Rising prices and supply and labor shortages causing 'significant impacts' to Elgin budget
Like many of its residents, the city of Elgin is experiencing a budget crunch from rising prices.
City officials are hopeful an increase in revenues and dipping into savings will help balance the proverbial checkbook.
Elgin's Chief Financial Officer Debra Nawrocki delivered the news to the city council Wednesday night. She said higher-than-expected prices and supply and labor shortages are causing "significant impacts" on the 2022 budget.
How significant? Nawrocki said that based on the first half of the year's costs, the city is projecting to be $2.4 million over budget in 2022.
The city annually builds a $400,000 contingency into the general fund for unexpected items or projects that come in over budget.
"In most years, we use very little of this funding. However at the halfway point of 2022, that contingency fund has already been exhausted," Nawrocki told the council.
The biggest impact has come from the increased price of electricity, natural gas and vehicle fuels. Nawrocki said those costs are projected to be $5.2 million this year, 36% over the $3.8 million budgeted.
Other expenditures exceeding what was initially budgeted include building and maintenance costs, expenses in the recreation department, which has seen rising costs in labor and project expenses and special events, specifically the $180,000 increase in the cost of putting on Nightmare on Chicago Street.
But on the bright side, the city is also bringing in higher than expected tax revenue that could offset some of the cost hikes.
"Our revenues are strong and performing well when compared to budgeted expectations," Nawrocki said.
Sales tax revenue is currently up about 10% over the same period last year. Property tax, income tax, natural gas tax, electricity tax, local motor fuel tax and riverboat gaming and admission tax are all coming in over budget.
The 2022 budget included $1.15 million in discretionary funding set aside in the general fund that hasn't been allocated yet. Nawrocki recommended utilizing it as an additional contingency for this year. She said that money, plus the projected increase in tax revenue, should keep the budget balanced for the year.
"If revenue patterns continue and the discretionary funding is freed to balance expenditures, I believe we can balance our revenue and expenditures in comparison to our budget," she said.
The council gave unanimous preliminary approval to transfer the $1.15 million, knowing that the money could be available again should rising revenues cover the extra costs.
"There's a lot of variables here, and projections show that we may not be as bad off as we think," council member John Steffen said.
Mayor David Kaptain said the city will do what it takes to not pass on the costs to residents.
"The last thing you want to do at a time when people are having problems is to raise taxes," Kaptain said.