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About 100 persons attended the first citizens’ budget workshop on Nov. 7: City employees, representatives of community groups and interested residents filled nearly all the chairs available in the gymnasium of the Levy Center. This meeting was the first of a series designed to gather residents’ recommendations in preparing the City’s budget for the next fiscal year, which begins March 1, 2010.

For at least the last 12 years, City staff members have prepared a tentative budget, presenting it to the City Council by Jan. 1. the Council then held budget workshops in January, at most of which citizen comment was allowed. This year, City Manager Walter Bobkiewicz invited citizen participation in the very early stages of budget preparation.

“We’re facing a very challenging budget,” he said. In announcing the meeting, he said only those who attended the Saturday meeting would be allowed to participate actively in the remaining three. Others, he said, may attend meetings as observers.

Even at this early stage, said Assistant City Manager Martin Lyons, the City faces almost an $8 million gap between projected expenses and anticipated revenues. Among the goals of these meetings, according to the City, are for residents to “submit ideas for improving services and efficiency, suggest and discuss possible non-tax-revenue sources [of revenue] and express opinions on priorities in improving municipal services.”

Persistent Problems

For several years the City has had a systemic problem of expenses outpacing revenues, said Mr. Lyons, but the gap had hovered at 3 percent or below. This year the gap is almost 5 percent. “We’re looking for both long-term solutions and also how to handle City services next year,” he said. Among the long-term issues are capital funding, the firefighters and police pension obligations and employee costs.

The City is looking for alternative ways to finance capital projects. “We are close to our maximum debt issue [in order to keep a high bond rating],” said Mr. Lyons. The City’s bond rating from Fitch is Aaa, he said, and Aa1 from Moody’s.

Each year the City’s contributions to the firefighters and police pension funds are determined by the City’s actuary, now Gabriel Roeder Smith. Those contributions are composed of a “present” amount – the amount owed each year to fund pensions of active personnel for the current year – and a “make-up” amount, because each of those funds has only about 40 percent of the full amount that will be needed by 2033, the year the state has mandated the pensions must be fully funded. GRS estimated that the City’s unfunded pension liabilities as of March 1, 2009, were $158 million.

Because benefits are determined at the state rather than the local level – as is the full-term-funding date – Evanston and other municipalities continue to lobby the state legislature for an extension of time to meet the full funding obligations, Mr. Lyons said. It has also been suggested that the City consider having future contracts with fire and police personnel provide “defined contributions” – that is, a specified amount of money paid annually toward the pension – rather than defined benefits – that is, specific promises to pay retirement and health-care costs. Some have said such a measure would decrease the City’s long-term pension obligations.

Employee costs represent the bulk of the City’s operating budget, said Mr. Lyons. The full-time payroll for the General Fund (the City’s main operations fund) is $50 million. Increases in health-care costs, wages and liability insurance affect the General Fund, he said. Three of the four union contracts will be up for re-negotiation within the next few months, he said, and the City says it hopes it will be “rolling out modest health-care benefit changes.” In addition, last year’s promise that no staff would be cut may not hold for this year, Mr. Bobkiewicz and others say.

Next Steps

City presentations comprised the bulk of the meeting: first an overview of the City’s obligations and other anticipated expenses, its projected revenues and how those revenues are allocated, followed by department presentations. Educating residents about how the City functions will enable them to make more informed recommendations about revenues, expenses, programs, personnel and services, City officials say.

Three additional residents’ meetings are scheduled at 7 p.m. on Nov. 12 at Robert Crown Center, 1701 Main St.; at 7 p.m. on Nov. 17 at Fleetwood-Jourdain Center, 1655 Foster St.; and at 7 p.m. on Nov. 30 in Council Chambers at the Civic Center, 2100 Ridge Ave.

Residents’ recommendations for increasing revenues or cutting City services will be presented along with staff recommendations to the City Council at a meeting on Dec. 7.

The City must approve a balanced budget by March 1, 2010, the beginning of its new fiscal year. Because the mayor has the power to veto the budget, the goal of City staff is to have the budget ready for approval on Feb. 8 of next year, allowing a two-week period – should there be a veto – for the budget to be approved on time.