A midyear review of Palatine's 2021 budget shows that property, sales and state income tax revenues are all above budget, while expenses are generally better than anticipated -- but there are still challenges ahead.
Palatine is bracing for a potential decline in tax revenue from automobile sales -- a major source of revenue for the village, which has eight car dealerships -- Village Manager Reid Ottesen told the village council Monday night.
"If you go out and you look at the parking lot of some of our car dealers right now, you will see virtually no inventory whatsoever," he said.
That's because the pandemic has caused a global shortage of microchips used in automobiles, computers, phones and other electronics.
Car dealerships are Palatine's largest tax-revenue generator besides Home Depot, Walmart and Target, Ottesen said.
Plus, there are the unknowns of the impact of the delta variant of COVID-19, which might be resolved in a couple of months or might last longer, Ottesen said.
The village has $26.1 million reserves, including: $20.7 million in operational reserves, equal to four months' worth of operations; $1.6 million for economic stabilization; $360,000 for pension smoothing; and $3.4 million in "excess reserves," meaning above and beyond village policy.
Ottesen recommended holding on to those excess reserves, saying auto dealers might not rebuild their inventory until the first quarter of 2022.
The council also agreed with Ottesen's plan regarding how to use federal Coronavirus Local Fiscal Recovery money.
The village received a first $6 million installment in May and receives to expect a second one in May 2022.
There are strict regulations regarding the use of the money. On the approved list are capital investments in public facilities to meet pandemic operational needs; managing and treating stormwater or subsurface drainage water; and replacing lost public-sector revenue to support governmental services. The latter excludes things like pension contributions and debt service.
Ottesen recommended using the federal money as such:
• $3 million for fire station projects, including about $2.5 million to build out Station 82 on Hicks Road to relocate the fire administration offices and the rest to remodel the first floor and the "little bit less than desirable" living quarters at Station 85 on Colfax Street.
• $1 million for creek stabilization projects.
• $1,350,000 to replace the fire tower truck.
• $265,000 to replace police and fire vehicle computer hardware, necessary after the police and fire departments transitioned to a new computer-aided dispatch system.
Altogether, the federal money "is taking tremendous pressure off our future capital budget so we can get more aggressive" with future projects, such as roads, public works and more, Ottesen said.
When the second $6 million installment arrives in May 2021, the village staff will make recommendations about how to use it. The village is earmarking $1 million to supplement the village's lead service line replacement program.
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