Rockford City Hall, 425 E. State St. (Photo by Kevin Haas/Rock River Current)

By Kevin Haas
Rock River Current
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ROCKFORD — This summer the city will tackle a unique problem in its rainy day fund: more money has poured into the account than expected.

The fund, which is where the city saves surplus tax revenue for emergency needs, benefited from a better-than-expected economic recovery after the coronavirus pandemic. The city also spent less than budgeted as it, like many employers, struggled to fill open jobs.

The result is that the emergency fund is carrying more than double the amount of money than the city’s own policy requires. The policy calls for the city to hold 20% of its operating budget in savings for emergency use.

“We are well beyond that 20% requirement,” said Carrie Hagerty, Rockford’s finance director. “It would not be prudent for us to just sit on it and hold it. We have needs in the community.” 

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How the excess cash will be spent hasn’t been decided. Hagerty said she will present City Council members with several options in the coming weeks.

There are no restrictions on how City Council could decide to use the cash. However, Hagerty said she will recommend it be put toward one-time expenses, rather than something such as additional personnel like police officers or firefighters that would need to be funded long-term.

“We can use that on anything council decides,” Hagerty said. “Looking at a one-time surplus like this, our recommendation to council would be to find a one-time expense.”

The city’s operating budget is $184 million, which means the total fund balance required under its 20% emergency fund policy is $36.9 million. However, that fund now holds $77 million, and that doesn’t include millions of dollars in American Rescue Plan funds sent here by the federal government as a part of a post-pandemic stimulus package.

Hagerty said the surplus cash was generated from taxes on corporate profits and income taxes. The city had budgeted that revenue conservatively, expecting that economic recovery after the pandemic would be slow.

“The recovery out of COVID from an employment and business perspective has been tremendous, much better than anybody anticipated right out of the gate,” she said. “With wages continuing to grow, unemployment continuing to be low, income-tax collections were well beyond what anybody anticipated them to be.”

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Alderman Kevin Frost, a Republican who serves as chairman of the City Council’s Finance Committee, said the city should also consider how to best invest the unexpected money so it can get a bigger bang for its buck on future projects.

“It’s important to know what we can do with it in the short term vs. long term as far as investments,” Frost said. “Hopefully there’s not an attitude that there’s a race to deplete it. We need to be judicious with it.”

Council members could opt to try to pass on tax relief to residents, but recommendations will likely center around addressing a much-needed fix rather than one-time rebates.

“Property taxes weren’t driving the surplus, so the idea of a refund or rebate of property taxes is a little harder to logically justify, especially when we know there are some pretty significant needs in the community that we can use this money to address,” Hagerty said.

Hagerty said the difficult to predict post-pandemic economy led to the biggest surplus she’s seen in her 20 years at City Hall.

“We’ve had operating surpluses, certainly, but nothing of this magnitude,” she said. “We’ve never been this far above our fund-balance policy in my time here.”

This year’s revenue is also expected to beat budget expectations, she said.

“We’re likely to see a budget surplus in 2023 also, based on where the numbers are today,” Hagerty said. “At some point things are going to cool off and we don’t expect this kind of surplus to continue in the future.”

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas and Threads @thekevinhaas