McHenry County’s revenue shortfalls because of COVID-19 likely will not be as drastic as initially predicted, but they still will total an estimated $1.38 million, according to a budget overview presented to the McHenry County Board on Thursday.
The county is trimming its budget for the coming year in preparation for the worst, but revenue loss projections are not as bad as they were when the budget process began in the early summer months, County Administrator Peter Austin said during a presentation at the Committee of the Whole meeting Thursday.
After attending meetings with his counterparts in nearby counties, Austin said he and Director of Finance Kevin Bueso have reason to believe that McHenry County is on relatively solid footing.
“What we’re finding is we’re in better shape than virtually everyone,” Austin said. “I’m really proud that we’re in that shape, but it’s because of our conservative approach in years past, and we’re reaping the benefits now.”
The first budget projections prepared by Bueso back in May showed revenue shortfalls for the current fiscal year amounting to anywhere between $6.9 million and $22.1 million based on four COVID-19 recovery scenarios.
Even at a Committee of the Whole meeting last month, staff gave a budget update that predicted a $2.2 million gap between projected revenue and expenditures, which would be made up for through the use of the county’s general fund reserves, Austin said.
At Thursday’s meeting, Austin announced that the finance department has since narrowed that gap to $1.38 million, a reduction of about $800,000, much of which was the result of savings associated with resignations and retirements.
Austin said drawing this amount of money from the general fund is not cause for concern given the strength of the county’s fund balance and the Coronavirus Aid, Relief and Economic Security Act money expected to come at the end of this year or early next year to reimburse the county for expenditures related to COVID-19.
“That’s going to push money back up into that general fund reserve and effectively washes that,” Austin said Thursday.
The county is eligible for $2.7 million in CARES Act reimbursement funds, he said.
As the County Board has taken an aggressive approach to reducing property taxes over the past few years, the county has become a bit more reliant on the use of its reserves, Austin said.
Although this made sense initially because of the county’s unusually high fund balance, the finance department feels the county currently is at a good level of fund strength and should strive to maintain that balance, he said.
The 2020-21 budget will need to draw from the county’s reserves, but the plan also will take steps to strengthen the balances of its other funds, such as the county highway and bridge funds, according to the overview.
In order to do this, the budget suggests an incremental increase in the county’s property tax levy amounting to $323,000, or 0.46%, over the year before, according to the presentation.
This small increase is proposed solely to account for estimated new property growth in the county, Austin said.
After the presentation, County Board member Jim Kearns applauded the finance department for its work but asked Austin whether there are any other areas where the budget could be trimmed further to reduce the revenue gap.
“I am concerned about the continual erosion of our levies,” Austin said in response. “I don’t know what next year is going to bring, but we build off of the last year’s levy, and to go further down makes it a bigger hole to climb out of when we build the [2021-22] budget.”
When asked, Austin said the county would not necessarily need to increase its property tax levy next year, but it will need to find a way to balance the budget in a sustainable manner.
The county currently is showing a 3% decrease in operating revenue going into next year, with the heavily affected areas being revenue from taxes outside property taxes – such as the county’s share of sales taxes – as well as interest income and fines and forfeitures.
Interest income is the hardest-hit revenue source, down 50% since the onset of the COVID-19 pandemic, according to the budget overview.
“Interest is virtually nonexistent now. We’re sitting on a lot of money, but it’s not making a lot of money,” Austin said. “And our fines and forfeitures are down [by 10%] because there’s less court activity going on right now.”
The county’s budget currently is estimated at $208 million, which likely will change by the time the budget is voted on next month, but only slightly, Austin said in the presentation.
McHenry County also will see a significant decrease in capital expenses next fiscal year because the Randall Road improvement project accounted for much of this year's capital expenses, Austin said. The project will continue into next year but is not projected to be as costly.
With much of next year’s budget preparations finished, the county’s finance department now will get to work on crafting its plan for capital expenses, which, according to the presentation, includes a placeholder for the potential expense of implementing body cameras for McHenry County Sheriff’s deputies – a hotly contested issue among County Board members.