The city of Elgin’s facing a $2.4 million shortfall mid-way through the 2022 budget year due to the escalating cost of gas, purchases and labor and supply chain disruptions, officials said.

Elgin City Council members were briefed on the situation Wednesday.

“Not surprisingly, the volatile economic conditions occurring with the start of the 2022 budget year are negatively impacting some operational expenses and capital initiatives,” City Manager Rick Kozal said.

The city annually budgets $400,000 in contingency funds to cover items that exceed what’s been budgeted or unexpected expenses, Chief Financial Officer Debra Nawrocki said.

“We use this funding very judicially,” Nawrocki said. “Every and all attempts are made to cover increases from other areas before we tap into the contingency fund. In most years, we use very little of this funding. However, being at the halfway point in 2022, that contingency fund budget has already been exhausted.”

Citing the cost of electricity, natural gas and fuel as examples, Nawrocki said the city budgeted $3.8 million for all three but projections show the city will end up spending about $5.2 million.

“(This isn’t) surprising to anybody as these three items are also impacting our personal budgets,” she said.

Other budget overruns include:

Building maintenance project costs, $189,000 over budget;

Nightmare on Chicago Street expenses, $180,000;

Parks and Recreation Department, $433,000.

All told, the budget deficit is $2.4 million, said Nawrocki, who asked the council to consider using the $1.1 million budget surplus to cover the gap.

Before the current situation developed, the council had been making recommendations on how to best spend the discretionary surplus money not earmarked for any expenditure.

Councilman John Steffen noted that city revenues were currently $4.4 million more than this time last year.

“It’s early in the year. We have a lot of budget year to live through,” Steffen said. “Of course, a recession could change that.”

There are a lot of variables that could affect the budget, Mayor Dave Kaptain said, but he also agreed with Nawrocki’s recommendation to use the discretionary fund to cover the financial shortfalls.

It’s a better option that trying to find other ways to resolve the deficit, he said.

“The last thing you want to do when people are having problems is raise taxes,” Kaptain said.

The city’s revenue situation is a bright spot in what otherwise is a difficult situation, Nawrocki said.

Property taxes, income tax, natural gas and local motor fuel taxes are all in line or slightly higher than projections, she said.

“Our revenues are strong and performing well,” she said.

Year to date, sales tax revenue is 10% higher this year, at $11.5 million, compared to $10.4 million at this time last year, Nawrocki said.

“I think this gives us some comfort level that if sales tax receipts do start to decrease, we are in a position to still achieve our budget for this year,” she said.

Gloria Casas is a freelance reporter for The Courier-News.