O’Fallon prepares annual budget after a year of challenges due to COVID-19 pandemic

As O’Fallon officials prepare the city’s budget for the next fiscal year, the past year’s double whammy of public health crisis and economic downturn continues to affect decisions.

The city’s fiscal year runs May 1 to April 30. The proposed FY22 budget currently reflects expenditures in all funds of $91.5 million, which is equally balanced by revenues.

Finance Director Sandy Evans said this is a 7 percent increase overall from last year’s amended budget, which is partially due to a 20 percent increase in capital projects and a 3 percent increase in operational expenses.

As part of budget preparations, departments presented their budgets at committee meetings Feb. 22 and March 8.

The Finance and Administration Committee will receive a complete budget for final review before being presented for first reading April 5. Final approval is expected at the O’Fallon City Council on April 19.

Until the council gets the proposed budget, Evans said the department will continue to monitor revenues as they come in.

Mayor Herb Roach said some of the activities O’Fallon is planning on for the fiscal year include finalization of the Strategic Plan 2040; announcements related to the new industrial area off Interstate 64 and Rieder Road; continued mitigation of the COVID-19 virus and the return of more city-wide activities and gatherings; improving infrastructure and internal systems; new park developments; new sewer plant development; and review of income sources and impact.

“Each year brings on different challenges that cities need to look at and plan for. Most of these are items that will require months of work and planning, depending upon the magnitude of each,” Roach said.

Council priorities, established in 2019, continue to be: Public safety, economic development, stormwater, streets, and water/sewer. Those goals in city services were used to develop the annual budget.

Evans said sales tax projections are coming in higher than originally expected, and, overall, the general fund is showing a 2 percent increase in revenues over last year.

“The good news is that the general fund shortfall is again less than we estimated,” Evans said.

A gain of $488,098 is due in part to the income tax revenue for June-December that was more than expected, compared to the previous year, as well as use tax coming in higher.

Sales tax for December was down by 4 percent but use tax was up by 40 percent compared to last year.

“Based on our estimates, we are $2,068,466 better off than what we thought we would be based on our earlier estimates,” Evans said.

Deficits are noticed in food and beverage and the hotel/motel tax. Food and beverage decreased 22 percent over last year, with a deficit of $110,668. The hotel/motel tax, which doesn’t impact the general fund, is down 38 percent at a deficit of $504,800.

“We will review the list of interim cuts and deferrals submitted by the departments to make up any shortfall. With the approval of the Local CURES grant of $1,255,742, approximately $767,000 will go back into the General Fund which will help offset the revenue losses,” Evans said.

Looking Back a Year

Last April, after the COVID-19 pandemic lockdown in mid-March, staff estimated there could be as much as a $2.2 million shortfall in tax revenue in the general fund for the FY21 budget.

The 2019 Illinois income taxes were deferred and not due until July 15, 2020, which made the amount higher.

Increased income tax revenues in November were the result of the Oct. 15 extended deadline.

Sales tax for November was up by 1 percent, which helped bring O’Fallon’s year over year comparison with last year. Use tax is also up by 38 percent, compared to last year.

FY22 Preliminary Budget

The budget assumes the utility tax, which is set to expire in February 2022, will be renewed.

If not, the budget will need to be amended to reflect a shortage for the Public Safety bond payment at $534,000, which goes through January 2024, and the $1.1 million, which goes to Parks and Recreation to help with operations.