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St. Charles approves $2.4 million in cuts in face of losses caused by COVID-19 pandemic

At Monday's St. Charles City Council meeting, aldermen approved $2.4 million in cuts in light of budget losses related the COVID-19 pandemic.
At Monday's St. Charles City Council meeting, aldermen approved $2.4 million in cuts in light of budget losses related the COVID-19 pandemic.

ST. CHARLES – At Monday's St. Charles City Council meeting, aldermen approved $2.4 million in cuts in light of budget losses related the COVID-19 pandemic.

The cuts represent a budget adjustment of approximately 5%. As part of the cuts, the city is looking to defer the replacement and purchase of city vehicles as well as holding off on filling non-essential vacant positions.

The cuts also include reductions to grant programs offered to small businesses, including reductions in the city's facade grant, business incentive, and corridor improvement grant programs. Other cuts include the postponement of public Works projects, primarily to city facilities, such as the replacement of a leaky section of roof in the public works facility and rehabilitation of the fuel island on the public works campus

"I don't think anyone will doubt or take issue with the fact that COVID-19 is going to have a pronounced and likely long impact on city finances," St. Charles Finance Director Chris Minick told aldermen during a St. Charles City Council workshop on May 18.

And additional cuts will be needed, he said.

"Those additional adjustments will likely have some noticeable impacts for our public and our citizens," Minick said.

City officials are projecting a $2.8 million to $9.5 million loss of general fund revenues related to the COVID-19 pandemic. Consumptive taxes such as sales, use, alcohol, and hotel/motel taxes comprise 47 percent of the city's general fund revenues.

"Those are the type of taxes that are generated when somebody buys something, someone consumes something or someone books a hotel room," Minick said. "And obviously, those particular areas of the economy have seen very deep and direct impact as a result of COVID-19."

In addition, the city receives about 7.5 percent of its general fund from income taxes and another 27.5 percent from property taxes.

"Right now, we don't expect the property tax revenue will be significantly impacted in a negative fashion," Minick said. "At least the amount of collections will not be affected negatively in a significant fashion."

However, he said there could be a delay as to when the city will receive the property taxes because the county is offering a 30-day grace period to allow people more time to make the first installment of their property taxes.

The city also will see financial impacts outside of the general fund. For example, he noted the city's capital improvement program is funded by video gaming revenues.

"Those terminals have essentially been shut off since mid-March and they have not been collecting any revenue," Minick said. "The terminal revenue was zero for April."

In addition, the city's road projects are funded by local fuel taxes and state motor fuel taxes, which have been impacted because not as many people are driving these days as a result of the stay-at-home order.

Minick said it is hard to estimate actual impacts because it is not known when the stay-at-home restrictions will be relaxed. The stay-at-home order was first put in place in mid-March as a way to slow the spread of COVID-19.

He said the city is working on the assumption the restrictions will be relaxed by June 1. In addition, Minick noted there is a 30 day lag time for most consumptive taxes and 90 day lag time for sales tax revenues.

"We will make additional adjustments as we get better data related to the impacts of COVID-19 and the economic downturns that have occurred because of it," Minick said. "We used the best available data that we had in mid-April."

The city has seen about a 50% reduction in hotel taxes compared to April 2019 along with a 25% fuel tax reduction, he said. In addition, there has been a 33% video gaming reduction compared to March 2019.

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