Which suburbs tax you more to eat out?

Every Quarter Pounder with Cheese sold at the Hanover Park McDonald's on Lake Street costs 11 cents more than the same burger two miles away in Bloomingdale.

Ronald McDonald isn't pocketing the difference in his oversized clown pants. Instead it's going into Hanover Park's coffers along with more than $1 million more collected from other establishments through the village's 3 percent food and beverage tax.

That's the highest rate among 25 suburbs in six counties that charge a similar tax, according to a Daily Herald analysis of municipal audits. Elgin charges a similar rate, but it applies only to booze sales.

All food and beverage taxes are in addition to sales taxes that are already as much as 10 percent in some places. Those 25 towns combined to generate almost $41 million from food and beverage taxes over the last fiscal year.

"We don't have a lot of retail vitality, so this is another source that helps us maintain the quality of life and improve upon that without putting the burden on property owners here," said Hanover Park Mayor Rodney Craig. "It offsets the cost of operating the village in an effort to keep property taxes low."

That's little comfort to Renate Smith.

Each cake that comes out of the oven at Smith's Olde Salem Cafe at Irving Park Road and Olde Salem Circle in Hanover Park is priced below what she would consider a normal price, to offset the 12.75 percent in taxes her customers pay with every purchase.

"I feel that they wouldn't come back if they paid that much plus the taxes, so I lower my prices," she said. "I do think it hurts business here."

To tax food and beverages, towns have to be home-rule communities, which grants taxing authority to elected officials either by prior voter approval or by exceeding a population threshold. However, any town can tax restaurant food sales on top of existing sales taxes. Libertyville is examining creating such a "places for eating" tax.

Most municipal leaders say the tax isn't deterring diners, pointing to growth in revenues from the tax. It isn't affecting economic development either, they contend.

"It is not apparent that (the tax) has discouraged St. Charles from being a destination location for entertainment," said City Administrator Mark Koenen.

St. Charles, like Elgin, taxes only alcohol sales. The town used to have a food and beverage tax, but the city council abolished it in 2007. In 2011, the council created a liquor tax. Liquor sales there are taxed at 2 percent, and that generated more than $1 million last year, according to city financial records.

The liquor tax revenue has grown each year since it was implemented.

Koenen said the choice to tax alcohol sales was made because there is a greater need for city services from those establishments.

St. Charles looks at it as a tax of choice.

"In an effort to find revenue streams that are sources broader than just from those living in the community, this is from a source that isn't necessarily tied to a core function of life," Koenen said. "It's a discretionary choice."

Like most towns with these types of taxes, though, St. Charles does not earmark the revenue for specific expenses.

However, there are towns like Arlington Heights and Naperville where officials do set aside a certain portion of the taxes to cover specific costs. Both towns use some of the revenue to fund cultural events or offset costs they incur from operating those events.

Naperville - which charges a base 1 percent food and beverage tax throughout the city and an additional 1 percent at downtown eateries - also uses the money to pay off some of the cost of building a downtown parking garage.

Some towns are even looking to increase these tax rates, confident it won't stunt economic development or make visitors reconsider dinner plans.

Lombard's "places for eating" tax, which taxes only food, could double to 2 percent at the start of next year if the village approves a citizen-committee recommendation to do so. The village board is expected to take up the issue at its July 21 meeting, Lombard Village Manager Scott Niehaus said.

"Given the quality of the dining establishments and easy access to the community, (the committee) felt that it wouldn't be overly burdensome," Niehaus said. "The village of Schaumburg has had a 2 percent food tax since 1987, and since that time many new restaurants have still made the decision to locate there because of the other benefits that the community provides."

Lombard is faced with a growing deficit that could amount to $1.6 million next year if left unattended, Niehaus said. The village board is looking to cut expenses by $800,000 and increase the food tax, which would generate nearly $1.6 million more.

Half the new revenue would offset the deficit and the other half would go into reserves.

"We looked at other revenue options like vehicle stickers and video gambling. ... This revenue source balances the economic needs of the village by providing additional funds that substantially come from nonresidents," he added.

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Contact Jake at jgriffin@dailyherald.com or (847) 427-4602.