'COVID deficit' will continue to impact St. Charles budget

St. Charles Finance Director Chris Minick has a term for the budget difficulties the city's endured for the last year: the "COVID deficit."

At last weekend's city council retreat, for the first time Minick outlined for Mayor Ray Rogina and the aldermen the ongoing impact of a "COVID deficit" that will create a nearly $3.2 million hole in the projected budget for the 2021-22 fiscal year that begins on May 1.

Minick said projected revenue of about $47 million is shy of a normal year where the city would expect $49.25 million. A significant amount of the decrease is from hotel/motel tax revenue that's projected to be at $750,000, compared with $2.2 million in a normal fiscal year.

Combined with an 8% increase in projected expenditures to $50.3 million - including a $1 million increase in pension payments and $1.5 million in deferred vehicle purchases - the city has work to do to close the gap.

"There's a lot of the same themes but with a little bit of a different twist," Minick said. "Last year when we entered the budget, we didn't know the extent to which the downturn would happen. We also didn't know the length of time for which it would happen. And we didn't know how far our revenues would fall."

The collapse of revenue caused by the pandemic during the 2020-21 fiscal year was offset by $2.5 million in budget cuts put in place last June by city officials. Through assistance from the federal government with the CARES Act, the city could end the fiscal year with a surplus.

Tackling the deficit for the upcoming fiscal year will be a multipronged approach, Minick said. A projected boost in economic activity, delaying hirings and certain projects, and the possibility of additional federal money will help.

City reserves, Minick said, currently stand at $19.4 million. That number would dip to $16.2 million if reserves alone were used to eliminate the deficit for the 2021-22 fiscal year.

While Minick expects the financial effects of the pandemic to continue, he noted several positive economic signs in the city including revenue from cannabis sales, the upcoming Pheasant Run development by McGrath Honda, an Audi dealership that's under construction and a reinvigorated downtown landscape.

"Our revenue stream, quite frankly, we don't know how quickly and to what extent we're going to see recovery from the economic impacts of the COVID pandemic that we've been dealing with over the last year or so," he said.