Post-Recessionary Trends & Responses

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.

[easychart type=”vertbar” width=”420″ title=”DeKalb’s Taxable Sales in Millions” groupnames=”Locally Taxable, State Taxable” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13” group1values=”356, 377, 405, 415, 407, 367, 385, 384, 379, 381″ group2values=”514, 540, 582, 594, 590, 528, 542, 535, 529, 523″ minaxis=”355″]

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.

Despite the failure of core revenues to grow, DeKalb has managed to add several millions in spending to its General Fund budget since 2008. Here’s how:

  • Hiking retail sales, fuel and utility taxes — some of them more than once.

  • Raising the amounts transferred from Water and TIF funds to the GF for “administrative purposes.”

  • Using TIF “declared surpluses” for general operations.

  • Hiking fees and fines.

  • Inventing new fees and fines.

  • 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.

    [easychart type=”line” width=”420″ title=”Number of Full Time Equivalent Employees” groupnames=”FTEs Budgeted” valuenames=”’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”250, 253, 261, 262, 249, 241, 211, 209, 217, 230″ minaxis=”208″]

    Back in 2007, DeKalb was readying its staff for population growth that they’d expected would reach 50,000 by 2010. But now, we probably don’t have 40,000 and the university has shrunk as well. It made no sense to budget the equivalent of 13 additional full-time employees last fiscal year in the face of the twin shrinkage of people and revenue.

    On top of that, they’re still having a hard time staying within budget. Expenditures once again significantly exceeded budgeted amounts in FY2014.

    Excess spending over budgeted amounts for FY2014*:
    General Fund – $347,773
    Public Safety Building Fund $ 948,611
    Fleet Replacement Fund $ 179,943
    Equipment Fund $ 96,610
    Police Pension $ 13,895
    Fire Pension $ 87,072
    Total amount over budget in all funds: $1.7 million

    The reason you never hear a peep about this at city hall is that they really only focus on the GF, and thanks to conservative revenue estimates the GF expenditures haven’t actually exceeded revenues. But, look at this:

    [easychart type=”vertbar” width=”420″ title=”Fiscal Year End Fund Balances in Millions” groupnames=”Total of Fund Balances” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”5.12, 4.92, 7.1, 5.38, 13.81, 14.91, 19.64, 14.82, 17.5, 21.14, 18.01″ minaxis=”4.9″]

    These are General Fund balances reported as of the last day of each fiscal year, which is June 30.

    There’s quite a jump for FY2008. That’s when the city implemented a policy to phase in, and then maintain, reserves equal to 25% of the annual GF budget.

    You can see it was doing great at building the general reserves, until holes in other funds grew so large that the city had to get rid of at least 30 employees in order to dodge a projected $5 million in deficits across all funds by FY2012. In all, DeKalb unloaded 20% of its workforce in the three years following the market crashes.

    Now, city government would like to have you think it’s doing great, but the slippage in FY2014 — and anticipated for FY2015 too, by the way — is a worrisome bit of déjà vu.

    _______________________________
    *Excess expenditures for both FY2013 and FY2014 appear in the auditors’ Letter to Management, which the city did not choose to post online with the CAFR on its downloads page. Instead, find it in this agenda packet on page 12 of the PDF file.