Pandemic Cuts Into City Budgets
Pandemic Cutting Into The Budgets Of Even Well-Off Municipalities
May 13, 2020
Brian Rogal, Bisnow Chicago
The coronavirus pandemic has led to plunging revenues for states and cities across the U.S., and with the White House and Senate Republicans opposing federal aid to make up budget shortfalls, it seems likely many governments will soon need to make drastic cuts in spending.
These troubles are not limited to governments like Chicago’s and Illinois’, which have struggled for years with high pensions costs and floods of red ink. Even relatively well-off suburbs in strong financial positions, such as Naperville and Schaumburg, now see shrinking revenues and will have to decide what programs to preserve.
Naperville, Illinois’ fourth-largest city, watched its budget gap widen this spring to $18M, though the true picture will not emerge until later in the summer, according to Linda LaCloche, the city’s communications manager. But after spending the last five years building up Naperville’s cash reserve to $45M and paying down $31M in debt, the city can approach this crisis with confidence.
“We have multiple choices with different levers we can pull,” she said. In early April, city budget officials forecast a 15% decline in general fund revenue, opening up an $18M budget gap. The forecast was driven by Gov. J.B. Pritzker’s statewide shutdown order, which had dried up sales taxes and was expected to drive down income taxes due to job losses.
"That was a very cursory look at the situation,” she added, one based on Pritzker’s initial shutdown order, which was set to expire April 30. But the extension of the state shutdown, now officially slated to end on May 30 and be lifted in stages, will almost certainly widen that budget gap further. In early May, the city decided to reduce its capital budget by about $25M, LaCloche said, and is prepared to cut more if necessary. Naperville's initial total operating budget for the year was $491M.
The nature of this crisis helped officials decide which programs they could cut. One delayed project was a plan to supply city residents with automated water meters. “Is it best to be going to everyone’s house at this time? Probably not,” she said. Other delayed projects include road upgrades and downtown streetscaping, but so far, nothing vital has been touched.
“City services have not been reduced in any way, and we’ve not heard of any delay on any of our commercial development,” LaCloche said. Major projects going forward include Costco’s plan to use what had been a vacant Kmart store as its second Naperville location and the development of CityGate West, a 100-acre entertainment complex on the city’s northwest side, which already hosts a Topgolf outlet.
Schaumburg’s fiscal year began on May 1, so village officials were forced to finish a budget as the crisis was unfolding and say they may have to make adjustments if original projections were too optimistic. Although the village typically does a re-evaluation mid-year, Village Manager Brian Townsend said it may now do so every month, according to the Daily Herald.
“Schaumburg, more than other communities, will realize the immediate impacts of a local economic shutdown, with 65% of its General Fund revenues directly tied to the local economy and consumer spending,” Schaumburg Director of Finance Lisa Petersen said.
“The proposed budget reflects actions the village intends to take so that it can match expenditures with anticipated revenues while continuing to preserve key programs and services.” Officials anticipated losing about $14M in tax revenue due to the coronavirus pandemic and projected the city's revenues would total about $262M and expenditures about $249M.
But they based that forecast on Schaumburg, best known as the location of Woodfield Mall, being able to restart its economy in June, with business getting to near normal by August. The village unveiled a wide-ranging set of cuts, including deferments of capital projects, a hiring freeze, eliminating a few nonessential services and a reduction in street repairs.
“Should the stay-at-home order be extended into the summer months or the impact is more severe than projected, the village will need to revisit the financial plan to make any necessary adjustments,” according to a statement from the Village of Schaumburg’s budget office.