Municipal governments haven’t started to feel any pinch from lost revenues due to the state’s response to the COVID-19 pandemic, but that could change if the stay-at-home order, and the closure of businesses and local attractions stretches into the summer.
With that in mind, local leaders are trying to plan for what could be lean months as the impact of lost or delayed sales taxes, state income taxes and other critical revenue streams intensifies.
“We really expect the tension to really start in early June,” said Doug Cooper, finance director for the village of Brookfield. “We have to really play it month by month, but we have enough money to keep us liquid for the next two months.”
Brookfield, along with Riverside and North Riverside, received its first installment of property tax revenue beginning in February, and sales taxes have been coming in at expected levels and will continue to do so for the next couple of months, since they are collected three months in arrears.
In Brookfield, property taxes represent about 47.5 percent of total operating revenues. As such, it’s an important revenue stream to keep coming in times of crisis for other revenue streams, like sales taxes or the tax the village collects on the sale of food and drink in restaurants and bars or its cut of revenue from the state tax on video gambling.
Cooper said he estimates that Brookfield, if the stay-at-home order remains in effect, will begin losing about $110,000 monthly in revenue due to lower sales tax revenue, state income taxes, video gambling revenue and other potentially lost revenues.
“It gives us a rough idea of where the revenue impacts are going to be if this keeps going,” Cooper said.
For a municipality like North Riverside, where property taxes represent just a fraction of total operating revenues – about 3 percent – a prolonged shutdown that sucks away sales taxes and video gambling revenues and delays red-light camera fine collection could make a serious dent.
Asked to estimate what that impact might be, North Riverside Administrator Sue Scarpiniti said she hadn’t yet completed that analysis, but that she’d received information from the state to help her sort out what the impact would be on sales taxes from, for example, an extended closure of the North Riverside Park Mall.
Offsetting that lost sales tax revenue, however, have been what appear to be record sales figures since mid-March at Costco and the village’s two grocery stores, Jewel-Osco and Aldi.
Michael’s remains open as well, with demand remaining high for fabric and elastic for making face masks.
And because those are large corporations, Scarpiniti said she expects no delay in getting that sales tax revenue, even though the governor has extended the time businesses have to report sales tax information to the state.
“It’s hard to estimate what the impact will be on our community because Costco is still open,” Scarpiniti said. “It’s helping to mitigate some of the lost revenue.”
There has been some talk of Cook County delaying the mailing of second installment property tax bills, which has concerned municipal leaders. While they support allowing taxpayers more time to pay those bills, delaying the entire process could really put a financial strain on village governments.
“We don’t support delaying the second installment, but we do support giving more time to pay,” said Scarpiniti. “There are a lot of people and businesses who will continue to pay, because they’ve been planning for it and have set it aside.”
With property taxes representing about 49 percent of its annual operating revenues, Riverside’s financial position a month into the COVID-19 pandemic response is similar to Brookfield’s.
Riverside got its expected first installment of about $4.8 million in property taxes in February and March, but Village Manager Jessica Frances said she and other officials are running various projections regarding the pandemics impact on village finances if a stay-at-home order stretches into the summer months.
One area where Brookfield differs from Riverside is with respect to sales taxes. Where sales taxes represent less than 3 percent of Riverside revenues – about $270,000 — in Brookfield sales taxes are almost 9 percent of total operating revenues, about $1.6 million.
While the 2009 recession forced all municipalities to tighten belts and reduce staff, how this pandemic is affecting municipalities will vary widely based on where each town draws its funding.
In a place like Riverside, which is dependent largely on local property taxes and fees, fines and charges for local services, the impact will look a lot different than it will in North Riverside.
“This is going to be very different than 2009,” Frances said. “Everybody is taking measures to minimize the impact on services to residents.”
Riverside furloughed crossing guards through April and their return will only happen if school resumes. The village may end up deciding not to hire any seasonal public works employees for the summer and will not hire any in April, said Frances.
Part-time parks and rec employees have seen their hours reduced for the month of April, and part-time/seasonal staff who provide summer support for various departments have been eliminated.
The village ought to see some savings through modified police scheduling, which includes a detective being assigned to the patrol division. With courts closed, the village is also saving some money it normally sees going toward police overtime.
“Additional reductions will be reviewed and implemented over the next three months,” Frances said.
In Brookfield and North Riverside, cost-saving measures have included delaying some large capital expenditures in order to keep as much cash on hand as possible.
Brookfield is holding off as long as it can on grant-funded improvements it’s planning for Candy Cane Park to keep the village’s $350,000 match available for other purposes if it comes to that.
Other projects on hold for now include replacing the roof at the Department of Public Works headquarters and pavement striping.
Some part-time employees, like crossing guards and preschool staff have been furloughed, since school’s not in session. A decision will have to be made soon on whether or not to move ahead with the Recreation Department’s summer day camp program, which provides a good chunk of revenue and also requires hiring a number of seasonal employees.
North Riverside, meanwhile, is delaying this year’s phase of the Cermak Road water main installation, scheduled street resurfacing and the demolition of the recently acquired Methodist church.
“Those are on hold until we see what kind of financial impact this has,” Scarpiniti said.
Scarpiniti said only essential operating expenditures are being approved, and department heads are being asked to be frugal with their 2020-21 budget requests. The new fiscal year started April 1, and the pandemic has forced a rethink of this year’s budget projections.
The village board hopes to be able to hold budget workshops in June. By law, the village must pass its appropriations ordinance by the end of July, although Scarpiniti said leaders of small communities around the state whose fiscal years begin mid-year have asked the governor to extend that deadline.
On the bright side, Scarpiniti said, the recently completed fiscal year was a good one for North Riverside.
“We finished with surpluses in all of our funds, so we’ve yet to feel an effect for 2020,” she said.