St. Charles weighs budget cuts, new taxes to offset projected deficit

When St. Charles won a wage freeze concession from its union and nonunion employees, city officials thought they would safely finish the 2009-10 budget year in the black. But a continuing economic slump has both the current and future budget turning red and the city council considering new taxes.

Projections developed by Finance Director Chris Minick show the city is facing a $530,000 deficit for 2009-10. The current plan is to dip into city savings to make up the difference. The city's rainy-day funds sit at about $14.3 million, enough to easily swallow the projected deficit.

Continuing downtrends in sales tax and investment returns are worse than the city anticipated. There are also a number of lingering capital improvement projects from last year's budget that have trickled into the current year and eaten away funds.

"Lack of revenue is what is really causing the deficit," Minick said. "There definitely is some shortfall in the top six revenue categories."

In fact, excluding property tax income, the other top revenue categories as a group are bringing in about 12.5 percent less than last year.

Those problems become worse next year as expenses will increase while revenue is projected to stay down. The city's wage freeze will end and union employees will receive their contractual raises as scheduled. Currently, the city council has not expressed a desire to ask employees to extend the freeze another year. In total, Minick estimates the city is facing a $3 million deficit in 2010-11.

"We will certainly need to address that," Minick said.

The plan to address the deficit employs a three-pronged attack. City staff is proposing using $1 million of rainy-day funds. The second prong is a request for all city departments to cut 3 percent from their individual budgets, wiping another $1 million off the deficit. The final $1 million would come from new revenue - the toughest sell to both the city council and St. Charles taxpayers.

The plan would create two new taxes - on amusements and alcohol. The city already charges an admissions tax of 10 percent for events such as trade shows at Pheasant Run and many events at the Kane County Fairgrounds. City staff wants to cut that tax in half to 5 percent, but expand it to include items such as movie and theater tickets. Staff also wants to create a 2 percent tax on both packaged alcoholic beverages and alcohol served at bars and restaurants. That would equal about 32 cents on a $16 case of beer, or $1 on a $50 bar tab.

The city council has not provided any substantive input on those possible budget solutions yet. And it still has quite a while to figure it out since the city is only halfway through the 2009-10 budget year.