What began as a typical budget review workshop for City Council members ended with a call for City employees, both union and non-union, to “give up” or give back something monetary to the community in exchange for already-promised job security.

The Budget

The total proposed budget for fiscal year 2009-10 is $235 million, an increase of $16.4 million or 7.5 percent over the present (FY 2008-09) budget. About $13 million of this represents capital expenditures funded from reserves, requiring no additional revenue, according to the introductory budget memo by Interim City Manager Rolanda Russell.

The tentative budget for the General Fund, the City’s main operating budget (excluding fleet service, parking, water and sewer), pegs expenses at $91.6, down $3.4 million from last year.

Even with these decreases, the tentative budget shows a $1.8 million shortfall (down from a $2.8 million shortfall projected earlier), which City staff has proposed plugging with a 4.9 percent increase in the City’s portion of the property tax bill.

The tentative budget also includes the following contributions to the firefighters’ and police officers’ pension funds, as recommended by the City’s actuary, Gabriel Roeder Smith: $7.3 million to the firefighters’ pension fund and $9.2 million to the police officers’ pension fund. The unfunded liability in each fund, calculated annually in March, was estimated to be about $145 million as of March 2008. That estimate does not include any investment losses incurred by the funds since then. At present, State law mandates that those pension funds be fully funded by 2033.

Expenditures

Because of the unexpected number of City employees who took advantage of last year’s early retirement offer, the City has promised not to decrease any positions for the coming year and to hold open certain unfilled vacancies, said Ms. Russell. “Thanks to a passionate and supportive City Council and a hardworking staff, we have come through the ravages of 2008,” she said.

Ms. Russell said, though, that the reworking of several positions has “eliminated 14 full-time positions and pared additional fleet and operational costs.”

She also said many employees have taken on additional tasks and departments and duties have been reorganized and reconfigured. But she added, “Every department is looking at the costs of service delivery. But the cost per person of delivering that service is as lean as it can be.” There could be dismissals for merit or poor job performance, Ms. Russell said, but no further layoffs or reductions are proposed.

The tentative budget anticipates higher costs of goods and services, as well as decreased revenues from fees, permits and sales and income taxes.

Despite reducing the number of employees, the City projects labor costs will increase by 1.2 percent over this year. Mr. Lyons said three of the four bargaining units will be negotiating in the coming fiscal year, and salary and benefit costs will vary, depending upon the results of those negotiations. The projected payroll in the 2009-10 budget is $56.2 million, he said. Other increased expenses are budgeted overtime (projected to increase by 11 percent, to $1.7 million), health-care costs (projected to increase by 11.6 percent) and contributions to the IMRF (Illinois Municipal Retirement Fund – increased by 13 percent).

Mr. Lyons said the overtime costs are principally “because of position reductions [in the current fiscal year] and because we have people doing more with less. We are still experiencing overtime to get to the levels of [promised or expected] services – 3 percent of the total wages is for overtime.”

Revenues

About 18.6 percent of the City’s revenue comes from property taxes. Other taxes – such as the home-rule sales tax, taxes on utilities and remittance of income tax from the state – provide 46 percent of the revenue. Nearly 10 percent comes from licenses permits and fees.

While the City is projecting decreases in some of these revenue sources – amounts from building permits and real estate transfer taxes, for example – the City proposes to increase some charges and fees, in addition to the property tax.

Housing market woes continue. Mr. Lyons said City figures show decreases in both the number of sales (down 30.5 percent from last year) and the dollar amount of the sales (transfer-tax collections are down nearly 38.6 percent from last year). For next year the City projects a 19 percent decrease in real estate transfer tax revenue and an 8.8 percent decrease in building permits.

General sales tax revenues are projected to increase by only about 0.8 percent, and home rule sales tax revenues – generally a strong revenue supply for Evanston – are projected to increase by about 4.85 percent, said Mr. Lyons.

The Illinois Municipal league is forecasting that income-tax remittal from the state will increase by 6.8 percent, he added. “These figures are above budget,” he said. State income tax, which is remitted to municipalities, is calculated on a per capita basis and is remitted to municipalities at a rate of $90-$100 per resident.” The City’s budget anticipates a 4.8 percent increase in state income tax remittal over last year’s budget.

Other utility taxes – on electricity, natural gas and telecommunications – “cannot be further increased,” said Mr. Lyons.

Fees and charges that can be increased are projected to increase: rooming house license fees, fire-plan review fees, and charges for birth and death certificates. There could also be some increases in charges for recreation programs and in “zoning fees, fire service fees and other building fees,” according to material presented at the Jan. 10 budget workshop.

Plugging the Gap

The 4.9 percent property tax increase was only one of the ways the City proposed to close the budget shortfall. The $1.8 million shortfall could be addressed by a combination of the following measures: reducing wage increases, using debt-service fund reserve and using a one-time revenue amounting to half the proceeds of a recent sale of City land.

Although not discussed at budget workshops, five revenue enhancement proposals were included in Ms. Russell’s transmittal letter to City Council. These are increasing fees for residential refuse pickups; enacting a head tax on large employers in Evanston; negotiating payments-in-lieu-of taxes with tax-exempt entities; further increasing the property tax levy; and implementing a food-and-beverage tax.

At present the monthly charge for residential refuse pickup is $6.95; City figures show that even a $1 increase in these charges would yield approximately $230,000. The head, or employee, tax and the food-and-beverage tax have both been discussed in prior years but not adopted by City Council. At present a subcommittee of the City’s Rules Committee is working on a plan to induce tax-exempt entities to engage in voluntary PILOT (payment-in-lieu-of-taxes) programs.

Property Tax Increase?

Several residents who spoke objected to the proposed 4.9 percent increase in the City’s portion of the property taxes; others objected to the guarantee of City jobs, when few others in the country have that security. Mayor Lorraine Morton, who has previously vetoed budgets with a property tax increase, hinted that she might veto this one as well. “The reality is that we can’t survive like this year after year,” she said. She added that she did not “want to see a loss of staff, but the community has to help us. We’re not on the mountain top. We’re down in the valley.”

She asked, “Have our bargaining units discussed anything they would do to help us? They shouldn’t place all the burden on the taxpayers, who are suffering – the burden of keeping everything going rests on them.”

Speaking to the City’s more than 800 employees, Mayor Morton said, “I think that Council made a wise decision that you will keep your jobs, but now we need your help. The City of Evanston needs your help. I just have faith that once our employees come together they will help us out.”

Alderman Edmund Moran, 6th Ward, said, “Implicit in the City Manager’s address to us is that it is incumbent upon us to show leadership.”

Alderman Ann Rainey, 8th Ward, said, “I want to support what Mayor Morton said and go a bit further. We have said we will not lay off anybody. … I would like to hear from the unions: What are you going to do to help? I don’t want to wait for our human resources person to negotiate. I want to hear from them directly.”