The City presented its budget for Fiscal Year 2017 (Jan. 1 to Dec. 31, 2017) to City Council on Oct. 17. The total proposed expenses for all funds (operating and capital expenditures) prior to eliminating interfund transfers, are $303.9 million.
If interfund transfers (which can result in double-counting) are eliminated, the total proposed expenses for all funds in 2017 is $242.3 million, which is 3.7% less than the amount budgeted for all funds in 2016.
The City’s main operating fund is its General Fund. Some of the major expenses paid through the General Fund are to operate the police department ($37.1 million); the fire department ($23.1 million); the public works department ($16.1 million); the parks, recreation, and community services department ($12.1 million); the administrative service department ($9.5 million); and the health and human services department ($3.5 million).
The total proposed budget for the General Fund is $118.9 million in revenues and $118.8 million in expenses, leaving a surplus of $99,844. The total proposed expenses for the General Fund in 2017 are about 6% higher than the expenses budgeted for 2016.
While the General Fund is balanced, the City plans to use almost $25 million held in reserves to pay for capital projects. The budget documents say, “Revenues across all funds are projected to decrease by approximately 9% compared to FY 2016.”
The Evanston Public Library’s budget, which is set by the Library Board, is also included in the City’s total numbers. The Library’s operating expenses are pegged at $7.3 million for 2017, up 3.5% over 2016. In addition, the Library is budgeting about $3.8 million for capital projects. Karen Danczak Lyons, Library Director, said the bonds issued to pay for the downtown library building 20 years ago have been paid off.
City Manager Wally Bobkiewicz said the City is facing four “especially challenging” issues: funding the police and firefighter pensions, managing debt and capital improvements, planning for potential reductions in State revenues, and maintaining the quality of life for all residents in the City.
He said the City’s revenues and expenses were stable, and absent the threats of losing funding from the State, “We’d be having a different conversation tonight.”
A Proposed Property Tax Increase And Parking Fees
On the revenue side, the proposed budget includes an increase of $930,152, or a 2.4% increase, in the City’s share of property taxes. For a home with a market value of $400,000, the impact would be about $46 per year, according to budget documents.
The vast bulk of this increase would be used to pay more money into the police and firefighter pension funds, said Mr. Bobkiewicz.
The Library Board is proposing a $190,000 increase in property taxes, or 2.96% over this year.
In addition to increasing property taxes, City staff propose to raise about $290,000 in additional revenues by increasing the hours for certain parking meters. Under the proposal, residents would be required to feed parking meters to park in all areas of the City between the hours of 8 a.m. and 9 p.m. The City is also proposing to increase parking deck fees by $5 per month, which would raise an estimated $280,000. Mr. Lyons said this would partially make up for the loss of about $1 million in parking fine revenue that the City has been experiencing since the City switched to the new parking meters and parking boxes.
The budget also builds in a 6% increase in the City Water Rate, which City Council discussed but did not approve on Sept. 19, and which would be used to fund “major capital improvements over the next several years.” This increase, however, is “completely offset by a 3% decrease in the City’s Sewer Rate,” said Mr. Bobkiewicz. He explained that the City’s debt for sewer work has been paid off, and that this will enable the City to reduce the sewer rate by 3%.
The City plans to raise an additional $80,000 in selling water to the City of Des Plaines, and anticipates it will collect a higher than usual amount of building permit fees ($1.7 million) because of increased construction by Northwestern University.
Staffing Levels and Costs
The City is budgeting for a total of 824 full-time-equivalent (FTE) employees, a net increase of 1.5 FTE employees over 2016. This is still below the peak of 885 employees reached just before the Great Recession in 2007-08
The addition of 1.5 FTE employees will enable the City to increase the time of one part-time employee at Noyes Cultural Art Center and that of two part-time employees at Gibbs-Morrison Cultural Center.
In addition, Mr. Bobkiewicz proposed to consolidate two positions in the City Manager’s Office and to create one new position at that office, which will be close to expense-neutral. The new position will be for an Equity and Empowerment Coordinator. The person filling this position will serve “as an educator, facilitator, and advocate regarding issues of access, equity, inclusion, opportunity and diversity in the City of Evanston,” said Mr. Bobkiewicz, and work with partners on community-wide initiatives.
The City’s labor contracts with employee unions expire at the end of 2016, and wage increases for most employees are at this point not determined. The City’s proposed budget, however, builds in an additional $780,000 for employee wages and benefits. In addition, health benefits are budgeted to increase by 8.5% for PPO policies and by 5% for HMO’s.
Earlier this year, City Council voted not to allocate additional revenues to increase the number of outreach workers in the City to help reduce violence in the community.
Police and Firefighters Pensions
One major challenge the City has been addressing is funding police and firefighter pensions. City staff recommend that the City increase the amount of its contribution to the police and firefighter pension funds in 2017 by $1.65 million, based on a study prepared by its actuary Foster & Foster. The proposed budget provides for a contribution of $8.7 million to the firefighter pension fund and $11.8 million to the police pension fund, for a total of $20.5 million.
The study recommends the increases because of a change in the mortality tables, which project that pensioners will live longer and thus be entitled to more payments. Another factor is that the investment return on assets in the police pension fund was 5.26% and it was 3.87% on the assets in the firemen’s pension fund, each of which is less than the assumed rate of return of 6.5%.
The reasonableness of an assumed rate of return is measured over an extended period of time, because fluctuations are expected from year to year. If the assumed rate of return proves to be higher than the actual rate of return over an extended period of time, taxpayers will be required to make up the difference.
The increase in pension funding “diverts funds from both ongoing capital needs and ongoing operational needs,” said Mr. Bobkiewicz. “While the City will continue to responsibly fund this expense, we will continue to lobby for pension reform that will reduce this burden on the City’s taxpayer.”
As of Jan. 1, 2016, Foster & Foster pegged the City’s unfunded liability at $114.1 million for the police pension fund and $89.8 million for the firefighter pension fund, for a total of about $204 million.
Some New Concepts
Mark Muenzer, Director of Community Development, and Evonda Thomas-Smith, Director of Health and Human Services, presented an approach to address affordable housing needs in the City, with a limited amount of funds. Ms. Thomas-Smith proposed the City use $17,000 to provide vouchers at local hotels to help people in need of emergency housing, such as after a fire; that the City use $10,000 to provide subsidies to seniors for intermediate housing (e.g., 12 months) at Ebenezer Primm Towers or Jacob Blake Manor; and that the City increase funding by $500,000 for its General Assistance program which would be used to increase the housing stipend from $200 to $600 per month to persons receiving general assistance. This would enable 70% of the persons receiving general assistance to have stable housing, she said.
The City also proposes to use $1.3 million in the City’s Affordable Housing Fund and HOME Funds to develop affordable housing units. Mr. Muenzer said the plan would be to work with an outside developer to develop the housing, and to leverage the City’s investment with other funding from other sources.
Lawrence Hemingway, Director of Parks, Recreation, and Community Services, outlined a proposal to increase funding for the Mayor’s Summer Youth Job Program by $200,000 to reach a goal of employing 1,000 youth next summer. A total of 560 youth were employed through the program last summer, which has been part of the City’s efforts to reduce violence and to introduce youth to the job market.
Ms. Lyons summarized some of the Library’s priorities this year. They include making the internet available to families at the Library and through Wi-Fi hot-spots, increasing the availability of books to residents online, providing programs to preschoolers to help prepare them for kindergarten, and providing reading programs during the summer to help prevent the “summer loss” in learning.
Northwestern University is making its second of five annual contributions of $1 million to the City. This year, Mayor Elizabeth Tisdahl and Northwestern University President Morton Schapiro agreed to allocate $500,000 to rebuild portions of Sheridan Road, including the addition of bike lanes, and the balance to support Evanston Fire Department paramedics, existing at-risk youth job training programs, two outreach workers in the Evanston’s Youth and Young Adult Division, and several other uses.
On a more somber note, Mr. Bobkiewicz said he was recommending that the City reduce its contribution to the Evanston Cradle to Career initiative from $50,000 to $25,000. He said this would be a policy decision for the Aldermen.
The Capital Plan/Spending Down Reserves
The City’s Five Year, 2017-2021, Capital Plan identifies a total of $257.7 million in capital projects over the next five years. The proposed budget plans to spend $56.9 million on capital projects in 2017.
The 2017 budget includes $19.5 million for street resurfacing, water mains, and streets; $9.2 million for other transportation; $6.8 million for parks; $7.9 million for facilities; $1.7 million for miscellaneous projects; $4.2 million for the library; and $7.8 million for water treatment, storage, and billing.
The City is also spending down balances in capital funds, or using reserves, to pay for some capital projects, Mr. Lyons told the RoundTable.
The City’s Fund Balance Summary for 2017 shows that the City’s estimated unreserved fund balances (excluding the police and firefighter pension funds, which are earmarked to pay pensions), will decline from about $66.9 million at Dec. 31, 2016, to about $42.5 million at Dec. 31, 2017, or by about $24.5 million.
The City is thus using about $24.5 million in reserves to balance its 2017 budget. Mr. Lyons told the RoundTable that the City is spending down fund balances in only “appropriate” capital funds such as the Capital Projects Fund, the Washington National TIF Fund, the Water Fund, the Sewer Fund, and the Parking Fund.
‘Plan B’ for Springfield
The State has adopted a six-month budget for its fiscal year ending June 30, 2017, and it never adopted a budget for last year. “The fiscal crisis being experienced by the State of Illinois will have adverse financial and service impacts to all local governments and their residents in the coming years,” said Mr. Bobkiewicz.
Among other things, Governor Bruce Rauner has proposed a 50% decrease in the Local Government Distributive Fund. If passed, it would reduce the City’s funding by $3.9 million each year, said Mr. Bobkiewicz. In addition, the State also has discussed a property tax freeze that, if passed, would become effective in Cook County in 2017.
The proposed budget does not build in any reductions of revenues that might occur through legislative action. Mr. Bobkiewicz said, though, the City has prepared a “contingency plan.” He said department heads were asked to identify cuts equaling about 4% of their expenses “in the event the State of Illinois takes budget action that adversely affects municipalities.”
“Although the 2017 Proposed Budget is balanced, an additional $3.7 million in potential reductions and revenue adjustments have been identified pending State budget announcements,” said Mr. Bobkiewicz. Many of the adjustments identified include reductions in staff.
Public Hearing on Oct. 29
City Council is scheduled to discuss the budget at its meeting on Oct. 24, and residents are invited to attend a public hearing on the budget at 9 a.m. on Oct. 29 in Council chambers.