Evanston City Council members on November 22 approved a $360 million 2022 fiscal year budget that will add nearly 40 staff positions and not require a property tax increase, with federal COVID-19 recovery funds providing a major cushion.
In this year – and next – of COVID-19 recovery, projected revenues vary. As examples, ground emergency medical transfers are projected to increase dramatically, from $100,000 in this year’s budget to $750,000 in 2022. The growth in streaming tax revenue is projected to increase amusement tax revenues by $275,000 – to $475,000 in 2022. Money from Northwestern University’s Good Neighbor Fund, however, has dried up completely.
Council members voted 5-3 in favor of the budget – one member was absent – which charts the revenues and expenditures officials foresee for the coming year.
Voting in favor were Council members Peter Braithwaite, 2nd Ward; Melissa Wynne, 3rd Ward; Jonathan Nieuwsma , 4th Ward; Thomas Suffredin, 6th Ward; and Eleanor Revelle, 7th Ward.
Voting against were Council members Clare Kelly, 1st Ward; Bobby Burns, 5th Ward; and Devon Reid, 8th Ward;
Council member Cicely Fleming, 9th Ward, was absent from the meeting.
The approved budget:
- Adds back 29 positions held vacant last year because of COVID-19. Staff members had proposed adding another 20 positions they maintained would lead to improved city operations, but reduced that number to 11 after council members raised concerns at a previous meeting about the costs. The remaining positions proposed will not be included in the 2022 budget, Hitesh Desai, the city’s Chief Financial Officer, said in a memo. “Staff will revisit these positions in June of 2022 based on operational needs and revenue performance, and may come back to City Council with these additional positions and a budget amendment at that time.”
- Covers the $650,000 cost of a free-beach program for Evanston residents. Reid had proposed the free-beach program shortly after he was seated as a new council member in May. The budget allocation also will maintain the current Evanston resident rate for residents of Skokie, under which Evanston residents get a break when using that village’s swimming pools.
- Reimburses revenue by $57,000 for a new service out of the City Clerk’s office, providing birth and death certificates. The office, headed by Stephanie Mendoza, will also add a second deputy clerk to the office, at a cost of $80,000.
- Picks up some large one-time expenses — $600,000 for permit-software improvements and $500,000 for comprehensive and strategic plan consulting. Those are supported by American Recovery Protection Act (ARPA) revenue-loss funding, officials said. Officials learned in March the city would receive $43.1 million in ARPA funds from the Biden administration, nearly twice what the city might have received if Republicans had remained in power, according to one estimate. Half of the ARPA funds are already in a city account.
- Recognizes $1 million in wage increases for union and nonunion employees in 2022: On January 1, AFSCME employees and members of the Fraternal Order of Police sergeants union will receive a 3% increase. Increases for FOP patrol officers and nonunion employees will be 2.25%. On December 31, International Association of Fire Fighters employees will receive a 5% wage increase.
Allocating ARPA funds
Officials said $4.25 million in ARPA money will be used to support the city’s General Fund operations in 2022, and that $13 million in ARPA funds in all has been earmarked for next year’s budget.
In addition, $25 million in ARPA funds was placed as “sort of a lump number right now” in the 2022 budget ordinance “so that it can be spent out of that fund,” explained Kate Lewis-Lakin, the city’s Budget Manager.
“We don’t have to spend up to that total,” she said. “We don’t spend up for a total expenditure budgeted amount in many of our funds.”
Rather, she said the money is budgeted that way so council members “have the option of considering contracts and expenses within that dollar amount.”
Nieuwsma said, however, he was “uncomfortable making that allocation without taking the broader ARPA context into consideration.”
At Reid’s suggestion, the $25 million was removed from the budget.
“By placing the funds in the budget, it sets up what I think is a not realistic expectation,” Reid said.
Desai’s ‘conservative’ projections
Kelly questioned staff about lower revenue projections in some funds. “It doesn’t make any sense we should be expecting a reduction next year, with the city recovering from COVID,” she said.
Desai said he preferred to be conservative in his estimates, pointing to past occasions when officials projected revenues after a big year and then saw substantial drops the next.
On building permits, for instance, “one year we got $8½ million [and] we tried to budget the same amount [the next year],” he related. “And then we got $4½ million the next year.
“I just don’t want to be, like, too optimistic and then end up spending more,” he said, meaning that that would force the city to recoup the lower revenue.”
“I can see it’s conservative for staff, not for taxpayers,” Kelly responded. “It just doesn’t seem at this point, when we’re coming out of the throes of COVID, where we’re going into 2022 with sales tax [revenue] likely to increase, that we will be estimating reductions.”
No property tax increase this year
The city’s portion of the overall property tax bill is about 21%. District 65 takes 41%, and District 202, Evanston Township High School, about 17%.
Kelly pointed to an analysis council members received from resident Jamie Robin-Collier, reminding council members that when property taxes were increased 1% last year, several council members said that if revenue was better “next year,” taxes could be reduced.
“2020 ended with $2.2 million surplus,” Robin-Collier wrote, “and 2021 looks like the surplus will exceed $4 million. Now is the time to make good on that promise to the tax payers and return the property tax levy to 2019 levels [i.e. roll back the 2020 property tax increase, not make it permanent].”
Kelly moved to table the budget to a special City Council meeting to allow council members to study the way taxes are being levied.
Council members voted 4-4 on the issue. Mayor Biss, allowed to break tie votes under council rules, then voted against tabling the issue.
This year, because of high investment returns, contributions to the police officers’ and firefighters’ pension funds were reduced from last year’s contributions: Police Pension Fund $10,869,538 ($236,923 decrease from last year); Fire Pension Fund $9,248,524 ($98,254 decrease from last year).
Kelly also sought more time to get council members to consider increasing the city’s annual contribution to those funds, in line with what the city’s Police and Fire Pension boards are asking.
She suggested that if officials look at the increasing fund balances “in our Human Services and our General Fund, “we’re going to end up with probably close to $4 million more.” She said stepping up the contribution would save residents money in the future.
Wynne suggested that proposal should be a topic for the city’s new Finance and Budget Committee.
The city, whose contributions to the pension funds were among the lowest in the state in 1980s, made a significant turnaround and now contributes more than the state requires, Wynne said.
“We did a very long, thoughtful discussion about this, and decided that we would undertake spending more to push down our liability,” said Wynne, first elected to the City Council in 1997.
“It has meant many times that we have raised our property taxes to pay for that. And so this is something that needs to have significant discussion by the entire council with the community participating in this, because there is no way for us to continue at that high rate, year after year without recognizing that there will be times when we will have to increase the property tax. And that is what has happened over the years.”
Kelly also requested that the interest rate assumption (a prediction of how much the funds will earn on investments) used by the city in its calculated contribution to the two funds be dropped from 6.5% to 6.25%, as recommended by the pension boards.
Desai said 70% of the communities in Illinois use the 6.5% interest rate in their calculations. Further, checking the numbers, he told council members that at the current 6.5% rate, the city’s annual contribution to the police retirees fund amounts to $11, 194,000. If the city were to go down to 6.25%, the city’s contribution would go up to $11,971,000, or roughly an $800,000 difference.
On the firefighters pension fund contributions, the change in the rate used would raise the city’s contribution from $9,528,005 to $10,056,876, roughly $500,000 more. So collectively the change would mean $1.3 million more in the city’s contributions to the two funds.
According to an August 16, 2021, actuarial report to the city, Evanston had unfunded liabilities in the police pension fund of approximately $121 million, achieving a funding ratio of 54.3% of the amount needed to be to be fully funded. Fire’s unfunded liability stood at $101.5 million or 47.9%, according to the report.
A 2018 report from the Better Government Association said there is no official standard for what is considered a healthy publicly supported fund, though in the private sector a fund under 80% is generally regarded at risk.
Council members voted 6-2 against Kelly’s proposal to consider higher funding; she and Reid were the lone “yes” votes.