Evanston City Council members are considering several alternatives that would help eliminate or reduce the need for a property tax increase in next year’s budget. At present, the proposed increase in the City’s portion of the property tax is 5.9%.
Two suggestions are to reduce expenditures in areas that the City has been trying to bolster in recent years and that outside credit rating agencies have viewed as important measures of the City’s financial stability.
At the Oct. 26 City Council meeting, aldermen supported a move to direct staff to prepare a budget that reduced by half the $1 million that officials were recommending the City put in its reserve fund
Similarly, Council members inquired about cutting back contributions to the City’s police and fire pension funds, where for decades Evanston has been playing catch-up, after ranking near the bottom of the list of Illinois communities meeting their pension obligations during the 1980s and into the 1990s..
Officials estimate the nearly 6% tax hike proposed by City Manager Erika Storlie would generate more than $3 million in additional revenue for the City. That amount would help offset a projected shortfall of more than $8 million in the 2021 budget because of revenues reduced by COVID-19.
They also estimate the property tax increase would cause the owner of a home valued at $400,000 to pay about $114 more in the City’s portion of the property tax.
Ms. Storlie’s budget calls for using $500,000 from property tax revenues to go in the City’s reserves, where the City’s goal is to have an amount stored away that meets 16.6% of expenses.
The fund is “an important indicator to reflect the financial health of the City,” officials pointed out in their Oct. 26 budget presentation.
Rating agencies review balance history as one of the main indicators to get a true sense of the financial picture of the community, they said.
Credit agencies look at factors such as the City’s reserves and police and fire pension liabilities when deciding to assign a credit rating on a City bond issue, Hitesh Desai, the City’s Chief Financial Officer, told Council members at the meeting.
In those cases, he said, “They would kind of caution me about a low fund balance and not complying with our own adopted fund balance policy, and highlight liabilities in the police pension and the fire funding pension.”
In the long run, officials have to look at such issues carefully, he said, because alower bond rating could cost the City hundreds of thousands in interest costs and possibly trigger the need for a tax increase.
But during the public hearing portion of the Oct. 26 meeting as well as in Council discussion, some speakers suggested the City might look at reducing contributions in those areas, reducing the need to rely on revenues generated through a property tax hike.
Speaking at the public hearing, Jamie Robin Collier, a Sixth Ward resident, suggested to aldermen that “to budget an increase in the reserve while the pandemic is still raging seems to be a bit aggressive,” she said, noting the City still retains an AA+s stable bond rating.
In addition, she said, the City has not maintained its targeted 16.6% reserve for the general fund reserve since 2015, “so to start doing it in the midst of continuing economic depression seems to be asking a bit much of the taxpayers,” she said.
City Council members continued in a similar vein during their discussion.
Alderman Cicely Fleming, 9th Ward, recognized officials need to establish a policy on fund balance.
“but in a year, where we’re just not doing well as a City, and our residents are just really hurting financially, I think we should really just think about maybe revisiting that,” she said.
“In addition I would say the same thing for the pension contributions,” she said. “I know that we are over-funding from what the state requires. And again, I think, in a healthy financial year, it’s a good policy. But this is a year when we need to really be thinking about how to tighten up some spending, so we don’t have to pass those costs on to the residents.”
Some other aldermen, though, reflected on the City’s efforts to bolster those funds in the past.
On pension contributions, observed Alderman Melissa Wynne, 3rd Ward, “this was an incredibly detailed discussion that we had over a period of years, and the recognition that by simply putting in the amount that the State had been recommending had gotten us into this really terrible position that we were in.
“In order to climb back out of it,” she said, “we really struggled to put more and more in and that has really helped us maintain the bond rating that we’ve had. I would be reluctant to even lose a step.”
Similarly, Alderman Ann Rainey, 8th Ward, expressed concern about any move that would affect the City’s bond rating.
“Because when we go to the bond market, our bonds get snapped up like crazy,” she pointed out.
Reducing the rating, she said, would place Evanston along with other low-rated communities, with the City no longer standing out.
She suggested that beyond property taxes, officials might examine “how we nickel-and -dime people to death with items that are much more regressive.
“I’ve been checking randomly with some of my constituents. Their taxes went down last year, their property taxes – but you add to the parking meters, you would add to the garage [parking costs], you add to solid waste collection or yard waste collection — and that’s things that come out of people’s pocket every single month.”
Alderman Judy Fiske, 1st, Ward, turned to staff for direction, expressing concern “that if we take two steps backwards, and one step forward each year, we’re going never going to catch up. I really think that we tried so hard on the pension funding, trying to catch up … and all of this is at risk.
“I mean, my own feeling is that we’ve cut staff as far as we can cut them. … Staff is being asked to do more than they really can do,” she said.
“So I’m, I’m searching for a way to try to figure out how to keep our costs to our residents as low as possible,” she said. I would love to avoid a property tax increase. I just I’m looking at to staff to try to help us figure out a scenario that makes sense.”
Alderman Thomas Suffredin, 6th Ward, pointed to a local unemployment rate, hovering around 8.8%.
“Can you remember a time when it’s been that high?” he asked Council members. “That’s really what this is. The concern here is there are people are in real financial peril right now. And if we can hold off on some things and be as responsible as possible about it, I think it’s something that we need to look at.
“And I don’t want to diminish our bond rating or get into having people freak out about asset [City-owned property] sales or any of that, he added, “but we really have a responsibility to be aware of how financially vulnerable a lot of Evanstonians are – in ways that they had no idea they would be in January of this year. That’s my concern.”
In a straw vote, aldermen showed support for staff coming back with a scenario that showed how the budget would look only $500,000, not $1 million, going into reserves and how that would affect the need for a tax increase.
Alderman Peter Braithwaite, 2nd Ward, made the proposal on behalf of aldermen, requesting that staff “come back with something concrete rather than hypothetical.”
In light of the concern about taxes, he proposed that aldermen prioritize projects in their wards that the City could hold off next year, maintaining “if you’re not willing to spend that extra hundred dollars for those houses that are impacted [by a tax increase], then we should also look at capital projects and figure out which ones in a very tough year can wait until next year.”
Council members are expected to discuss the various budget issues at their next City Council meeting, scheduled to be held 5:30 p.m. on Monday, Nov. 9.
Aldermen are looking to pass a final 2021 Budget at the Nov. 23 City Council meeting.
More details are available by clicking the “Budget” tab on the City’s web page, cityofevanston.org.