O’Fallon hopes to rebound from COVID-19 in the new fiscal year
City officials are optimistic but cautious about the new fiscal year ahead when a $91.9 million budget takes effect in O’Fallon on May 1.
“Staff is optimistic that the restrictions due to COVID-19 will be lessened by the start of the new fiscal year and revenues will begin to rebound,” Finance Director Sandy Evans told the O’Fallon City Council.
The budget was approved at the council meeting April 19.
Evans said with the passing of the American Rescue Plan Act of 2021, the city may recoup lost revenues from fiscal year 2021, such as hotel/motel, food and beverage and park program revenues.
She noted they are unsure if the Local Government Distributive Fund revenues will be reduced because of the state budget deficit.
“Should changes occur, the budget may need to be amended,” she said.
While the challenges of the coronavirus public health crisis remain, officials are hopeful they can provide high quality services. which is a 7% increase from Fiscal Year 2020-21’s $84.3 million.
City Administrator Walter Denton said the increase is because of scheduled capital projects, primarily $10 million for wastewater treatment plant improvements. Operational spending increased 3 percent, mostly stemming from pay raises.
The state requires a balanced budget — with revenue matching expenses — and the council approved the FY22 budget, which runs from May 1, 2021, to April 30, 2022, at its April 19 meeting.
Denton said despite the pandemic, most of the local revenue sources are improving.
“This budget does not contain any major cuts in programs or expenditures,” he said. “The city’s revenue is stable and growing, although we are concerned about the economic changes due to COVID-19.”
He said the 2021 budget was dominated by the pandemic, with many items cut and delayed because of revenue shortfalls. They were carried over to the proposed FY2022 budget, also impacted by the coronavirus.
“We anticipate revenues to recover as the pandemic subsides, but there are still many uncertainties about the economy over the next one-two years,” Denton said.
The largest part of the general fund is sales tax, at 42%.
“We expect sales tax revenue to increase primarily due to new changes in the collection of online sales taxes,” he said.
The city kept the sales tax income steady because of the revenue from car sales, Menard’s, Home Depot, Walmart and other retail businesses, Denton said.
Hotel/motel tax takes biggest hit
During the last fiscal year, with the state shutdown and mitigation efforts, the hotel/motel tax suffered the worst.
“This tax declined 34% over the past year, but we are expecting it to rebound as the economy reopens this year,” Denton said.
The Parks and Recreation Department also suffered because of the lack of rentals, tournaments and recreational programs, he said.
At the council’s Finance and Administration Committee meeting April 26, Evans presented a comparison between February-May 2020 and February-May 2021 to show how revenue projects and actual results due to COVID-19 have impacted the city.
Additional tax, revenue information
Sales tax did not see much change, with revenue $7,600,136 last year and $7,700,168, only a 1% difference.
Income tax increased 20%, with $2,497,042 last year and $2,992,567 this year.
Use tax grew 33%, with $893,265 last year and $1,189,033 this year.
The food and beverage tax took a severe hit with restaurants closed or operations altered because of the state guidelines. It was a negative 19 percent — $814,304 last year compared to $658,654 this year.
The hotel/motel tax was hit hard as well, with a negative 32% — $1,764,010 to $1,203,476.
More on the new approved budget
The new approved budget was guided by the council’s priorities — public safety, economic development and infrastructure. The council’s Finance and Administration Committee, chaired by alderman Mark Morton, has spent months working on the new budget, identifying the needs from the city departments.
The staff developed a Capital Improvement Plan that schedules equipment and construction projects over the next five years and this serves as a planning document for the proposed budget.
Denton noted during the state’s tiered stages, the city kept operations going.
“We were still able to provide every service we had without a break, with city hall closed,” he said. “We did the best we could to keep everyone safe.”
To see what has been identified in the CIP for 2021-2025, go to the document: https://www.ofallon.org/sites/g/files/vyhlif1031/f/uploads/cip_2020_2025_final_reduced.pdf.