A question hangs over the 2021-22 city of Mexico budget.

“To what extent will COVID-19 impact this budget?” asked city manager Bruce Slagle in his presentation to the city council. “There remains uncertainty as to whom will agree to be vaccinated and how long it will take to eradicate this pandemic.”

What is certain – relatively – is that city staff estimate expenditures for fiscal year 2022 to exceed revenues by more than $2.8 million. On more solid footing is the solution for the shortfall.

Total budgeted expenditures are estimated at $19.4 million. Revenues are expected to reach $16.5 million.

As Slagle points out, however, the difference will be assumed by reserves, surpluses left over from previous years and American Rescue Plan funds.

Budget planning is an excruciating science. Governments are essentially not for profit entities and income – money from taxes, investments and grants – go into specific funds. Yet anticipated revenue is based on annual assessments.

For the upcoming fiscal year, Slagle notes that property valuation increased over the previous year, as did sales tax receipts despite the pandemic. Even lodging taxes were up. On the other hand, “gross tax income is down,” Slagle pointed out to the council.

In June of 2020, voters approved a use tax on purchases from out of state vendors, which went into effect in October of that year. The use tax is a wild card.

“Receipts from the use tax have exceeded expectations,” Slagle noted.

Proceeds from the use tax are directed toward capital improvement projects, specifically paying off the cost of rebuilding the Fairgrounds Aquatic Center.

Much of the difference between revenue and expenditures in the new budget are due to planned improvement projects and equipment purchases.

“The budget is balanced and the city is operating in a lean and condensed state,” Slagle observed.

Helping keep things even is the American Rescue Plan Act, signed by President Joe Biden in March. As part of the legislation, Mexico will benefit from federal funds to cover pandemic response costs.

Mexico should receive $2.3 million from this plan. In addition, the state is pumping money toward infrastructure projects, so revenue from the State Road Fund is expected to go up.

Tempering this increase is the mandated rise in the state’s minimum wage.

“The rate at which people are participating in the workforce has plateaued since the summer of 2020 and has made it very difficult to attract and retain employees,” Slagle explained.

In other words, workers are both more expensive and more difficult to attain. Property and liability insurance costs for the city are also on the increase.

Slagle points out that the city is holding firm on current staffing levels. The financial support accorded to charitable agencies such as the Senior Center, the Help Center and the Audrain County Historical Society remain relatively unchanged.

Funds directed toward contract agencies – the Mexico Area Chamber of Commerce, Presser Hall, recycling and so forth – also remain at the same level as the previous year.

Also helping to balance the upcoming fiscal year budget are external revenue sources. For example, Mexico anticipates almost $500,000 from the state Department of Transportation for airport improvement projects.

Capital projects included in the fiscal year budget included an aerial fire truck, a thermal imaging camera, new patrol vehicles and a truck for code enforcement. Also on the list are dam and stormwater improvements, a culvert on Pollock Road, vehicles for streets and maintenance and a $155,000 renovation of the City Hall elevator.