Finance director previews audit, pension valuations and tax-levy posture; no action taken

Finance Director Bill Hamlin told the City of St. Charles Government Operations Committee on Aug. 4 that the city is in the final fieldwork stage of its annual audit, the general fund closed the fiscal year about $550,000 in the black, and recent state sales-tax changes will shift how use-tax and sales-tax receipts are reported. Hamlin said the presentation was informational and that there were no action items: "So there's no action items for tonight. It's really just meant to be informative." He walked members through audit timing, year-end figures, pension actuarial valuations and the schedule for the utility rate study. The audit process, Hamlin said, begins in March and intensifies through July; auditors are completing their on-site fieldwork now and the city expects to present the annual comprehensive financial report at the Government Operations Committee meeting on Oct. 6. Hamlin reported the general fund ended the year about $550,000 positive, better than earlier projections, driven in part by higher-than-expected sales tax receipts, investment income and some expenditure variances. He attributed part of the sales-tax improvement to recent state changes to the "Leveling the Playing Field" law effective Jan. 1, 2025, which altered how use tax paid by remote retailers is distributed to municipalities. "That revenue source line item is going to go down significantly," Hamlin said of the use-tax distribution, "but the intent based on the act that was passed was to have not just the state taxes, but the local sales taxes imposed on that transaction as well." He showed that prior use-tax distributions were roughly $1.2 million to $1.3 million, fell to about $800,000 after the change and are expected to decline toward $200,000 as reporting shifts to direct sales-tax collections to municipalities. Hamlin also reviewed pension actuarial valuations prepared for the city's police and fire pension funds. He said the fire fund's actuarially determined contribution appears to increase by about 8% for the coming year and that the police fund improved but gave a numerical figure in the presentation as well; Hamlin summarized the net effect as "an overall increase about $265,000 or 3.5%." He reported funded-ratio estimates of roughly 70% for the fire fund and about 58% for the police fund and reminded members that state law sets a funding target (discussed in the presentation) to reach a specified funded level by a date stated in the actuarial requirement. Committee members asked questions but took no votes. Alderman Ryan asked whether the ongoing utility rate study will incorporate the city's lead-pipe replacement obligations; Hamlin replied, "I think it's roughly $8,000,000 a year for 10 years. That will be part of the rate study calculation." Alderman Barnard asked whether the property-tax levy may exceed the preliminary 1.7% increase that was set last year; Hamlin said the city is still finalizing details and that "it's a strong possibility" the levy recommendation could be higher when staff brings a proposal forward. Hamlin noted that sales tax receipts are recorded on a three-month lag (transactions in April are typically received in July), which affects the timing of revenue recognition and makes early-year trends provisional. He also reminded members that the utility rate study draft for electric, water and sewer is scheduled for discussion in November and that staff plans earlier-than-last-year levy discussions in August and September with no immediate action requested. The committee did not take any formal action on financial items during the meeting. Hamlin said he would circulate the slide deck to committee members the next morning and return with updated figures as necessary.