St. Charles staff warn of growing capital shortfall, urge planning for water, sewer and streets

Mayor Vitak opened a special City Council budget overview meeting where staff summarized near-term revenue estimates and a multi‑year list of capital needs that city leaders say will require choices on priorities and funding.

"This is not intended to get into the fine line detail of our budget. We will be presenting a full draft budget in March before it's actually approved by City Council," said Heather McGuire, city administrator.

The presentation, delivered by Finance Director Bill Hanna, framed the budget work as midway through the process and stressed the difference between recurring operating obligations and an expanding set of capital projects that have been deferred. "We are in the middle of our budget process right now... roughly about 75% through our budget process right now," Hanna said.

Why it matters: staff and council members said St. Charles faces multiple large, often mandated projects — including water treatment and lead service line replacement, sewer trunk mains and continued road and facility maintenance — at a time when available capital funding is smaller than ongoing needs. That imbalance, staff warned, will require prioritizing projects, possible rate or revenue adjustments, use of loans and careful reserve management.

Key budget and revenue items

- General fund: staff noted a balanced general fund budget of roughly $65,000,000 for the current year. Hanna said about 70% of general fund expenditures go to police, fire and public works personnel and operating costs.

- Dedicated sales tax: the 2023 sales tax increase is producing roughly $4,700,000 a year for core streets and infrastructure programs; staff budgeted $4,800,000 for the current year and expect about $4,700,000 to be realized.

- State-shared income tax (LGDF): staff are tentatively projecting about $5,900,000 for the coming fiscal year; the city receives LGDF on a per‑capita basis and it comprises roughly 9% of general fund revenue.

- Other revenues: hotel and alcohol taxes have increased, hotel tax is projected near $2,100,000, and overall sales tax to date is about 4.5% higher than last year.

Capital funding gap and priorities

Hanna and other staff displayed multi‑year capital estimates showing annual capital funding of roughly $6,500,000–$7,500,000 (sales tax, video gaming tax, investment income and transfers) versus estimated general capital needs often exceeding $8,000,000–$10,000,000 in some years. "If you look comprehensively at the total dollars that we have yearly and over the course of even these five years... there isn't a way to make up that revenue in alternate ways absent some large grant funding source," Hanna said.

Utility projects and mandates

Staff outlined several high‑cost utility projects and mandates:

- Water well capacity/treatment (Well A): planned transmission main and treatment improvements; staff are pursuing an IEPA loan and estimate annual debt service around $1,000,000.

- Lead service line replacement: new state requirements compressed an earlier 30‑year schedule into roughly 10 years; staff estimate an indicative annual cost of about $7,500,000–$7,600,000 per year for a 10‑year program.

- Eastside sanitary trunk main: Phase 1 completed with ARPA funds; next phases were estimated at roughly $39,000,000 in total, with one Phase 2b segment estimated at $7,000,000–$10,000,000. Staff are exploring interfund loan financing for parts of that work.

Hanna emphasized that enterprise funds (water, sewer, electric) must be self‑sustaining and that deferred maintenance is increasing operational stress, including overtime for crews responding to frequent water main breaks.

Reserves, debt and rating

The city has reduced general obligation debt and maintains a Moody's AA1 rating. Hanna reported the city's general obligation debt outstanding was about $88,465,000 as of April 3, 2025. Council members and staff discussed reserve levels: staff reported a recent reserve level in the roughly 40% range versus a 25% policy threshold, and staff warned drawing reserves repeatedly is not sustainable.

Personnel and operating program highlights

Staff proposed modest staffing adjustments and wage steps tied to collective bargaining agreements. Hanna said planned FTE counts are roughly stable; two additional full‑time positions for water and sewer operations were proposed to address maintenance and testing demands.

Council reaction and process requests

Council members pressed staff for clearer sequencing and more regular updates. Several aldermen asked for quarterly finance briefings and said they want earlier, clearer information to inform the November property tax levy decision. Alderman Vanguard and others proposed a September workshop to preview levy and budget tradeoffs before the November levy vote. Hanna and McGuire agreed to provide earlier and more frequent management‑level reporting and to include the council in prioritization discussions.

Next steps

Staff said they expect to formalize a draft budget by late February–early March and recommended final budget approval remain on the April schedule. The council also plans a strategic‑plan refresh this summer to align priorities with budget choices.

Ending: The council did not take formal votes on specific budget allocations during the session; staff will return with a draft budget and supplemental materials for further council consideration.