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McHenry staff presents balanced draft budget; proposes 3% water, 5% sewer rate increases
Summary
City staff presented a draft FY 2026budget showing a stronger-than-expected fund balance and recommended a 3% increase to water rates and a 5% increase to sewer rates; council members pressed staff on rec center support, staffing and long-term capital needs.
City finance and administration staff presented a balanced draft budget March 16 that projects the city will close the fiscal year with a stronger position than anticipated and proposes modest utility rate increases.
Suzanne Lynch, presenting the general fund highlights, said the city expects revenues to finish roughly 6.2% above budget while expenditures are running about 8.4% below budget, leaving a projected year-end general fund balance of roughly $23.7 million. She said the proposed 2026–27 budget is balanced and includes a recommended 3% water-rate increase and a 5% sewer-rate increase to keep those enterprise funds self-supporting.
"We're estimating being about 6.2% higher than budget for revenue and about 8.4% lower for expenditures," Lynch said. "We're seeing higher sales tax and video-gaming revenue and stronger interest income; the resulting position gives the council room to plan for capital needs while preserving the 120-day reserve policy." (speaker 5)
Council members focused questions on operating details and long-term liabilities. Alderman Miller warned about staffing and public-safety needs as the community grows, urging future manpower analysis; council and staff confirmed a manpower study is scheduled for the next fiscal year. Alderman Bassi asked whether one-time savings should be diverted to recurring program needs; staff said several capital items remain unfunded and recommended continued targeted reserves.
The budget packages a $120,000 transfer from the general fund to support the rec center in the coming year while staff continues a business analysis aimed at making the facility self-supporting. Staff also noted a recommended $375,000 in excess fund balance allocations and capital items including streets work, gateway signage, and bridge engineering.
Staff said the city is monitoring the Local Government Distributive Fund (LGDF) and state-level actions that could affect local revenues. Discussion also covered the TIF fund deficit and the accounting treatment of enterprise fund supplements; staff advised against regular transfers from the general fund to water and sewer, saying those funds are intended to be self-supporting.
The council did not vote on the budget at the March 16 meeting; staff said revised numbers will be distributed April 1 and the full budget will return for further council review in April.
