Figure could be as high as $13 million
By Ted Schnell • BocaJump | Oct. 20
City officials braced themselves Wednesday for more work to balance the city’s budget after learning late Monday that an unprecedented 20 percent drop in property values would push Elgin’s structural budget deficit to as much as $13 million.
A structural budget deficit is one that can be resolved only through cutting costs and increasing revenues. The City Council is scheduled to begin its budget deliberations in November.
The drop in estimated drop in property values and its corresponding impact on property tax revenues was more precipitous than had been anticipated. Elgin officials entered 2011 projecting a $4.5 million structural budget deficit in 2012. As word trickled out that property values were dropping, the city staff nearly doubled its deficit projection to $8.8 million in September, just as the Elgin Budget Advisory Task Force was winding down its efforts to send the City Council its recommendations to help resolve the deficit.
But Elgin Chief Financial Officer Colleen Lavery said Wednesday that she received a report late Monday from the Kane County Assessment Office, which estimated that Elgin’s equalized assessed valuation had dropped 20 percent. The corresponding drop in revenue would put the city’s structural deficit at $10 million to $13 million, based on the city’s nearly 2-decades-old tax rate. That range includes projected losses for other city revenues as well.
“While our budget projections over the past two years have been based on a significant decline, this new data demonstrates that property values in Elgin have been in a complete free fall,” City Manager Sean Stegall said in a release he issued Wednesday afternoon.
“This historic decline in property values is a prime example of the economic times we are now living in,” Mayor David Kaptain said in the same release. “As such, we have to take significant action to address these issues.”
What that action will be has yet to be determined, but the new figures are daunting.
“It’s a challenge, that’s for sure,” Lavery said.
“We are formulating a strategy based on this new information along with the work of the budget task force,” Stegall said. “Staff is preparing the budget to present to council in early November.”
The Kane County Assessment Office’s report specifically projected that the city’s 2011 equalized assessed valuation, which is used to calculate property taxes, dropped 20 percent this year. Property taxes are collected based on the prior year’s equalized assessed valuations, so the city’s 2012 property tax revenues are based on the 2011 valuations.
Lavery cautioned that the 20 percent figure remains an estimate and could change, up or down, in the coming months.
But as a practical matter, she continued, the city will use that estimate as its working number in terms of further budget preparations.
Based on the $1.92 tax rate the city has had in place for nearly two decades, the decline will knock Elgin’s total property tax revenues from the $47.7 million levied in 2011 to just $38.3 million in 2012, Lavery said.
Property taxes comprise nearly half the city’s general fund revenue, as well as funding for the city’s debt and pension fund obligations, Lavery said. Of the $47.7 million the city levied this year, she said $33.2 million was for the general fund.
According to the release issued by Stegall, over the coming months, the city plans to update residents of the budget process via traditional, electronic and social media tools. Residents are encouraged to visit the city’s website at www.cityofelgin.org for links to the city’s Facebook and Twitter pages, RSS feeds, e-news blasts and more.