Elgin discusses raising taxes or using reserves in uncertain budget year

Elgin City Council members on Saturday discussed increasing property taxes or using reserves - or possibly both - to deal with uncertain budgeting in light of the state's inaction.

The city's property tax levy amounts to $43.9 million this year - including levies for the general fund, public pensions, and bonds and interest payments - and city staff members propose increasing that 14 percent to $50.1 million in the 2016 budget. The general fund levy has decreased or stayed flat in the last four years.

Council members will find out how much the increase would amount to for property owners at their next meeting Wednesday.

Resident Chuck Keysor exhorted the city council "to stick up for taxpayers. … Please don't throw in the towel."

But the city must prepare for a possible two-year property tax freeze and limits on borrowing - which could become permanent - proposed in state Senate Bill 318, City Manager Sean Stegall said. Those borrowing limits would, paradoxically, affect more negatively municipalities like Elgin that have low levels of debt, he said.

That prompted city staff members to propose borrowing $25 million for street improvements and underground utility work

While raising taxes is "rather unattractive," the city council must prepare for the worst, Councilman Terry Gavin said. Councilman Rich Dunne said he's not sure he supports a tax increase, though he's OK with the $25 million bond issue.

"If you object to the property tax levy, I would ask you to come up with proposals," Mayor David Kaptain said. "What would you do to raise those funds moving forward?"

The proposed $287.2 million budget, a 1 percent decrease from the 2015 budget, would leave $42.5 million in general fund reserves by the end of 2016, or 38 percent of annual operating costs. Councilman Toby Shaw questioned that.

"When I see us still having very strong reserves yet also imposing a tax increase, something is just not quite adding up," he said.

Stegall said he's OK with no less than 30 percent in reserves, especially if the city uses some of the excess money to beef up public pension funding. If the looming property tax cap were only for one year, he'd recommend using more reserves, he said. He said he'll "present scenarios" to draw down reserves as the budget process moves forward.

If the Senate bill is defeated by March, Elgin would abate the tax increase before the bills are mailed out, Assistant City Manager Rick Kozal said.

And if the bill is defeated later in 2016, the city has the option to reduce the property tax levy next year, Kozal said. "We have the ability to put that money back in the citizens' pockets," he said.

The city is budgeting only $9.5 million in expenses in the 2016 Riverboat fund, plus grant-funded projects, which means a slew of items totaling $6.9 million will be funded only when money owed to Elgin is released by the state, Chief Financial Officer Debra Nawrocki said.

Lacking funding are grants for arts, social services, youth sports and historic rehabilitation, and expenses such as technology, property acquisition, bike paths, tree replacement, improvements to the Hemmens Cultural Center, fleet replacement, security upgrades at city hall, the Ride in Kane program, and more, she said. Future decisions will require city council approval.

Nawrocki explained that $9.5 million is the amount of Riverboat money the city will have by Dec. 31. By then, the state will owe the city $5 million in gambling money, she said.

Projects budgeted for 2016 in the Riverboat fund include $1.7 million in neighborhood street resurfacing, $1.4 million for combined sewer separation along Chicago Street, $610,000 for the traffic signal at McLean Boulevard and Big Timber Road, $800,000 for the security system at the police department, $1.2 million for the auto mall development agreement, and $866,000 in miscellaneous economic development initiatives.

Resident Deborah Harris, who said she's legally blind and her husband has medical issues, said she's concerned about lack of funding for Ride in Kane. "I feel it's a very necessary program," she said.

Stegall said after the meeting the program's funding will be up for discussion as budget talks continue.