Elgin 'well-positioned' to face economic shutdown in near term
Elgin is well-equipped to face the economic shutdown for the time being because of healthy reserves and revenue diversification but will delay or cancel some capital projects because of a loss of casino revenue, officials said.
Elgin has "very strong budgetary flexibility and liquidity" that leaves it "well-positioned to withstand the near-term effects of the COVID-19 pandemic and current recession," said an updated financial bulletin released this week by S & P Global Ratings.
"This is tremendous news to receive during such uncertain times," Chief Financial Officer Debra Nawrocki said in a statement.
"The city will continue to manage taxpayer funds responsibly and effectively in order to continue delivering city services that our residents have come to rely upon," she added.
General fund reserves at the end of 2019 were $59 million, which was $2.9 million more than anticipated. The surplus that will help cover revenue shortfalls due to the pandemic, Nawrocki said.
This year's budget projected $127.2 million in general fund expenses and $54.6 million in reserves, or enough to fund 43% of operations. The city's three-year financial plan anticipated gradually spending $15 million in reserves so that at the end of 2022, reserves would be at 30%, as per city policy.
Having more than 15% in general fund reserves is considered very strong, S & P credit analyst David Smith said. "Compared to places that are pretty thin in terms of their reserves, they (Elgin) are in a better situation," he said.
Elgin's revenue diversification, or not relying too much on one source of revenue, also is a strength, Smith said. The city's 2020 budget projects 23% of revenues from property taxes, 22% from sales taxes, and 8% from income taxes, plus other sources.
"While this a very uncertain situation and we definitely feel that there is going to be some long-term impact," Smith said, "at least in the short term, we feel the city is sufficiently positioned to withstand the immediate impact, which will likely be a pretty sharp decline in sales tax revenues."
Local governments get their share of sales taxes with a two- to three-month lag from the state, so exact figures aren't available yet.
The state will lose an estimated $2.7 billion this fiscal year, or a 7% drop, and $4.6 billion next fiscal year due to the economic shutdown, the governor said Wednesday.
Elgin's share of gambling and admission taxes from Grand Victoria Casino, which closed temporarily in mid-March, were down $250,000 in March, with an estimated $745,000 loss for each additional month the casino is closed, Nawrocki said. The casino leases land from the city at $1.1 million per year, with the first quarterly payment due this month.
The city uses gambling revenues only for capital projects, so the loss will not affect day-to-day operations. "We are looking at every single expenditure during this time period," Nawrocki said.
Projects already underway will continue, such as the reconstruction of Chicago Street and the Bluff City Basin combined sewer separation project, Nawrocki said. Design work will continue for public improvement projects so they are ready for bids if funding becomes available, she said.
S & P Global Ratings also released updates this month about Kansas City, Missouri, deemed "well positioned," and Le Roy, in downstate Illinois, deemed "sufficiently positioned" to face the pandemic in the near term.
The updates came because S & P had issued financial analyses for Elgin and the other two cities in the Great Lakes region just before the pandemic hit, Smith said. Elgin had borrowed about $9 million in March for water and sewer utility projects with a AA+ bond rating.