Evanston’s Liquor Control Review Board voted Friday to table a proposal that would have repealed the 6% Liquor Consumption Tax and replaced it with a 1.5% Food and Beverage Tax.
Action on the issue will remain on hold at least until the board’s next meeting in December.
The postponement comes after board members received lukewarm feedback from liquor license holders during past board meetings and through direct communications.
The general consensus was that, while licensees do not like the 6 percent tax on liquor sales, they feel a tax on food and beverage sales would also impose a significant burden on their businesses.
The board is now considering raising the city’s home rule sales tax, which is a broader-based tax, a quarter of a percentage point to 1.5 percent.
Budget Manager Clayton Black estimated that such an increase would raise $2.2 million, compared to the $3 million the Liquor Consumption Tax now raises for the city.
Black said that his calculations are based on the assumption that licensees’ sales remain unchanged even if the tax burden is eased on their businesses.
Mayor Daniel Biss, who is also the city’s liquor commissioner, said he favored a go-slow approach to any tax changes.
“Making a bet on how positive it would be is reckless,” he said.
Ald. Devon Reid (8th), who attended the meeting via Zoom, reiterated his opposition to substituting broader taxes that would affect more consumers than the current liquor tax.
He said the tax was shouldn’t be replaced “with a tax on goods and services that folks need to survive.” He suggested that licensees could enact efficiencies in the way they operated their businesses to compensate for the liquor consumption tax.
But licensees who were present at the meeting pushed back on the idea that the tax, as is, was not a significant drag on their businesses.
Ian Schmueck, general manager of the Binny’s Beverage Depot store in Evanston, said that he has seen many customers balk at the high liquor tax and how it affects an overall transaction, then announce they were leaving for the Binny’s store in Skokie.
He said his store has also put together liquor orders for big events, only to have the customer take the order to a cheaper location when they are ready to finalize the order.
Michael Lachowicz, senior managing partner of Fonda Cantina, said that the cost of doing business and how it affects customer behavior in his Evanston restaurant compared to his restaurant in Winnetka has been an eye opener.
He said that higher taxes, parking fees and the lingering effects of the pandemic are all factors that could keep customers away.
He also said that, even if the cost of eating out in Evanston is only minimally more expensive than dining in nearby suburbs, it still makes a difference.
“It’s pennies, but pennies add up to dollars and dollars add up to profit,” he said.
Mayor Biss said given the concerns of licensees, it would be ill-advised to rush changes to taxes affecting this group.
“City Council is extremely sensitive to the challenges that the restaurant industry is experiencing,” he said. He added that approving such consequential changes to taxes targeting these businesses might put City Council on a collision course with a large number of local restaurants, thereby diminishing the likelihood of the changes being adopted.
In the end, the Board unanimously voted to table the matter until their next meeting, and will direct city personnel to obtain further information regarding the impact of amending the liquor tax scheme, as well as comparable data from other communities.
In other business, the board recommended City Council approval of a proposal to create a new category of one-day liquor licenses available to “educational, business, fraternal, political, civic, religious, or not-for-profit organization(s).”
These licenses would only be available to such organizations that have an annual license and would allow them to apply for an unlimited number of one-day licenses throughout the year when they hold events where liquor is sold.