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Before moving ahead with a presentation of the City’s proposed budget for fiscal year starting Jan. 1, 2016, City Manager Wally Bobkiewicz stressed that the City is operating in “very unusual and uncertain circumstances” due to the failure of the State to adopt a budget for its fiscal year starting July 1, 2015, and the likelihood that when the State does so, the budget will likely harm municipalities. “I cannot stress enough the uncertainty of these times and the uncertainty of the impact from the State of Illinois,” he said. “But we need to move forward.”
Mr. Bobkiewicz said City staff have worked diligently to prepare a budget “that is responsible, that meets the needs of this community, and continues to support the quality of life.”
The Big Picture
When interfund transfers are excluded, the total budgeted expenses for all funds, except the library, is $243.2 million. That is an 8% increase in expenses over the 2015 budget. Most of the increase in expenses is for needed capital projects, said Martin Lyons, assistant City Manager.
One measure of the increase in operating expenses is the growth in the General Fund, which is 2.8% for 2016, Mr. Lyons said.
A Property Tax Increase But Nothing Else
On the revenue side, the proposed budget includes an increase of $800,000, or a 2% increase in the City’s share of property taxes to accommodate additional spending on police and fire pensions, said Mr. Bobkiewicz in a prepared statement.
For a home with a market value of $400,000, the impact would be about $37 per year, according to budget documents.
“There are no other proposed tax or fee increases,” Mr. Bobkiewicz said. Several weeks ago, the City increased fines for parking violations in anticipation of potential cuts in State funding.
Staffing Levels and Costs
“We still have just over 800 FTEs [full time equivalent employees], and we are still below our peak of 885 in the mid-2000s,” said Mr. Lyons. “We have held the line on increases for staffing.”
He said the proposed budget builds in the cost of a net 1.9 additional FTEs.
Salary increases are budgeted at just under 2.5%, with union employees receiving a contracted for 2.5% increase and non-union workers, 2%. Health insurance costs are expected to decline by 3% due the City’s being a part of a health insurance cooperative, said Mr. Lyons.
Police and Firefighters Pensions
One of the major challenges the City faces is funding police and firefighter pensions. In 2016, the City plans to contribute about $9.4 million to the police pension fund and about $7.4 million to the firefighter pension fund. On a combined basis the increase is about $1.7 million.
The City’s new actuaries, Foster and Foster Actuarial Inc., recommended the increase in a 2015 Actuarial Study that used a new mortality table to estimate the future pension liabilities. As of Jan. 1, 2015, the new actuary pegged the City’s unfunded liability at $105 million for the police pension and $83 million for the firefighter pension.
Mr. Lyons said the City’s unfunded liability for all pensions, including other City employees, is about $218 million.
Some New Funds
After the City absorbed Evanston Township, it created a General Assistance Fund. The City provides general assistance and emergency assistance services through this fund. In its budget documents, the City says that due to efficiencies, “the same increased levels of service will be available to residents with a decrease in the property tax levy for General Assistance programs.” The proposed General Assistance levy is $600,000 less than the levy collected in 2015.
Northwestern University recently announced that it will contribute $1 million each year, for five years, to the City to be used on projects agreed to between the City and NU. These funds are accounted for in a newly established Good Neighbors Fund.
The Capital Plan
The City’s 2016-18 Capital Plan identifies $122.6 million in capital projects over the next three years, according to the proposed budget. The 2017 and 2018 Capital Plans do not include cost estimates for parks and facilities projects that are being identified through a community process.
The 2016 Proposed Capital Improvements contained in the budget have an estimated cost of $56.1 million. Mr. Lyons said the City has deferred some projects in the last few years, “so we have an aggressive capital program this year.” The budget includes $16.3 million for water/streets; $5.3 million for facilities; $1.8 million for parking; $4 million for parks; $2.3 million for sewer lines/systems; $6.5 million for transportation; and $19.6 million for Water Treatment and Storage.
One project that has generated some discussion in the past is replacing a five-million gallon clearwell built in 1934. It is a concrete tank that stores water after it has been treated. One engineering evaluation in 2014 concluded that the roof of the clearwell would not last another five years. The 2016 expenditures include $15.4 million (with $4.1 million to be budgeted in 2017) for the replacement of the clearwell.
Mr. Lyons said approximately $31 million of the capital projects would be funded through debt, most of which will not be paid for through property taxes.
The City is also spending down reserves to pay for some capital projects, said Mr. Lyons. The budget documents show that fund balances, excluding police and firefighter pension funds, are declining about $18.9 million in 2016.
“We are drawing down our reserves for capital purposes, not for operating purposes,” said Mr. Lyons.
‘Plan B’ for Springfield
Legislation in Springfield may cut the City’s revenues. Among other things, the Governor proposed a 50% decrease in the Local Government Distributive Fund (LGDF). If passed, it would reduce the City’s funding by $3.75 million each year. The State also has discussed a property tax freeze and other cuts in municipal funding.
Anticipating that the legislature will take action that will cut the City’s funding, staff have identified $1.5 million in potential reductions and revenue adjustments that could be quickly implemented if it becomes necessary to do so, said Mr. Lyons.
Public Hearing on Oct. 24
Residents are invited to attend a public hearing on the budget at 9 a.m. on Oct. 24 in City Council chambers.