Pension costs, loss of businesses contribute to 'substantial gap' in St. Charles budget

St. Charles is anticipating a nearly $1.2 million structural deficit in its budget next fiscal year - a "substantial gap" that officials say will persist if they don't re-evaluate their funding structure.

Finance Director Chris Minick said projections initially looked strong, with a small surplus expected as the fiscal year comes to a close April 30.

But a combination of factors changed the city's outlook for 2020-21 and beyond, when expenditures appear to outpace revenues, he said. Among the greatest contributors are rising public safety pension costs and the loss of two significant revenue-generating businesses: Pheasant Run Resort and Binny's, which plans to move to a neighboring town.

The 2020-21 budget, adopted this week by the city council, doesn't include any new or increased tax rates. To cover the anticipated gap for the next year, Minick said, the city plans to use reserves, along with one-time measures to reduce the budget and defer some capital expenses.

But those aren't long-term solutions.

"Those deficits, quite frankly, continue into future years," he said. "It's not a sustainable picture as we move forward."

Looking ahead, Minick said, officials will have to consider changes to the city's revenue structure, the level of services it provides and its funding of capital projects.

The budget doesn't take into account any potential shortcomings from the coronavirus pandemic, Minick said, noting it's too soon to have a handle on the severity of the situation. He warned aldermen those discussions are forthcoming.

"We're not going to be able to ignore the impacts of COVID," he said. "We will need to deal with that as time goes along."

In light of the global health crisis, Minick said, the city may need to re-evaluate its capital projects planned for the next year, which include the first phase of the 7th Avenue Creek flood mitigation project, road improvements, technology and network upgrades, and First Street development plans.

Any proposed changes or budget adjustments likely would come in phases.

The city also plans to increase water and sewer rates to help fund the implementation of an "aggressive" $50 million capital program over the next several years, Minick said. Officials estimate the average residential customer will see a monthly increase of just over $8 on their utility bills, or about $97 a year.