The governor’s proposal to make huge cuts in funding to state universities is the big news today, but municipalities are facing a similar threat.
At Monday’s council meeting, DeKalb’s finance director will present the mid-year budget report. The city appears to be pretty much on target for the current fiscal year, but administrators are concerned about possible future cuts to DeKalb’s share of the state income tax (see p. 26) if the governor gets the budget he wants.
Income tax started out on pace at the beginning of the year and has slowly fallen behind budgeted dollar expectations. Dollars are projected to come in slightly below budget at $4.15 million. Please note this revenue source is a part of the Local Government Distributive Fund (LGDF) which is currently collected and disbursed by the State of Illinois based on a per capita basis. With a new Governor, there has been discussion about perhaps eliminated [sic] these funds or changing the distribution allocation.
The current budget proposal doesn’t eliminate the income tax LGDF, but if passed would halve it. The impact on a given municipality would depend on how much of its budget depends on income tax. In DeKalb’s case it makes up about 12.5% of the operating budget so its absence would definitely cause pain.
This is not the first time a governor has targeted income tax payments to municipalities, and I identified this vulnerability as early as 2010. Even if we dodge the bullet this year, we should start talking about how to reduce dependence on this revenue source for funding operations.
Related: “Budget Addresses Have Consequences” at the Capitol Fax.
Filed under: City Watch
, State Watch
| Tagged as: budget
The city council voted Monday on a measure to waive the customary bidding process and award a contract to out-of-towners for a new custom website. Staff insisted only CivicPlus could make DeKalb’s official website comply with Americans with Disabilities Act (ADA) rules within a 4-month deadline negotiated with the U.S. Department of Justice.
Some city employees, including the city manager, have worked with CivicPlus previously and elsewhere.
Some city residents have questions about this deal and Bessie Chronopoulos offered a list of hers in a letter to the editor. Read the rest of this entry
I placed a couple links and short comments on these topics with the Facebook Group in case anyone feels chatty this weekend.
**Update** 1/26. Related: “Sales tax coffers could get boost with new law”. Discusses the Marketplace Fairness Act and its impact (if it ever passes the U.S. House) on state revenues.
**Update** 1 p.m. Related: “Now comes the Internet Sales Consultants”. It provides more food for thought on this scheme, as well as a description of an omission that sounds like a possible violation of the Open Meetings Act.
DeKalb’s city council is considering a new kind of retail revenue source. You should know about it because your tax money is involved.
City leaders are trying to lure Internet retailers with an 85 percent sales-tax rebate.
The first step in the coaxing process came Monday when aldermen unanimously approved an agreement with a shell company called Great Lakes Economic Development LLC.
The company was created by Tom McPeak, a partner with Atlanta-based Barnwell Consulting, who said he has an undisclosed client interested in setting up shop in DeKalb.
McPeak is an acquaintance of Roger Hopkins. Hopkins used to head the DeKalb County Economic Development Corporation, and after that contracted with the city to provide economic development services for a time. And it looks like he’s done us a solid in facilitating an introduction.
Let’s take a closer look at the potential in this gift. Read the rest of this entry
A few days ago in another post I said this:
Fine/fee revenue can be highly variable, as we’ve seen with the disappearance of building permit revenues. TIF districts have time limits and both of ours expire at the end of the decade. These are appropriate sources for making capital improvements as you can. They are not meant to cover permanent, fixed costs yet that is exactly what is happening.
That post ran long, so I saved elaboration on the above point for another day. But now I’ve picked it back up with a vengeance. Read the rest of this entry
The City of DeKalb released its FY2014 Comprehensive Annual Financial Report last month, and as usual there’s plenty to digest. A large part of this report draws data from supplemental reports found in the back of the CAFR, some of which track the past 10 fiscal years and are therefore useful for understanding the lingering effects of the Great Recession on the local economy.
First up, I’ve prepared a chart of taxable sales. Retail sales taxes make up more than 40% of DeKalb’s operating budget — no other single revenue category comes close — so sales and the taxes they generate are important indicators of economic health.
The advantage of looking at the sales themselves instead of the tax revenues is that you don’t have to account for sales tax hikes, abatement deals and other “noise” in the data.
Of course there’s a lot of overlap between state and local sales, but showing them both underscores the trend, which is this: Taxable sales have stabilized since 2009, but they’ve more or less stabilized at 2005 levels.
And it’s not just retail sales that have stagnated. DeKalb’s share of the state income tax is climbing, but so far has only made it back to 2008 levels. Utility tax revenue totals for FY2014 were less than FY2012’s.
Water sales were down by 5.2%. If you think about the combo of utilities and water falling, it seems likely that it can’t all be about plugging leaks and conservation. DeKalb’s likely still losing population.
City government, however, is bucking that trend. Read the rest of this entry
Overtime comprised most of DeKalb PD’s excessive spending over budgeted amounts for FY2014, but another major culprit was spending in the “Commodities” category that came to roughly twice as much as the $260,000 budgeted.
Commodities were clearly under-budgeted in 7 of 10 accounts in that category and in a couple cases downright unrealistically. For example, actual costs for gas, oil and antifreeze for that department came in a bit over $117,000 for FY2013, yet PD budgeted only $95,000 for the same item the following year.
What’s going on? My guess is that the decision to return expenses from off-budget accounts back into the department’s budget accounts was an unexpected development.
Fortunately, spending for general government was lower than budgeted and this partially offset the excessive spending on public safety, leaving the city at a mere $347,773 over its General Fund budget for the year.
City of DeKalb FY2015 Budget
Comprehensive Annual Financial Report for Fiscal Year 2014
Auditor’s Letter to Management (see p. 6 of the PDF)
City of DeKalb’s Downloads Page (Look under the Finance heading for annual budgets and CAFRs)
The Comprehensive Annual Financial Report (CAFR) for FY2014 is out. So far the document is only accessible as part of the December 8 council meeting agenda, but at some point will probably appear on the city’s downloads page under the Finance title.
Let’s stick a toe in by first visiting the DeKalb Taylor Municipal Airport (DTMA) annual operating deficits:
The city has to make up for the deficits using tax money that would otherwise go to general operations.
DTMA took on fuel sales a couple years ago, and all of its hangar space is rented out (PDF p. 143). I do not know whether the city has recently compared rental rates with other airports, but if not that might be a good next step to ensure that taxpayers aren’t subsidizing operations any more than they have to.
The agenda for last night’s joint meeting between DeKalb city council members and the city’s Finance (sic) Advisory Committee included a list of 14 communities besides DeKalb and their “comparable economic data.”
The argument seems to be that DeKalb taxpayers can afford to pay more in property taxes than the “bargain” they are currently getting relative to residents of other towns.
The comps had DeKalb’s median family income as $61,806. I laughed.
Don’t get me wrong — DeKalb’s median family income really is $61,806.
But you only come up with that figure if you leave more than half of DeKalb’s households out of the calculation. Read the rest of this entry
DeKalb city staff have come up with a proposal to raise the city’s property tax levy by 10%. Daily Chronicle reports that the council gave initial approval on Monday.
Here’s how the city is presenting the recommendation:
City staff want to move away from the current practice of using the general fund to pay for pension obligations property tax revenues don’t cover. Finance Director Cathy Haley explained property taxes currently fully fund police and fire pension obligations and 97 percent of Social Security and Medicare costs. But only 26 percent of the city’s costs for the Illinois Municipal Retirement Fund comes from property taxes, leaving the general fund to cover more than $720,000.
A 10 percent increase would bring in an additional $495,000, fully fund Social Security and phase in fully funding IMRF obligations through property taxes, Haley said.
Council will furthermore consider the recommended hike in a joint meeting with the Financial Advisory Committee tonight.
The most important thing to understand is that the discussion is not just about setting the levy for the upcoming tax year, but about committing to a significant policy change in how the city chooses to fund its pensions — possibly for years to come. Read the rest of this entry