Naperville projects 'significant' revenue shortfall from virus shutdown
Naperville is projecting a 15% reduction in general fund revenue because of business shutdowns caused by the COVID-19 pandemic, which creates a roughly $18 million budget gap the city now is working to fill.
But now that the governor's stay-at-home order has extended through May, that gap may become even wider.
The shortfall is being created by "significant" expected decreases in revenue sources, Mayor Steve Chirico said, including the sales tax, motor fuel tax, real estate transfer tax, and food and beverage tax. All fund elements of operations, especially through the city's general fund, which was budgeted to bring in $125 million.
Chirico said steps during the past five years to strengthen the city's financial situation will help plug the hole.
"We've replenished our cash reserves to $45 million and paid down $31 million in debt, and have kept up on maintenance," he said. "It's important because we don't need any surprises right now due to infrastructure maintenance. We have a lot of levers to pull as a community."
The city plans to use at least three methods to address the shortfall, including deferring capital improvements, dipping into cash reserves and taking on new bonds.
"I will encourage the city council to take advantage of our financial position so that we can power through this thing and then come back and refocus on saving and paying down debt again as the economy improves," Chirico said.
City Manager Doug Krieger said staff members plan to bring a list of potential capital improvements that could be deferred to the council for consideration on May 5.
The city also could use some of its reserves from the general fund, electric fund and water fund to help balance the budget, Chirico said. This year's operating budget stands at $491 million
Now is a good time to take on debt, Chirico said, because interest rates are "the least expensive they've ever been that we're aware of."
The city is learning from other municipal leaders about how to best respond to the financial challenges through several meetings each week with the DuPage Mayors and Managers Conference.
"We are in a little different situation than many cities because of our financial discipline for the past five years," Chirico said.
But projections that the city will fall 15% behind budgeted revenue were based on the stay-at-home order expiring April 30. Now that it has been extended with some modifications until May 30, the picture could differ, and the economic effects likely will be more pronounced.
"We're going to have to relook at those numbers," Chirico said. "It could get very, very painful very, very quickly."