Since March, City officials have been cautioning that living in Evanston next year will be a little leaner and a little costlier. Projected expenses appear to outstrip anticipated revenues for 2019, leaving a shortfall of $7.4 million.
City Manager Wally Bobkiewicz in a budget outreach presentation on Sept. 13 acknowledged that the predicted shortfall had been $3 million, “but we’ve sharpened our pencils,” and the outcome, while grimmer, may also be more precise.
A baseline budget – comparing how much it would cost in 2019 to provide the same level of salaries, goods and services as in 2018 – now shows a $4.9 million deficit in the General Fund, the City’s main operating fund.
Covering the debt service for bonds issued this year to help pay for the new Robert Crown Center and building up the City’s reserves add another $2.5 million to the shortfall – $1 million for the Crown debt and $1.5 million for reserves.
Although Mr. Bobkiewicz has not presented a tentative budget to City Council, residents will likely see a combination of reduced services and increased taxes and fees paving the way for a balanced budget for fiscal year 2019.
City Chief Financial Officer Hitesh Desai said the City is “trying to be conservative” in projecting revenues for 2019. Some decreases in revenue appear to be inescapable, however, and the only variable is how much less than last year they will be.
At this point the City anticipates the following decreases from last year’s levels:
- $400,000 decrease in sales taxes. “Sales taxes have been flat,” Mr. Bobkiewicz said. He said it is too early to tell whether the addition of yet another place to buy liquor – Binny’s, opening soon in the former Whole Foods space at 1111 Chicago Ave. – will augment sales or cannibalize existing places to purchase wine, beer and spirits.
- $375,000 decrease in utility taxes. Telecommunications taxes and franchise fees are decreasing as residents abandon landlines and use cell phones and tablets for information and communication.
- $1.7 million decrease in building-permit fees. Northwestern University’s building frenzy appears to have slowed, and although there are some projects in the pipeline, it is not clear when construction will begin on any of them.
With the closing of the Washington National tax-increment financing (TIF) district this year, the surplus funds will be distributed among all taxing bodies with a stake in the TIF, and the City will not have the $1.5 million in TIF funds it had last year. Some of that loss will be offset by the $1 million the City could receive in property tax revenues, since the closing of the TIF will add new property to the tax rolls.
The City has 400,000 water customers, thanks to a partnership with Northwest Water Commission, Mr. Bobkiewicz said. The City pumps water from Lake Michigan and distributes it to, among others, Lincolnwood and Skokie, charging only for the services the City provides. Municipalities may tack on additional charges they incur in providing water to their residents. The amount of water distributed to each municipality reflects that community’s allotment of Lake Michigan water. Evanston “sells” only the finished product – water cleaned and ready for use.
The City’s decades-long water-sales contract with Skokie expired several months ago, and, in a new contract provided to Skokie, the City increased its charge. Skokie has refused to pay the new amount, and the City still provides water to Skokie, although Skokie is paying less than half of what the City believes is owed.
The City of Evanston has sued the Village of Skokie in state court, in an attempt to resolve the matter, and Skokie has sued Evanston in federal court. The matter remains in litigation. For budgeting purposes, Mr. Bobkiewicz said, the City is estimating revenues from Skokie water sales based on the old rate – 78 cents per 1,000 gallons – rather than the new rate, $2.06 per 1,000 gallons.
Mr. Bobkiewicz, Mr. Desai and Assistant City Manager Erika Storlie gave an overview of the services the City provides to its 75,000 residents, noting some of them as “community standards,” that is, not mandated by law or ordinance but desired by the Evanston community.
There are 10 departments in Evanston City government: Administrative services, City Manager’s office, Community Development, Fire, Health and Human Services, Law, Library, Parks, Recreation and Community Service, Police and Public Works Agency.
The general wage increase for next year is about 2.6%, Mr. Bobkiewicz said.
The City allocates 55% of the General Fund to the Fire and Police departments, 16% to City administration, 10% to Parks, Recreation and Community Service and 3% to the Health Department.
Public Safety: The Evanston Police Department has 165 sworn officers and 55 civilians; all officers now have or soon will have body-worn cameras. It also funds and manages the 311 and 911 services and the Officer and Gentlemen Academy, Mr. Bobkiewicz said.
The Fire Department has 107 sworn firefighters, all of whom are also trained paramedics; five fire stations; 1,385 fire hydrants; and some community outreach programs such as CPR classes and the Fire Explorer Program for Evanston Township High School students.
City Administration: The 16% of the General Fund that is allocated to City administration covers administrative services, City Manager’s office, community development, legal and public works functions.
In 2018, the City spent about $2.5 million for outside counsel to handle some of its legal matters. Of that amount, $2.1 million was spent on the James Park/ComEd/Nicor lawsuit.
Parks, Recreation and Community Service: The City of Evanston maintains seven recreation centers and five lakefront beaches – ownership of Lincoln Street Beach is yet not agreed between the City and Northwestern University, although the law appears to favor the City. Ms. Storlie said 99% of Evanston residents live within a 10-minute walk of a City park.
The Mayor’s Summer Youth Employment Program provided jobs to more than 600 Evanston youth this year, Ms. Storlie said. The Youth and Young Adult Engagement team offers help and support to steer at-risk youth toward jobs and education.
Health and Human Services: The City’s Health Department is one of only four municipal health departments in the State, Mr. Bobkiewicz said, adding, “This is a function of a community standard we have taken on.”
The City’s Mental Health Board allocates $800,000 in General Fund dollars annually for social and mental health services in the community.
“So, we do a lot in Evanston and have for a very long time,” Mr. Bobkiewicz said. “My guess is we’ll see a downturn in staffing in 2019,” he added. All City departments, including Police and Fire, have been asked to pare their budgets.
Both Police Chief Richard Eddington and Fire Chief Brian Scott have defended their departments but conceded that holding vacant positions open for another year could work. Each has said his priority is the safety of Evanston residents.
Bonds: Earlier this year the City approved issuing a net of $75 million in bonds. Of that amount, up to $50 million will go toward paying the cost of the new Robert Crown Center. The issue was split into two parts, with $25 million issued this year and the balance to be issued next year. Depending on the amount of funds raised by Friends of the Robert Crown Center, the second issue could be for less than $25 million. Other bonds issued this year were for capital improvements – $20 million – and redevelopment projects – $5 million.
To be able to issue such a large amount of bonds, aldermen at the June 25 City Council meeting unanimously approved an amendment to the City’s budget policy that increased the City’s debt limit by $37 million – from $113 million to $150 million.
Annual debt service for each $1 million of bonds is $70,000. The City has placed a binding referendum question on the Nov. 6 ballot, asking residents to approve an increase in the real estate transfer tax.
If approved, the real estate transfer tax – $5 per $1,000 of the sales price – would increase on properties sold at more than $1.5 million. City officials estimate the City could see $780,000 annually from this increase.
Reserves: The City’s reserve levels appear to operate on a cyclical basis: The City builds up reserves then spends the funds down on capital projects. It also keeps two months of operating expenses as reserve in the General Fund, per Council policy, Mr. Desai said. “Currently, the City doesn’t have enough reserves. We intend to have the General Fund reach that level within next couple of years with additional funding,” Mr. Desai told the RoundTable.
Pensions: The City contributes annually to three separate pension funds: the IMRF (municipal employees retirement fund), the police pension fund and the firefighters pension fund. The contribution for 2019 will be $1.6 million, Mr. Desai said.
While the IMRF funds have for the most part been on par with what is required, the police officers and firefighters pension funds are funded at only about 50%, meaning they are 50% underfunded. On Jan. 1, 2018, the firefighters pension fund was 46% funded and the police officers pension fund was 50% funded. Nine years ago, the percentage rates were 41% (firefighters) and 43% (police officers), Mr. Desai said, adding, “These are good numbers in terms of where we are. This pension underfunding is not unique to the City of Evanston.”
“We have really tried to increase that percentage,” Mr. Bobkiewicz said.
In 2017, Foster & Foster, the City’s actuaries, estimated the City’s unfunded liability at $113.4 million for the police pension fund and at $91.1 million for the firefighters pension fund, for a total of $204.5 million.
In the past few years, the City has contributed more money than was actuarilly required, in an effort to boost that percentage.
In 2018, the City contributed $8.8 million to the firefighters pension fund and $12.5 million to the police officers pension fund. For 2019, Mr. Desai said, the City is recommending a total contribution of $18.8 million to those two pension funds.
“The City used a 6.5% investment rate assumption last year. We expect to use the same this year unless council decided otherwise,” Mr. Desai said. Using a lower assumption rate increases the unfunded liability as well as the amount needed to fund the pensions on an annual basis.
Library: The Library’s proposed budget for 2019 is $10 million, a 1.1% increase over last year’s budget. Of that amount, about $7.8 million is for operations – $5.2 million for personnel and $2.6 million for non-personnel operating costs. The debt service is pegged at $353,437, and capital costs at $1.8 million.
Personnel cost include increases in wages and health insurance and staff costs in the last quarter of FY’19 for staff at the Robert Crown branch library.
Capital costs are allotted among the main library, $555,000, the north branch, $30,000, and the new Crown Center branch, $1.25 million.
“The Library does not report to the City but to the library director,” Mr. Bobkiewicz. The Library follows the State model for library boards. Council cannot approve or reject the budget but may have to make changes in the City budget to accommodate the Library budget.
The City is looking at about a 7% increase in its overall levy, Mr. Desai said.
Ms. Storlie added that many residents are feeling squeezed because their recent tax bills reflected not only the triennial reassessment from Cook County but also the District 65 referendum.
The City’s share of the property tax bill is 17%. The two public school districts take up 67% – School District 65, 41% and School District 202 (Evanston Township High School), 26%.
Some City Council members have expressed reluctance to increase taxes, preferring instead to increase fees, thus spreading the pain to different sectors of the populace – including visitors, who pay for parking spaces and parking violations.
Mr. Bobkiewicz said between Oct. 5 and 25, residents will be able to use an online tool called Balancing Act to propose changes to the City budget.
By State law, the City must pass a balanced budget by the beginning of its next fiscal year, Jan. 1, 2019.
Readers can visit Evanstonroundtable.com and read “Evanston City Budget Outreach Set for Sept. 13” to see a list of proposed tax and fee increases.
Oct. 5: City Manager presents budget to City Council.
Oct. 5-25: Online budget simulation available for resident responses.
Oct.15: Budget Discussion
Oct. 22: Budget Discussion
Oct. 27: Truth in Taxation Public Hearing – FY 2019 Proposed Budget
Preliminary Tax Levy Estimate
Nov. 6: General Election (with real estate transfer tax referendum question)
Nov. 12: Budget Discussion (if needed)