Sauk Valley governments find financial balance despite the economic challenges that coronavirus brings

Local cities and counties faced with financial hardship over COVID-19 found different ways to stay balanced as the pandemic impacted revenues.

Whiteside County

Whiteside County Administrator Joel Horn said the county expects to have lost about $1.5 million in revenue in the 2020 fiscal year because of the virus’ impact on typical sources of cash.

A majority of that loss – about $800,000 – will come from reductions in the county’s share of state revenues generated from measures like the 6.25% sales tax and the 30% tax on video gambling.

The county was betting on taking in at least $100,000 in gaming revenue, but as of Sept. 30 had collected less than half, or $44,404. That hole was largely dug by the suspension of video gaming operations between March 16 and June 30 to help stop the spread of the virus.

Another state revenue source for the county – the $0.83 motor fuel tax – was supposed to bring in at least $200,000 in revenue, but executive stay-at-home orders in the spring that kept people off roads meant fewer vehicles were using, and paying, for fuel, Horn said.

The remaining $650,000 or so in projected losses will come from a decrease in fines and fees collected by county departments, like the Whiteside County Health Department, which is projected to lose about $350,000 in revenue.

Some of the county’s spending on virus-related costs in the current fiscal year was offset by about $5 million in grant money and more than $900,000 in funding from the federal Coronavirus Aid, Relief and Economic Security Act, Horn said, but those funds cover only reimbursable costs.

“The issue here, though, is with that money – we’re being reimbursed for expenses in excess of what we’ve budgeted,” Horn told the 27-member board in October. “That leaves a hole, and I think we’re going to struggle to come up with that much money.”

Despite that hole and the steep drop-off in revenue from the limits brought by the coronavirus pandemic, the board in November unanimously passed its budget for the fiscal year that started on Dec. 1 and will end on Nov. 30.

The budget estimates $49,513,394 in total revenue and $53,679,086 in total expenses, a 5.7% spending increase from the previous fiscal year.

To bridge the anticipated $4,165,692 gap between projected total revenue and expenditures, officials largely will depend on reserves normally designated for large capital projects, Horn said.

“We’re not going to overdraw any funds ... we’re dipping into reserves we’ve built up,” Horn said. “One or 2 years of this kind of budgeting I think we can sustain – beyond that, it becomes unsustainable.”

At least $1.5 million was transferred from the public works landfill fund to cover a gap in the general fund, Horn said.

The remaining gap between total expenditures and total revenues across the county’s other funds will be filled with other county reserves and by federal reimbursements for extra costs related to the pandemic.

“It’s not a typical budget year, by any means,” Horn said.

Lee County

Lee County was able to stay in the black during the year despite coronavirus hurdles.

The county’s fiscal year, which runs from Dec. 1 to Nov. 30, ended with its general fund at $522,000 net income to the good, county Treasurer Paula Meyer said.

The main reason for that is additional revenue from zoning fees, almost $1 million, from wind and solar projects, she said.

That also meant that the county didn’t need to dip into its capital fund to balance the budget.

“In the past, we’ve had to transfer from the capital fund to make ends meet, but we didn’t have to do that this year,” Meyer said.

The county saw a drop in the half-percent public safety tax used to pay for the Lee County Law Enforcement Center this year by about $60,000, but other areas came in higher than budgeted.

County board members have said that the tax likely was down because it doesn’t apply to things like groceries, and people aren’t spending as much on other things.

The general fund also took in about $3.5 million in property tax revenue, up about $100,000.

Sales tax also came in about $200,000 higher than expected because of revenue from the online sales tax, Meyer said.

One of the biggest financial surprises came from the landfill, which brought in $127,000 more than budgeted. Landfill revenue had steadily decreased during the last decade – from a high of $1.8 million to around $200,000 – making the county tighten its belt and look for revenue elsewhere.

The county has received about $540,000 so far in federal coronavirus aid, and put in about $1 million in claims.

“Really, at year end, we’re looking good,” board Chairman Bob Olson said.

Dixon

The city of Dixon froze most of its capital spending because of the financial uncertainty with COVID-19, and like Lee County, is seeing an uptick in revenues.

“Because of COVID, we’ve taken a much deeper dive and breakdown into the budget,” City Manager Danny Langloss said.

The city budgeted for around $750,000 in capital expenses but spent only $70,000 on priority items.

Sales tax revenues were on target because of online sales tax, and motor fuel tax money is tracking even with last year at around $345,000.

“We’re doing really good on revenues,” he said.

One of the main areas seeing decline is with gaming revenue, which was down about $90,000 in November because of COVID-19-related closures.

The city’s fiscal year runs from May 1 to April 30, and about half-way through the year, spending was at 41%, including staff raises of 2.5%, so they’ve been able to maintain a tight budget, Langloss said. About 72% of city expenses are for staff wages and benefits.

“We’ve got our eye on the major expenses, and we’re keeping an eye on the smaller expenses as well,” he said.

They’ve also cut back on nonessential spending, and department heads have been holding off on purchases, he said.

“We’ve cut things down as far as we can cut.”

Sterling, Rock Falls and Morrison

Sterling City Manager Scott Shumard still is looking at an economic reality with a lot of question marks, a situation he compares to waiting for more than a couple of shoes to drop.

One of the major shoes comes from gaming revenue. In his latest mitigation efforts, Gov. JB Pritzker ordered video gaming facilities to close.

“We’re talking $15,000-$20,000 a month in lost revenue there,” Shumard said.In a typical year, one in which there is no global pandemic changing everything, Sterling is looking at $12 million to $14 million coming in, Rock Falls, a bit over $7 million, and Morrison in the neighborhood of $1.5 million.

Morrison’s biggest revenue stream, according to the 2020 budget, was expected to be state income tax ($410,000) and sales tax ($350,000).

For Morrison, the revenue projections are about 7.5% off 2019 numbers. That is adding up Morrison’s share of the state income tax, the sales tax, the local 1% sales tax and gaming revenue.

“So, it’s fallen off some, but not enough to cause a huge change to what we’re hoping to do,” city Administrator Barry Dykhuizen said. “We’ll have to just keep an eye on it and see how it looks after the first of the year, and once we get into January and February. Of course, no one really knows what the pandemic itself is going to do. That’s where we’re at, a lot of unknowns.”

One bright spot for Sterling has been relative stability in sales tax revenue.

“We’ve seen, year-to-year, 4% growth in the sales tax,” Shumard said. “We had an initial drop early on, but then it’s recovered since. We had a couple bad months when the restrictions first began, but then we’ve had anywhere from 8% to 10% growth, in some cases more.”

That gets offset, however. With fewer people working in offices, there are fewer utilities being used in office buildings, which leads less in utility tax revenue.

Travel has decreased during the pandemic, but Sterling is bringing in more motor fuel tax dollars because of last year’s change in the state funding formula, which raised the rate from 19 cents to 38 cents per gallon.

Sterling was not as lucky when it came to revenue from income tax. As businesses closed, people found themselves out of work. For Sterling, that meant a drop in income tax revenue of $40,766.43 May through November, a 6.25% decline. The starkest month was May, when that revenue went from $308,650.85 in 2019 to $154,961.10 in 2020, a drop of 49.79% over the previous May.

Share of income tax revenue for Sterling accounted for $1,825,283 for the 2019 fiscal year, 12.5% of the total money coming into city coffers.

For Rock Falls, that Local Government Distributive Fund was expected to amount to $933,549 in the 2020 budget, 12.8% of the municipal budget.

Another big hit for Rock Falls comes from the decline in sales tax, expected to be $2,130,798, nearly 30% of the city’s revenue.

“Our sales tax is down because not all of our businesses are open at 100%, and the revenue that they would generate, not only their income and paying their employees, but sales tax is down because they’re not doing as much,” Mayor Bill Wescott said.

Sales tax is another huge question mark moving forward and another shoe Shumard will have to wait to hit the floor. Typically, businesses see their biggest sales in November and December as people get in their holiday shopping, but those dollars take a few months to filter to the cities.

“We don’t find out until March or April how the Christmas season went,” Shumard said. “So it’s hard to project. Sales tax could bump up $100,000, $150,000 for those couple of months. We’re always nervous about how that’s going to shake out.”

That is where a lot of municipalities find themselves now, waiting to see how a lot of things shake out because no one is quite sure what will happen next, especially with how many businesses will be closed because of the pandemic.

In Morrison, there are no likely changes to what the city is planning for the next year. Morrison already put a street project on hold by a year, simply pushing into 2021 that which was slated for 2020. The City Council also is in preliminary talks to build a new public works building.

“You want to be cautious, but it’s difficult because cities still have to function and you still want to fix roads,” Dykhuizen said. “I think the unknowns are out there, for sure, so it’s, more than anything, we’re tapping into our reserves, our rainy-day fund. And you have to be cautious about that, too, you don’t want to run it down too much.”

So far, Sterling isn’t planning to put any projects on the back burner.

In Rock Falls, any issue with lower amounts of money coming in from various sources will have no affect on things like water or broadband, which are handled as different accounts, with than money specifically going to things like maintenance and infrastructure upgrades to those systems.

Rock Falls also has a financial cushion to fall back on that has been built up over the years.

“That’s why we have reserves,” Wescott said. “We don’t just spend it because we have it, but we have it if we’re down and we have to meet budgetary needs. I feel very confident in our reserves. We’ve done our due diligence.”

The state’s Local CURE program includes a Coronavirus Relief Fund for local governments, which cities and counties can apply for. That covers medical expenses and public health expenses directly related to the pandemic. It does nothing to fill holes left in municipal budgets.

“Small, rural communities, we always have to play it conservatively,” Dykhuizen said. “We try to build up our cash fund balances, and we never try to bite off more than we can chew, keep our finances steady. I don’t know if it will last a couple years or not. For the business owners, there are some that will feel it and have a harder time getting over it.

“At the same time, you hear reports of pent-up consumer spending, where, at some point when this ends, consumers might be ready to spend money again.”