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The City is promising rigorous scrutiny of its programs and services and extensive outreach to the community as staff members continue to work on the 2019 City budget. Residents can expect a combination of reduced services and increased taxes or fees, or both.

The $3 Million Gap

There appear to be at least three areas of concern: a projected $3 million shortfall in the General Fund, the City’s main operating fund; a lower-than-recommended reserve fund; and increased debt service costs to pay for the new Robert Crown Center.

Projected increases in salaries for cost-of-living, health insurance and “non-personnel expenses” account, at present, for a projected deficit of just over $3 million in the General Fund for 2019. 

“Non-personnel expenses” are goods and services that are not related to salary costs, such as contracts for computers and snow-removal salt, City CFO/Treasurer Hitesh Desai told the RoundTable.

The City has been on a save-and-spend cycle with its reserves: building up reserves then spending the funds on capital projects. “This is one way of financing projects – build reserves over a number of years and spend it as projects arise,” said Mr. Desai. He said the City projects a balance of $13.8 million in the General Fund at year’s end. The City’s budget year is the same as the calendar year.

The other “half” of the shortfall comes because the Washington National tax-increment financing (TIF) district will close at the end of the year. The City currently receives money from the TIF to pay for expenses related to the TIF, such as the Fountain Square project.

After the TIF closes, the City will not receive monies from the TIF. around $5.5 million annually from that TIF,

Property that is no longer in the TIF can be added as “new” property, and taxing districts can vote to levy against that property. Because of the way TIFs work, the City, by doing this, could generate $1 million in additional revenues without increasing property owners’ property taxes.

City Council last month approved the issuance of up to $85 million in bonds. Of that amount $50 million will go toward paying the cost of the new Robert Crown Center, with $25 million issued this year and $25 million – or less, depending on how much is raised privately – in 2019.

Referendum on Real Estate Transfer Tax Increase

To cover some of the Crown debt expenses, the City is proposing an increase in the real estate transfer tax. Residents will have the opportunity to vote on the proposed increase in the Nov. 6 General Election.

Council is expected to approve at its Aug. 13 meeting a referendum question that would increase the real estate transfer tax on properties selling for more than $1.5 million. The present rate, $5 per $1,000 of the selling price, would remain the same for properties selling for less than $1.5 million. Properties selling at prices between $1.5 million and $5 million would have a transfer tax increase of $2 per $1,000 of the price, or a total of $7 per $1,000. The proposed increase for properties selling at more than $5 million would be $4, or a total of $9 per $1,000.

Under the proposal, the cost of the transfer tax would be shared equally by buyer and seller. The City anticipates receiving an additional $750,000 annually if the increase is approved.

Other Proposed Increases

City staff members are looking at increasing certain taxes and fees with the following expected revenue increases:

• Home rule sales tax increase of 0.25% – $1,500,000

• Food and Beverage tax at 1% – $175,000

• Transportation network tax (e.g., Uber and Lyft) increase to $0.40 – $300,000

• Hotel tax increase 0.5% – $115,000

• Wheel tax increase to $95 – $500,000

• Increase to boat rack and launch fees – $14,500

Parking

Ever seeking to garner revenue from residents, visitors and customers who need to park, the City is looking at increasing fees and at selling one City asset.

City Council members have not discussed any of these proposals, which were in the July 30 packet.

• Eliminate first hour free at City garages: $185,000

• Install parking meters along the lakefront and surface lots: $550,000

• Increase hourly parking deck fees and put in automatic escalation: $390,000

• Increase Sherman Avenue garage monthly permit fee: $148,500

• Increase parking meter hourly fee by $0.50/hour: $1,695,600

• Increase surface parking lot monthly permit fee: $38,880

• Eliminate free Sunday parking in meters and garages: $685,000

12 Analyses Completed, 25 to Come

 At the July 30 City Council meeting, City Budget and Finance Manager Ashley King said staff have completed analyses of 12 of the 37 City programs they had been asked in June 18 to study: tax-assessment advocacy; Citywide training and benefits/payroll administration; crossing guards; Divvy bikes; planning and zoning; vacation rentals; special recreation; Fleetwood-Jourdain Theatre fees; block party/moving van/dumpster permits; business licensing; contractor licensing; and the storefront modernization program.

Promised in the next few weeks are analyses that include possible revenue enhancements or service cuts of the following 24 programs: administrative adjudication; revenue and collections; community arts administration; public art installation; MWEBE/Local Employment Program; membership dues and subscriptions; training and travel; City employee cell phone stipends; facilities maintenance; fleet services; property maintenance; City-sponsored special events; Gibbs-Morrison Cultural Center; Noyes Cultural Arts Center; athletic programming; best practice tree maintenance and replacement; tree preservation permit; streetlight, traffic signal, and sign maintenance and repairs; right-of-way permits; special refuse pickups; twice  annual bulk pickups; leaf pickup; special event support; and the Merrick Rose Garden.

In September, City staff will provide an evaluation of the nearly 200 social service programs offered or supported by the City. The report will include a baseline inventory, program financials, and service delivery. Other, later, phases of the report will include equity assessments and the  impact of the services capacity of each program.

Outreach and Calendar

The City has planned several ways to involve the public in this budget cycle, using priority-based budgeting. The first wave of public involvement was a survey, available in print and online earlier this summer, that allowed residents to choose from about 50 City programs 10 they would eliminate and 10 to keep. Working from those selections, City staff has analyzed several of the choices and plans to complete several more.

Patricia Efiom, the City’s Equity & Empowerment Coordinator, said her office has set the goal of reaching 500 Black and Latinx residents to discuss the budget with them. Volunteers from the communitywide Cradle to Career initiative will contact the residents, she said. There will also be eight or more community meetings about the budget.

On Sept. 13, the City will host a cable television show with department heads and others discussing the budget and implications of tax and fee increases as well as program and service cuts. It has been suggested that aldermen hold ward meetings that same evening, so their constituents can discuss the budget with City officials.

Other dates in the budget cycle are:

Oct. 5: City Manager presents budget to City Council.

Oct. 5-25: Online budget simulation available for resident responses.

Oct.15: Budget Discussion

Oct. 2: Budget Discussion

Oct. 27: Truth in Taxation Public Hearing – FY 2019 Proposed Budget

Preliminary Tax Levy Estimate

Nov. 6: General Election

Nov. 12: Budget Discussion (if needed)

Nov. 19: Adoption of budget and tax levy