Evanston City Council members support the concept behind a staff plan to beef up the City’s reserve fund. But they are not quite ready to commit to the payment schedule that staff has outlined as necessary to put the City’s rainy day fund on solid ground again.
Aldermen held off at their Jan. 11 meeting approving a resolution committing to increasing the General Fund reserves to a minimum of 16.6%, which would equal two months of expenses, by 2025.
The increase would require that the City make contributions of at least $1.9 million annually to the reserve fund in the years 2022 through 2025.
Facing a projected $8 million shortfall in revenues this past budget season attributed to the COVID-19 pandemic, Council members dipped into their reserves, drawing out an additional $500,000.
Adding that half-million dollars to the General (operating) Fund allowed aldermen to lower a proposed property tax increase from 5.9% to 1%.
Alderman Judy Fiske, 1st Ward, was among those concerned about the impact on the City’s reserves. She conditioned her support for the budget to an agreement from Council members to approve a firm plan to rebuild the fund.
City staff has pushed for a recommitment to build the reserves back up, noting that bond rating agencies, such as Moody’s and Fitch, review fund balance history as one of the main indicators to get a true sense of the financial picture of the community.
Some Council members, however, showed ambivalence on Jan. 11 at committing to a plan. They cited questions about the future impact of COVID-19 and wondered whether the issue would more properly be decided by the next City Council, to be seated in May.
Similar Pledge Made Before
In discussion at the Jan. 11 meeting, Alderman Ann Rainey, 8th Ward, said, “I felt really bad, I felt terrible,” when aldermen took more from reserves than staff had recommended.
“I felt like we were doing something very, very wrong, but it is an emergency and we had to do it,” she said.
“But you know what,” she told her fellow Council members at the Jan. 11 meeting, “I went back and did some research,” and “it’s been a long time since we had 16.6% in our reserves.”
Ald. Rainey said her research showed that the reserve funds after climbing as high as $17.1 million or 19.2% of budgeted expenditures in 2014, had fallen as low as 11.6% by the end of 2018.
In fact, Council members had promised in 2019 to chip in $1.5 million each year to boost the fund – a promise they were not been able to keep back then, she said.
“Passing this resolution is not the answer,” the alderman argued. “We can’t pass this, because we can’t make this promise, just like we shouldn’t have made this promise in 2019. We absolutely should have a healthy fund balance, and I believe in that, but I don’t think it makes sense for us to make these promises and not keep them.”
Rather, “we have to do everything we can do to generate our revenue, to keep our expenses down, so that we have a 16.6% fund balance, if that is still be best practice,” Ald. Rainey said. “We don’t have to keep passing these phony resolutions.”
Some other aldermen agreed.
“I do have concern if we make this resolution,” said Alderman Cicely Fleming, 9th Ward.
“We’re going to have a new administration in [in Washington]. Hopefully, things will change,” she added.
In the meantime, Ald. Fleming said, “we’re having a lot of trouble just getting the vaccine rolled out. … We don’t know when people are going to be returning to work, our schools haven’t opened.
“I’d much rather us make a plan and look at how were going to cut some of the spending, generate more [revenue], [have a plan] that isn’t so aggressive to our citizens, who are really struggling,” she said.
Besides, she noted, “I also think we should be honest that we have an election coming up … and we don’t know who is going to be even be sitting in what chair.”
In that regard, pointed out Fourth Ward Alderman Donald Wilson, the resolution aldermen were considering “is not a Constitutional mandate. If a different Council comes in with different people elected, and they want to do something different, it’s just a different resolution.
“But on other hand I think it’s important for us to set goals and intentions and plans,” he said.
When he first started on the Council, Ald. Wilson said, the numbers and plans handed off to new Council members “were not where you would have liked them to be. So I think this [the resolution] is important – to set a course,” he said.
But it is not clear what course the Council would be committed to.
“There’s nothing in this resolution that requires anybody to do anything,” observed Alderman Thomas Suffredin, 6th Ward.
Further, he said, “We’re not the right group of people that should be making this vote. This vote should happen in May, when the next meeting Council is seated.
“Is there a reason we should vote on this tonight, other than symbolism?” he asked.
Major Costs Ahead
City Manager Erika Storlie, asked to enter the discussion, being held virtually, said there was a reason.
“One of the reasons is historical,” she said. “The rating agencies look at our fund balance as a measure of our fiscal health.”
The 16.6% figure officials have set as their goal “is not the only measure of our fiscal health, but it is one of the main measures by which the rating agencies grade us and then therefore [the measure for what] we end up paying for any debt we would borrow to do capital improvements.”
She acknowledged the previous pledge the City had adopted in 2019.
Officials were starting to take steps to rebuild the reserves fund then, she said, “and then we were hit by a 100-year pandemic.”
The temporary retreat “is not the end of the world,” she told Council members. “But the rating agencies are still watching, and we’re going to have to borrow quite a bit of money come October or November, for all the capital projects that were approved in this year’s budget – and that [the bond interest] is going to cost us.”
She suggested to aldermen the City might “weather the storm a little easier if the fund balance was a little bit bigger.”
To Council members’ concerns about specifics, she said even some statement in writing from the Council, in which “we said to our Community, ‘This is important to us,’” would be a step forward.
For now, Council members decided to take up the issue again at their next meeting, scheduled for Jan. 25.
During the Jan. 11 discussion, several Council members, including Seventh Ward Alderman Eleanor Revelle, referred to comments made by Sixth Ward resident Jamie Collier during the citizen comment portion of the meeting earlier in the evening, as weighing in their thinking.
Ms. Collier warned Council members the requirement to contribute $1.9 million a year for four years will “lead directly to property-tax increases.
“There is no requirement in this resolution for the City to reduce expenditures, to live within its expected level of revenue, and neither are their annual targets to be achieved before 2025,” she said. “Furthermore, the resolution directs that priority be given to using the proceeds of City asset sales to increasing the general fund reserves, whereas increasing the contribution to police and fire pension funds would be a much better use for City funds,” she pointed out.
That move would “ensure more security for the pensioners, have a larger impact with the rating agencies, and can reduce the burden on taxpayers by at least 6.25% per year for the next 20 years on every additional dollar contributed,” Ms. Collier argued.
“Make no mistake, a vote for this resolution as it now stands is about to increase property taxes, with nothing to show for it,” she told aldermen.