As We Head to the Final Vote on the Budget

DeKalb’s expenses are outpacing revenues:

The city will spend at least $30 million from its general fund, a 5.4 percent increase from this fiscal year. The city’s general fund pays for city personnel, equipment, and contractual services.

The city is projecting $31.1 million in revenue for fiscal 2014, a 4.2 percent increase from this fiscal year. In fiscal 2014, the city is paying $750,000 more on police and fire pensions out of their general fund.

Today I want to look closely at the revenue increases.

In dollars, the 4.2% expected net increase equals $1.08 million, which will cover the pension contribution hikes plus a bit more. However, so little of it comes from natural growth that you won’t need to pull out the tarot cards to see a shaky future.

Let Us Count the Ways

1. Anticipated income tax increase = $400,000. According to the budget narrative, the Illinois Municipal League says municipalities will enjoy an 11% increase in their shares of state income tax receipts (PDF p. 28). Despite our county’s less-than-stellar jobs reports and ongoing threats from the state that it may cap local shares, DeKalb immediately projected the full amount of the IML forecast.

2. Planned increases in formal and de facto transfers = $752,700. Most of the increase comes from the expiration of the sales tax TIF ($500,000), with the money coming to the GF instead of the Central TIF Fund. Much of the rest comes from bumping up voluntary transfers from the TIFs ($185,000+) and Water Fund ($75,000). Main point: None of the increases represent new money, they’ve just become part of the juggling act to cover new spending. Even worse is that the TIF voluntary transfers, made annually to cover administrative costs, total $942,000 but are temporary; they’ll be gone in a few years and will need to be made up.

3. New programs = $297,000. This of course comprises the new rental housing registration ($227,000) and towing fee programs ($70,000). Expenditures for housing and inspection services (PDF p. 67) are expected to exceed the registration fees for this year. Towing fees are earmarked for Fleet and Equipment funds and that’s fine, though keep in mind the GF will have to make up for deficits in these funds if revenue projections are faulty in the wrong direction.

4. Actual new tax revenue = $320,800. Property tax revenues are expected to increase $116,800; expiration of the Kohl’s tax sharing agreement to bring $80,000; a new hotel to bump hotel/motel taxes $54,000, utility taxes to rise by $50,000, and the video gaming share to yield $20,000. The “Kohl’s money” will help offset decreases in city sales taxes. The rest of the growth will immediately be devoured by pensions and the Chamber of Commerce.

Council member Kristen Lash said in the Chronicle story:

“It reminds me of living paycheck to paycheck,” 3rd Ward Alderwoman Kristen Lash said. “If one thing goes wrong, the whole budget is blown. We can’t operate a city like that.”

We shouldn’t, but history tells us we can and we have, and the latest budget developments suggest we may very well continue.

Added CofC link 5/30.