 1% tax on groceries.  During our FY25 Budget meeting, this new law was anticipated with an effective date of 7/1/24 to correspond with the State’s new budget fiscal year start date. The Village approved a .25% Home Rule Sales Tax increase to help offset this revenue deficit.  Unknown at the time of our budget, this law will now eliminate the state’s 1% tax on groceries on January 1, 2026 rather than the anticipated date of July 1, 2024.  This new law allows municipalities to impose their own local grocery tax by ordinance effective January 1, 2026. Page 7 of 20  HOME RULE SALES TAX AND 3 GROCERY TAX OPTIONS OPTIONS TO CONSIDER: Option 1 – Do Nothing Keep Home Rule Sales Tax increase of .25% which was effective 7/1/24, and do not implement 1% grocery tax on January 1, 2026. Option 2 – Back to Way Things Were Reduce Home Rule Sales Tax by .25% effective 1/1/25, and implement 1% local grocery tax on January 1, 2026. Option 3 – Implement Village Grocery Tax Keep Home Rule Sales Tax increase of .25% which was effective 7/1/24, and implement 1% grocery tax on January 1, 2026. Page 8 of 20 HOME RULE SALES TAX & GROCERY TAX OPTIONS REVENUE COMPARISON 4 HR Sales Tax Grocery Tax Total Option 1 – Do Nothing No Change to Home Rule Sales Tax (8.25%) & No Grocery Tax FY25 $ .70 M $1.00 M $1.70 M FY26 $1.20 M $ .92 M $2.12 M FY27 $1.20 M $ .00 M $1.20 M Option 2 – Back to Way Things Were Decrease Home Rule Sales Tax .25% (8.0%) & Implement Grocery Tax FY25 $ .60 M $1.00 M $1.60 M FY26 $ .00 M $1.00 M $1.00 M FY27 $ .00 M $1.00 M $1.00 M Option 3 – Implement Village Grocery Tax No Change to Home Rule Sales Tax (8.25%) & Implement Grocery Tax FY25 $ .70 M $1.00 M $1.70 M FY26 $1.20 M $1.00 M $2.20 M FY27 $1.20 M $1.00 M $2.20 M Page 9 of 20  HOME RULE SALES TAX & GROCERY TAX OPTIONS 5 OPTION 1 – DO NOTHING Leave Home Rule Sales Tax Increase of .25% in Place & Do Not Implement the Grocery Tax PRO’S  Minimal impact to taxpayer from Home Rules Sales Tax Increase. (No adverse feedback received when increase occurred 7/1/24.)  Taxpayer will save on grocery purchases since no Grocery Tax will be charged.  Home Rules Sales Tax paid by both residents and nonresidents.  No Burden to Business Owners who implemented changes for 7/1 Home Rule Sales Tax change. CON’S  Taxpayer pays slightly more on discretionary purchases.  Revenue decrease from no grocery sales tax may increase need to identify other funding sources.  Recessionary financial environment will result in less revenue as drop in discretionary purchases will cause decline in Home Rule Sales Tax. Page 10 of 20  HOME RULE SALES TAX & 6 GROCERY TAX OPTIONS Option 2 – Back to Way Things Were Decrease Home Rule Sales Tax .25% & Implement Grocery Tax PRO’S  Taxpayer sales tax rate declines back to 8.00%. CON’S  Burden on Business Owners to Update Their Operations for Sales Tax Change a second time in one year.  Home Rule Sales Tax revenue decline may result in need to identify other funding sources. Option 3 – Implement Village Grocery Tax Leave Home Rule Sales Tax Increase of .25% in Place & Implement Grocery Tax PROs  Minimal impact to taxpayer (No adverse feedback received when increase occurred 7/1/24).  Tax paid by both residents and nonresidents.  No Burden to Business Owners who implemented changes for 7/1 Home Rule Sales Tax change.  Revenue increase may lessen need to identify other funding sources. CON’S  Taxpayer pays slightly more on discretionary purchases. Page 11 of 20  HOME RULE SALES TAX & GROCERY TAX 7 NEXT STEPS for ordinances needed for changes . . . HOME RULE TAX RATE CHANGE  Bring ordinance to September 9, 2024 Board meeting to reduce Home Rules Sales .25% bringing the Mundelein sales tax rate to back to 8.00% effective January 1, 2025.  The Village of Mundelein will begin to see the decrease in revenue from the sales tax decrease in April 2024. GROCERY TAX IMPLEMENTATION  Bring ordinance no later than September 8, 2025 Board meeting to allow Grocery Tax of 1% effective January 1, 2026.  The Village of Mundelein will begin to see the revenue from the grocery tax in April 2026. Page 12 of 20 8 QUESTIONS Page 13 of 20 9 REFERENCE MATERIALS Page 14 of 20  Estimated* Annual Financial Impact of the Proposed Elimination of the 1% Grocery Tax on Illinois' Municipalities (As of 9:00 a.m. 5/31/2024) Municipality Population Estimated Annual Loss Algonquin 29,700 $2 million Alsip 19,063 $670,000 Arlington Heights 77,676 $1.3 million Aurora 180,542 $4.5 million Bannockburn 1,013 $555,506 Barrington 10,722 $612,600 Batavia 26,098 $1.1 million Bedford Park 602 $900,000 Bensenville 18,813 $500,000 Benton 6,709 $30,764 Bloomington 78,680 $2 million Bolingbrook 74,022 $1.75 million Bourbonnais 18,164 $735,000 Bradley 15,419 $800,000 Buffalo Grove 43,212 $1.5 - 1.9 million Burr Ridge 11,192 $200,000 Cary 17,826 $400,000 Champaign 88,302 $2,703,704 Charleston 17,286 $350,000 Chatham 14,437 $300,000 Chicago 2,746,388 $60 - 80 million Clinton 7,004 $250,000 Coal City 5,705 $80,000 Coffeen 647 $44,000 Collinsville 24,366 $1.2 - 1.5 million Countryside 6,420 $700,000 Crest Hill 20,459 $100,000 Crete 8,465 $300,000 Creve Coeur 4,934 $89,713 Crystal Lake 40,269 $1.3 million Darien 22,011 $372,127 1 *Estimates provided by each municipality. To submit an estimate, please email IMLLegislation@iml.org. Page 15 of 20  Estimated* Annual Financial Impact of the Proposed Elimination of the 1% Grocery Tax on Illinois' Municipalities (As of 9:00 a.m. 5/31/2024) Municipality Population Estimated Annual Loss Decatur 70,522 $2 million Deerfield 19,196 $500,000 DeKalb 40,290 $750,000 Des Plaines 60,675 $1,413,149 East Moline 21,374 $579,702 Effingham 12,252 $600,000 Elburn 6,175 $118,838 Elgin 114,797 $1.1 million Flossmoor 9,704 $200,000 Fox Lake 10,978 $250,000 Freeport 23,973 $800,000 Geneva 21,393 $600,000 Genoa 5,298 $100,000 Glen Carbon 13,842 $1 million Glencoe 8,849 $200,000 Hanover Park 37,470 $493,477 Hawthorn Woods 9,062 $65,000 Herrin 12,352 $350,000 Hickory Hills 14,505 $440,000 Highland Park 30,176 $1 million Homer Glen 24,543 $700,000 Homewood 19,463 $650,000 Huntley 27,740 $424,827 Joliet 150,362 $3 million Justice 12,600 $65,000 Kankakee 24,052 $1,059,000 La Grange Park 13,475 $230,000 Lake Forest 19,367 $408,913 Lake Zurich 19,759 $1.76 million Lexington 2,090 $15,600 Libertyville 20,579 $750,000 - $800,000 2 *Estimates provided by each municipality. To submit an estimate, please email IMLLegislation@iml.org. Page 16 of 20  Estimated* Annual Financial Impact of the Proposed Elimination of the 1% Grocery Tax on Illinois' Municipalities (As of 9:00 a.m. 5/31/2024) Municipality Population Estimated Annual Loss Lily Lake 1,032 $748 Lisle 24,223 $245,000 Lockport 26,094 $1 million Lombard 44,476 $500k - $1.5 million Machesney Park 22,950 $250,000 Macomb 15,051 $300,000 Mahomet 9,434 $350,000 Marion 16,855 $1.68 million Mattoon 16,870 $475,000 Midlothian 14,325 $126,000 Milan 5,106 $570,000 Mokena 19,887 $850,000 Montgomery 20,262 $800,000 Morris 14,613 $1.5 million Mount Carmel 7,015 $147,000 Mount Vernon 14,600 $1,217,141 Mundelein 31,560 $500,000 Naperville 149,540 $3.5 million Niles 30,912 $2.3 million Normal 52,736 $2.6 million North Aurora 18,261 $700,000 North Riverside 7,426 $850,000 Northbrook 35,222 $1.8 million Northlake 12,840 $550,000 Oak Lawn 58,362 $2.2 million O'Fallon 32,289 $1.2 million Olney 8,701 $600,000 Oregon 3,604 $43,000 Orland Hills 6,893 $392,000 Orland Park 58,703 $2.5 million Oswego 34,585 $1 million 3 *Estimates provided by each municipality. To submit an estimate, please email IMLLegislation@iml.org. Page 17 of 20  Estimated* Annual Financial Impact of the Proposed Elimination of the 1% Grocery Tax on Illinois' Municipalities (As of 9:00 a.m. 5/31/2024) Municipality Population Estimated Annual Loss Palatine 67,908 $1.25 million Palos Heights 12,068 $350,000 - $400,000 Palos Park 4,899 $211,000 Park Forest 21,687 $100,631 Peoria 113,150 $4 million Peotone 4,150 $160,000 Plano 11,847 $540,000 Princeville 1,636 $231,759 Prospect Heights 16,058 $600,000 Quincy 39,463 $920,000 Red Bud 3,804 $52,000 River Forest 11,717 $1,170,768 River Grove 10,612 $190,000 - $200,000 Rock Island 36,636 $1 million Rockford 148,655 $7 - 8 million Rolling Meadows 24,200 $500,000 Romeoville 39,863 $900,000 Schaumburg 78,723 $3.1 million Sesser 1,888 $30,000 Shiloh 14,098 $450,000 Shorewood 18,186 $500,000 Skokie 67,824 $1.5 million South Chicago Heights 4,026 $400,200 South Elgin 23,865 $212,286 South Holland 21,465 $526,000 Sparta 4,095 $200,000 Spring Grove 5,487 $410,000 Springfield 114,394 $3.8 million St. Charles 33,081 $1.6 million Sterling 14,764 $500k - $1 million Sugar Grove 9,278 $200,000 4 *Estimates provided by each municipality. To submit an estimate, please email IMLLegislation@iml.org. Page 18 of 20  Estimated* Annual Financial Impact of the Proposed Elimination of the 1% Grocery Tax on Illinois' Municipalities (As of 9:00 a.m. 5/31/2024) Municipality Population Estimated Annual Loss Sycamore 18,577 $717,086 Tinley Park 55,971 $1.8 million Urbana 38,336 $1 million Vandalia 7,458 $175,000 Vernon Hills 26,850 $1.75 million Washington 16,071 $500,000 West City 656 $311,174 Western Springs 13,629 $580,000 Westmont 24,429 $1 million Wheaton 53,970 $2.1 million Wheeling 39,137 $660,000 Wilmette 28,170 $550,000 Wilmington 5,664 $72,000 Winnebago 2,940 $120,000 Winnetka 12,744 $240,000 Woodridge 34,158 $300,000 Woodstock 25,630 $257,439 Yorkville 21,533 $298,888 5 *Estimates provided by each municipality. To submit an estimate, please email IMLLegislation@iml.org. Page 19 of 20  FY25 ESTIMATED SALES TAX AND HOME RULE SALES TAX BASED ON 1ST QUARTER ACTUAL RECEIPTS OPTION 1 - DECREASE HOME RULE FY25 EST. FY25 BUDGET FY25 BUDGET 25% YTD Q1 ENDING YTD OVER/ HOME RULE EST OVER/ FY25 BUDGET INCREASE MAY-JUL 07/31/24 (UNDER) OCT-MAR * (UNDER) SALES TAX 6,850,000 8% 1,712,500 1,647,000 (65,500) (262,000) HOME RULE SALES TAX 5,900,000 1% 1,475,000 1,359,000 (116,000) 600,000 136,000 FY25 ESTIMATE TOTAL (126,000) OPTION 2 - LEAVE HOME RULE INCREASE IN PLACE YTD FY25 EST. FY25 BUDGET FY25 BUDGET 25% YTD Q1 ENDING OVER/ HOME RULE EST OVER/ FY25 BUDGET INCREASE MAY-JUL 07/31/24 (UNDER) OCT-APR * (UNDER) SALES TAX 6,850,000 8% 1,712,500 1,647,000 (65,500) (262,000) HOME RULE SALES TAX 5,900,000 1% 1,475,000 1,359,000 (116,000) 700,000 236,000 FY25 ESTIMATE TOTAL (26,000) * Estimated Home Rule .25% Increase Based on $1,200,000 per fiscal year Page 20 of 20