Elgin considers borrowing $25 million, raising tax levy

With uncertainty over revenues, Elgin officials are considering borrowing $25 million for street and utility improvements in 2016 and raising the property tax levy.

The city council got its first look this week at the proposed $285 million budget for 2016. The budget must be approved by Dec. 31 as Elgin's fiscal year begins Jan. 1.

Officials are concerned whether the city's share of gambling revenues from the Grand Victoria Casino, and motor fuel and emergency telephone systems taxes will come through in 2016 due to the state's budget crisis. Nearly $5 million of $10.2 million in casino revenues are overdue. Those revenues fund infrastructure improvements, economic development initiatives, and grants for cultural arts and social service agencies.

"After several years of a declining tax levy, we have to move in the other direction," City Manager Sean Stegall told the city council Wednesday.

Canceling the Elgin Valley Fox Trot in 2016 and reducing operating hours for city facilities also may be in the offing, if the state funding shortfall continues, he added.

Officials are anticipating a property tax cap and a limit on the city's ability to borrow money in the future if the state imposes restrictions on home-rule communities. Legislation passed by the state Senate freezes property taxes in the 2016 and 2017 levy years, officials said.

"For 30 years, the state of Illinois has been digging an ever deeper hole," Stegall said. "It's up to all of us to find a way to get out of that. In spite of the (state) budget crisis that we are facing, we've been through difficult situations before."

Stegall said the city is in the best financial position to deal with this budget crunch because of its good stewardship of taxpayer monies. Raising taxes in 2012 helped put the city in this sound position, he said.

"We have incredibly low debt," Stegall said. "We only have seven years left of general obligation debt."

Stegall said there is a possibility the city may see its overdue gambling, motor fuel and emergency telephone systems tax revenues come through, if state legislators vote Nov. 18 to release the funds and the governor doesn't veto the bill.

"But I can assure you we are not counting on it," Stegall said. "We have tried to become as independent as possible from the state of Illinois. As a home-rule authority, we have that ability, but they can take it away."

Elgin has begun dipping into its reserves this year. The general fund reserve is expected to be $40 million at the end of this year.

"Those reserves are what are keeping municipal operations afloat, not only in Elgin but also in other communities," Stegall said. "If we are facing the biggest financial conundrum for a state, cities are going to get cut."

The proposed 2016 budget takes "a realistic approach," Stegall said.

"We are assuming that income tax won't be cut … because at least the conversation has moved from that," he said. "We can assume that we are going to have a two-year cap in property taxes. We are also assuming that our debt limit will be capped."

Officials are recommending delaying one-time capital projects, such as purchasing replacement vehicles, until after the first quarter of 2016.

"We have to begin to wean away from just the use of reserves," Stegall said. "It seems to me that we shouldn't continue to spend riverboat money that we are not getting."

Officials anticipate eventually receiving the 2015 and 2016 motor fuel tax revenues used to fund critical expenses, such as road salt, streetlights, traffic signals, pavement markings.

"We will continue to do that because we don't have a choice," Stegall said.

Since Elgin has a AAA bond rating - the highest - city officials expect to get favorable interest rates on loans.

Of the $25 million the city hopes to borrow next year, $15 million would be for street improvements and $10 million for underground utility work. The loan would be paid back over 15 years through $1.2 million in yearly principal and interest payments, Stegall said.

Many neighborhood streets in the northeast part of town need resurfacing.

"If we wait a couple of years, it will fail to the point where it's really expensive," Stegall said.

The city council will review the budget over several meetings: Nov. 14, Nov. 18 and Dec. 2. Residents will have the opportunity to comment before final adoption on Dec. 16.

To view the proposed 2016 city budget, visit il-elginbudget.civicplus.com.