One year later: City officials talk pandemic’s financial impact, $891K in overtime, and balancing a budget despite

DeKALB – It’s been a trying year for municipalities during the COVID-19 pandemic, but City of DeKalb officials say they remain optimistic despite expected financial hits to the budget.

In the past year, the City’s EMS crews have wracked up about $681,000 over budget in overtime responding to increased called directly related to the pandemic, DeKalb City Manager Bill Nicklas said. DeKalb’s police department’s overtime was over budget by about $210,000, Nicklas said, in part due to increased police presence ensuring roads were blocked off for marchers during this past summer’s daily Black Lives Matter protests.

That combined with an expected dip in tax revenue as the country battled COVID-19 lockdowns and mandates on non-essential services made for a $4 million shortfall the City addressed in part through aid from the federal government to balance a Fiscal Year 2021 budget.

As his mayoral term is coming to an end, DeKalb Mayor Jerry Smith said he’s optimistic about DeKalb’s future overall, pointing to mayoral candidates Carolyn Morris (who also serves as Ward 1 Alderman) and Cohen Barnes vying for the seat in the April 6 consolidated election.

“We have two folks who are youthful and care so much about the city,” Smith said. “I feel very, very good in that transition, whomever it is next in the mayor’s seat.”

Financial outlook

Nicklas said the City’s overall finances are on a January through December fiscal calendar. From March 2020 through February 2021, he said finance officials are looking at total revenues for the next fiscal year being down about $2.2 million in revenue from what the City budgeted in early 2020. The City also had to take $1.8 million out of the spending side to balance the budget, he said.

[ Proposed City of DeKalb 2020 budget is balanced ]

“So the total impact in 2020 was around $4 million,” Nicklas said.

To combat a dip in expected sales tax revenue, Nicklas said the City didn’t fill open positions and put a hiring freeze on those positions. He said the City also took an additional $1.8 million out of the 2021 budget by moving some of the debt service, which the City didn’t have at its disposal as an option during the 2020 fiscal year.

“Because we were already almost halfway through the fiscal year when we were really wrestling with the heart of the COVID beast, we didn’t have that benefit,” Nicklas said. “We’d already paid our debt service.”

Nicklas said the City’s hotel and motel tax revenue was down by 46%, since city hotels were basically completely closed in early 2020. He also said restaurant and bar tax revenues are down by 23%.

“There were some offsets,” Nicklas said. “The couple of new entries, as you know, Raising Cane’s came in and started doing a fast significant drive through business. And that helped a little bit. And some of the restaurants found ways to stay open with a drive through pickup business. Others could not because of the layout of their businesses or where they were in relation to the public access and so forth. So it was down a significant amount.”

However, Nicklas said City building permits increased by 23% – though that wasn’t from people buying more residential property and building new homes. Two big businesses – Ferrara Candy Company and Facebook – coming to town is the main contributor to that increase.

“So we are blessed with both of their commitments and investments in, and that will, for a period of years, continue to be a bright part of the overall revenue picture, although that’s not a major piece of all the revenue categories,” Nicklas said. “We’re still talking about around $400,000 a year total. That’s everything, including the new starts. ... So that’s a smaller piece of the overall picture.”

Revenue response

Smith said he’s encouraged by the state of business in DeKalb, especially considering how COVID-19 has hit the community as a whole financially. He said it looks like DeKalb might fare a little better than its neighbors who might not have the same advantages as bigger businesses coming to town.

“Obviously, we are very, very heartened by fact that with addition of Facebook and Ferrara and other expansions within business community,” Smith said. “It gives us some impetus going forward.”

Smith said he and Sycamore Mayor Curt Lang have made it a point to periodically check in with other municipalities within DeKalb County, especially to emphasize the message of ‘everybody’s in this together’ and to communicate and collaborate with each other. For example, Smith said, when the City was in the early stages in attracting businesses to the Chicago West business park, both mayors made sure to inform other mayors and village presidents that they’re on the cusp of something really significant.

Smith said future businesses might not think DeKalb is a good fit for them, but Sycamore or Genoa might be. He said DeKalb’s westward expansion ultimately is the county’s westward expansion and neighboring communities will be able to benefit in the long term as long as everybody works together in that aspect.

“With that, I think we’re going to be much better served as a county community,” Smith said.

By the numbers

Nicklas said the Illinois state sales tax revenue portion for the City is down 18% and the home rule sales tax is down 21%. That wasn’t a complete surprise to City officials, he said.

“A couple of points up or down from where we actually ended up, I would say, but pretty much projected,” Nicklas said.

Nicklas said police overtime was about $210,000 over budget for 2020. He said that was due to support services provided through the summer to provide traffic control for the near-daily demonstrations and Black Lives Matter marches which would often lead to roads being blocked for traffic to allow demonstrators to pass safely. The summer of protests was spurred by the death of George Floyd in Minneapolis while in police custody.

“And then also we froze some positions,” Nicklas said. “And so, in order to make up shift strength, there were times ... through the summer and fall when we had to hire people back on overtime.”

Nicklas said the city’s EMS overall overtime was about $681,000 over budget.

“Fire personnel were much more active in direct service to people suffering from COVID symptoms,” Nicklas said.

Nicklas said the City plans for overtime every fiscal year for first responders – including fire, police and public works – and those funds generally come from the City’s general reserves. Though the amount of overtime pay, meaning time and a half, that is budgeted changes from year to year, he said, the City initially budgeted about $572,000 in police overtime and about $450,000 in fire overtime for 2020.

Nicklas said overtime is paid out of the City’s general fund reserves and part of the CARES Act funding the City received – which was $1.8 million total – helped cover the more than $1 million worth of overtime this time around. He said this year’s overtime going over budget was challenging this year with the revenue shortfall from the pandemic – and it’s not like City police officers and firefighters can just clock out after 40 hours in a week when they need to be on call for emergency situations.

“So that only aggravated the problem,” Nicklas said.

However, Nicklas said the City’s use tax revenue, which includes online sales, was up about $262,000 more than budgeted for 2020. He said that specific increase is a reflection of the times.

“A lot of people are buying online and staying home,” Nicklas said.

Motor fuel sales tax revenues were also up, Nicklas said, despite the lockdown period and people working from home. He said that was partly because of the state raising the tax in 2019 and giving larger portions to municipalities, along with federal money being pumped through that system for COVID-19 relief.

Hospitality recovery program

Nicklas said direct rebates for the city’s hospitality recovery program totaled $123,000. On top of that, he said, the city has deferred liquor license fees payments and renewals pretty consistently since March 2020 and continues to do so.

“So we have three or four different groupings, and they don’t all come due at the same time,” Nicklas said. “And there’s another round coming due here very soon and we’ve asked that we can defer. ... In some cases, people who have not yet paid all of their 2020 license renewal fees are up again for 2021. So they’ll be maybe at the end of the second quarter of finishing their payment of the 2020 fees. So they will have gained a grace period of about four months overall, but more than that, in the sense that they didn’t have to pay the first installment until probably November and January, then March.”

A year into the city’s hospitality recovery program, Nicklas said there are about 126 restaurants and bars in town that could qualify if they reach a threshold of $3,000 in taxes collected, but many didn’t reach that threshold nine months into the program. He said there were some businesses that never reopened – like Tapa la Luna in downtown DeKalb – or have just barely reopened and are working to rebuild their customer base.

“And they still haven’t hit that $3,000,” Nicklas said.

Overall, Nicklas said the main take away for residents is to keep patronizing local businesses that you want to see survive the COVID-19 pandemic.

“It’s, I think, a truism, that if you buy local, you’re helping the people that could be your neighbors or people that you know who have children in school with you or your kids,” Nicklas said. “So I think patronizing the local businesses is a high priority.”