As we saw in the previous post, DeKalb has had a difficult time coming to terms with population loss since 2007. It’s not difficult to see why: a “grow or die” mentality, a downtown beautification plan at stake, an $88.5 million high school to justify, and so forth.

But before we go any further, let’s place this story of denial into a budget context. Management put raises for themselves into the FY2012 budget, and managed to budget us a nice $1.8* million surplus as well — a surplus that will be used for additional raises that accompany new labor contracts, because pay hikes for union workers are not part of the budget until they are approved by council.

The budget surplus is roughly equal to an anticipated 11.91%* increase in sales tax revenues plus the city’s share of the first year of TIF surplus.

The trouble is, the surplus is only a guess. They’ve been wrong before — and in the past few years, often very wrong.

The Trend of Rosy Budget Projections

Here’s a chart of total sales and use taxes. (FY2011 actual revenues are not yet available.)

Sales & Use Tax Revenues

BudgetActual
Difference
FY200610,213,468
FY200710,770,00010,634,986-135,014
FY2008 11,567,95011,070,466-497,484
FY200912,339,98111,750,615-589,366
FY2010 12,028,00011,568,304-459,696

During the 2009 mayoral campaign (in which I participated) the city and the acting mayor insisted we were in good budget shape. Then they had to kick off FY2010 by laying off 19 people.

And then they let go 34 more employees in FY2011.

The usual method for coming up with revenue projections has not been working for a community that suddenly became smaller and poorer. Sales and use taxes are not the only example. Here are utility taxes.

Utility Tax RevenuesBudgetedActual
Difference
FY20063,671,553
FY20073,850,0003,663,782-186,218
FY20084,050,0003,814,184-235,816
FY20093,973,3403,574,598-398,382
FY20103,640,5003,324,918-315,582
FY20113,771,4293,730,593-40,836

The city imposed a utility tax hike for FY2011 to help combat the losses.

With water sales, I was able to add demand numbers because annual water reports are readily available.

FY
BudgetActual
Amount
Actual is
over/under
Budget
Average
Daily
Demand,
in
Millions
of
Gallons**
Total
Water
Pumped,
in
Billions
of
Gallons**
'063,694,6683.881.41
'074,000,0003,561,023-451,0563.901.42
'083,829,5003,977,610+148,1103.721.36
'094,391,2164,445,719+54,5033.671.34
'104,883,6444,710,436-173,2083.401.24

City officials have said several times that water demand per capita has been dropping over the years due to conservation and efficiency measures (e.g., low-flow toilets). Expected increases in sales in FY2007 must have been due to anticipated growth that did not pan out.

DeKalb responded to protect revenues by putting annual water rate hikes into place for five years beginning July 1, 2008. They justified the move by pointing to rising costs, and it ensured continuation of an annual $500,000 transfer to the General Fund.

The rate hikes have provided nice increases, but as you can see, demand has continued to fall.

Conclusion

For the sake of our city’s financial health, we need:

–a healthy skepticism about budget “surpluses” for the time being, and related caution in spending.

–some aggression in getting a better handle on the implications of local trends, including ongoing high unemployment and population loss.

You are welcome to add yours in the comments.

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*FY2012 adopted budget figures differ from draft budget figures that were used in earlier posts.

**Water data covers the calendar year, not the July-through-June fiscal that the budget does.