The data for the following charts come from Comprehensive Annual Financial Reports (CAFRs).

In view of DeKalb staff’s continually stated desire to hire, I’ve begun with a look at the numbers of full-time equivalent employees. The city is using a figure of 220 city employees during its budget process instead of the most recently available CAFR number of 230. I’ve arbitrarily split the difference for the chart.*

dyerware.com


No matter whose number you use for the past year, DeKalb’s been hiring at a brisk pace following the Great Recession crash-and-burn. However, some council and Financial Advisory Committee members would like to start putting the brakes on hiring. Let’s look at why. Read the rest of this entry

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.

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.

dyerware.com


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

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

The numbers are the amounts budgeted for streets combining two line items, Street Maintenance/Repairs (8632) and Street Construction/Reconstruction (8633). It does not include alleys or permanent street improvements (e.g., Taylor Street widening).

Keep in mind, what’s budgeted may not always reflect what’s spent, either.

Fiscal YearCapital
Projects
Motor FuelTIF 1TIF 2Totals
FY200775,000980,000417,60020,0001,492,600
FY2008115,0001,650,0003,390,00020,0005,175,000
FY200901,500,000350,000100,0001,950,000
FY201001,500,000450,000100,0002,050,000
FY2011360,0001,050,000450,000100,0001,960,000
FY2012378,0001,120,000950,000100,0002,548,000
FY2013300,0001,382,000530,00075,0002,287,000
FY2014150,000635,000500,000500,0001,785,000
FY2015300,000400,000500,000500,0001,700,000
Totals1,678,00010,217,0007,537,6001,515,00020,947,600

Observations:

  • The Motor Fuel Tax Fund is taking a dive.

  • Overall funding of street repairs and reconstruction has dropped significantly.

  • TIF 2 has only just recently become a major funder of street reconstruction.

  • Now I’ll explain what has happened in three parts.

    Part 1: The Motor Fuel Tax Fund used to hold both the state and local (home rule) motor fuel taxes, but the city was having trouble keeping up with other infrastructure needs and began placing the local portion into the Capital Projects Fund, where it has to compete with other projects besides road-related ones. (DeKalb has also dedicated some local motor fuel tax funds to the Public Safety Building Fund.)

    Part 2: The city doesn’t dare budget more for streets from the Motor Fuel Tax Fund because it doesn’t know how much is in it. Here’s the explanation from the FY2015 budget narrative:

    This fund has some outstanding obligations due to outstanding bills from past construction projects in the amount of approximately $1.0 million dollars. The City will also receive $198,673.00 from the Illinois Jobs Now Capital Bill. The balance in this fund is attributed to the outstanding obligations of projects that have not been closed out. These outstanding obligations amount to an estimated $1,888,455.73. Once the Illinois Department of Transportation completes the audit of this fund a greater understanding of the actual amount available will be determined.

    Part 3: TIF 2 can be used to catch up/make up for/cover up for the lack of funding to streets now that the fund has accumulated a $7 million nest egg for remodeling the city hall building.

    Related posts:

    So DeKalb Has a Streets Problem — Is TIF or a Sales Tax Hike the Answer?

    FAC Using the Faulty Street Repair Numbers Too

    This week’s number: $33 million

    The city’s streets could need $33 million in repairs over the next five years, but a key funding source for the work will dry up by the end of the decade.

    That has city leaders considering options including increasing the sales tax to generate more revenue.

    Of the $1.5 million the city plans to spend on streets this year, $1 million comes from the city’s two tax increment financing districts. TIF districts allow the city to divert property tax money into a special account that is used to rehabilitate blighted areas.

    However, one of the city’s TIF districts expires in 2018, while the other will expire in 2020, meaning the only source of funding left will be the local gas tax.

    The above account is incorrect and incomplete. Let me count the ways. Read the rest of this entry

    I am loving the budget talks, mostly. They make me feel like the city is in much better hands than it used to be.

    For example, in response to a question from a Financial Advisory Committee member last Saturday, the city manager confirmed: Revenues that for the previous year had been spent out of (off-budget) balance sheet accounts have all been returned to the budget.

    We probably dodged a bullet, and by that I mean city administrators have reversed a corrupt trend that eventually could have rendered meaningless the annual DeKalb budget.

    But we still have the same council.

    Fifth Ward Alderman Ron Naylor and 3rd Ward Alderwoman Kristen Lash contended the city has held the line on property taxes because the dollar amount the city collects has not changed much in previous years.

    “When I look at it from year to year and see that I’m paying the same amount from year to year, that’s not an increase,” Lash said. “I’m paying the same amount.”

    David Jacobson, 1st Ward alderman, contended “holding the line” could be seen as a tax increase considering the drop in property values.

    Jacobson is right, but in my opinion he is not going far enough. We should figure out how much the conscientious underfunding of the pensions during the past decade has cost us.

    You see, every dollar we short the pension funds is a dollar that can’t be invested. I don’t know about you, but my assets have performed very well the past few years — it’s a shame that our pension funds couldn’t have maximized their earnings in this market.

    That’s not to say that underfunding is the only problem with the public pensions. It’s not. But a council truly serious about “holding the line” for our sake would be doing a bit less self-pleasuring and a lot more work toward a solution.

    Related:

    Painting a Picture of DeKalb’s Pensions

    The special joint meeting between city council members and the Financial Advisory Committee (FAC) on Saturday filled in a lot of blanks, even for — or maybe especially for — folks who have reviewed the FY2015 City of DeKalb budget including its excellent Transmittal Letter.

    One of the changes proposed by city manager Anne Marie Gaura is to split off community development services from Public Works and place them into their own department. Community Development would then handle and/or oversee the following:

  • Planning & economic development
  • Building services such as code enforcement
  • Community Development Block Grant administration
  • One part of the argument is that Community Development functions are not Public Works core competencies. Splitting them off would allow PW to better concentrate on the budgetary and strategic priority of infrastructure.

    Also there is a track record to consider. As you are probably aware, the city has placed a building supervisor and two building inspectors on administrative leave as it debates their fates vs. the proposed reorganization. From the budgetary Transmittal Letter:

    In the past year, the City has seen a number of very public, very unfortunate business closures and even building collapses. In order to protect public safety, changes in the City’s operations are essential.

    On Saturday it came out (during the Workers Comp discussion, actually) that the police officer who was injured by falling through the floor of the old Wurlitzer building may remain permanently disabled. Read the rest of this entry

    FY2014 General Fund Budget: $30.87 million
    FY2015 General Fund Budget: $35.22 million

    Does this reflect $4 million in revenue growth for City of DeKalb? No, it does not. For one thing, FY2015 currently shows a deficit of $586,800. It is not a balanced budget (at least not yet, though they may not be done with it).

    Also, more than $2 million of the shown increase is a result of the city manager’s effort to record more revenues and expenditures in the actual budget.

    Let that statement sink in for a min.

    And we are not just talking about bringing the Administrative Tow account into the budget picture.

    [T]he Home Rule and State Sales Taxes are being revised to show the gross sales tax revenue. In previous years, the sales taxes were shown as a ‘net’ income, after deduction of sales tax abatements with DeKalb County and the City of Sycamore.

    The result of the change is that, for the first time, we can look at sales tax revenues and it’s the real number. And for the first time, we can look at expenditures and find out that tax-sharing agreements are expected to cost us about $2.1 million next fiscal year.

    It’s another reason to feel pretty good about how the budgeting process is going under new city management.