The FY26/27 Budget: Flat Revenue, Rising Costs, and a Tax That Disappeared

Marengo's next budget is balanced, but only barely. The city expects to bring in and spend about $6.49 million in its General Fund, leaving just $3,196 of cushion. ¹ The budget was presented to the council on March 23 for discussion. Final approval is expected in April.

The most significant change from prior years is the loss of Use Tax revenue. Use Tax is a state-collected tax on goods purchased from out-of-state sellers, including online retailers, that is then distributed to municipalities based on population. It is distinct from local sales tax, which applies to in-store purchases. As e-commerce platforms have increasingly registered as Illinois retailers (and thus pay Sales Tax instead), the Use Tax pool has shrunk statewide. Marengo's share fell from roughly $280,000 per year to a projected $20,000, a loss of $260,000 over three fiscal years. ¹

That decline directly affected the city's ability to maintain a voluntary $150,000 annual contribution to the police pension's unfunded liability. ¹ The contribution, begun in 2023, is not included in the FY26/27 proposal. The city continues to fund the pension above the statutory minimum, but the additional voluntary payment depended on revenue that is no longer there.

City of Marengo budget documents, FY24-FY27

Cost pressures are compounding. Health insurance premiums are projected to increase 15%. General liability insurance: also 15%. ¹ The police department budget rises 4.31% to $2.68 million, driven by salaries, overtime, and dispatch costs. A 3.5% cost-of-living adjustment applies across all departments. A new full-time code enforcement inspector adds to the building department's line.

The 1% non-home-rule municipal sales tax, approved by voters in March 2024, is the bright spot. It now generates roughly $800,000 per year and is earmarked entirely for street improvements. ² The Street Department budget nearly doubled from $744,338 to $1.46 million last year as a result. ³ Marengo's roads, rated at a Pavement Condition Index of 35 ("very poor") in 2023, are finally getting sustained investment. ⁴

But the sales tax cannot be redirected to cover General Fund shortfalls. The ballot question restricted it to public infrastructure. So the budget must absorb the Use Tax loss, the insurance increases, and the pension obligation entirely from other sources.

Revenue growth is modest. Property taxes are up 4.99%, directed primarily toward the police pension. ⁵ State Income Tax is projected at $1.3 million. Video gaming tax: $162,000. Interest income is budgeted at $75,000, which staff described as reflecting an aggressive investment strategy. ¹ Administrative tow revenue, at $30,000, is a new line item.

The city eliminated its state lobbyist position at the end of June 2025, saving $25,000 annually. ³ Contingency was cut to $15,000. These are targeted reductions that reflect the tighter margins.

The projected ending fund balance is $4.06 million, ¹ a healthy reserve for a city of Marengo's size. The budget is balanced, and new revenue from the sales tax is funding road improvements that were deferred for years. The broader context: a reliable revenue source (Use Tax) has been replaced by growth in dedicated funds (the 1% sales tax) that cannot be redirected to general operations. The council is expected to vote on the budget in April.