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.
The Comprehensive Annual Financial Reports (CAFRs) contain financial statements called “Statements of Revenues, Expenditures & Changes in Fund Balances.” Except for a little FY2015 budget material, all the data in today’s charts come from the “General Government” column of these statements.
All that’s meant by “general” is that the funds are not legally restricted to any special use.
The magenta line in the chart below shows the total spending of the general funds.
The blue line combines two of the general revenue categories, “Taxes” and “Intergovernmental Revenues.” I would have preferred to use just the taxes, because intergovernmental (while being taxes also) include grants, and grant amounts can vary a lot from year to year. However, in looking over these figures it has become apparent that what’s included in “taxes” and “intergovernmental” has changed a couple times and would render “taxes” meaningless on its own when it comes to tracking trends. Also, any graphic weirdness is easily explainable.
[easychart type=”line” width=”420″ title=”Tax Revenues vs Gen Gov Spending in Millions” groupnames=”General Gov Tax Revenues, General Gov Spending” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”17.1, 19.6, 21.2, 22.07, 23.98, 24.26, 23.31, 25.79, 25.52, 25.53, 26.56″ group2values=”18.85, 20.96, 22.69, 24.57, 25.83, 25.38, 25.69, 25.91, 26.32, 27.88, 29.01″ minaxis=”17″]
The most important thing is to mind the gap between the lines. Narrow gap means the core, stable revenues are tracking well to expenditures. Here, we see they did until a wobble appeared in FY2007 (yes, interestingly, even before the market crashes) and the two lines began to diverge (despite hikes in several types of taxes in 2008). The gap then widened dramatically in FY2010 because the city gambled that the tax revenues would bounce back that year, and they lost the bet — badly.
We do need to explain the even-more-dramatic closure of the gap in FY2011, which DeKalb tried to sell as real recovery. Here are the most important factors:
— Increase of $769,500 in operating grants over the previous year.
— Increase of $668,367 in utility taxes because of a second rate hike.
— Serious cuts in expenditures through layoffs and a voluntary separation incentive.
After that you see tax revenues flat-lined until quite recently. Meanwhile, expenditures have picked up the pace again, driven primarily by steady increases in public safety spending that in some years have reached a million bucks or more. Look here:
[easychart type=”line” width=”420″ title=”Growth of DeKalb Public Safety Spending in Millions” groupnames=”Total Public Safety Spending” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”12.41, 13.89, 14.96, 15.7, 16.64, 17.39, 18.03, 18.22, 19.34, 18.6, 19.86″ minaxis=”12.4″]
(The slowdown in FY2010 and FY2011 was probably attrition via hiring freeze, and I think the FY2013 bobble might at least partially reflect the city’s temporarily taking a significant portion of police spending off-budget. Other factors could include the replacements of both the police and fire chiefs and/or a downswing in overtime costs.)
Below, I’ve added the FY2015 numbers:
[easychart type=”line” width=”420″ title=”Growth of DeKalb Public Safety Spending in Millions” groupnames=”Public Safety Spending with FY15 Projection” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14, ’15” group1values=”12.41, 13.89, 14.96, 15.7, 16.64, 17.39, 18.03, 18.22, 19.34, 18.6, 19.86, 20.7″ minaxis=”12.4″]
[easychart type=”line” width=”420″ title=”Tax Revenues vs Gen Gov Spending in Millions” groupnames=”General Gov Tax Revenues, General Gov Spending” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14, ’15” group1values=”17.1, 19.6, 21.2, 22.07, 23.98, 24.26, 23.31, 25.79, 25.52, 25.53, 26.56, 27.97″ group2values=”18.85, 20.96, 22.69, 24.57, 25.83, 25.38, 25.69, 25.91, 26.32, 27.88, 29.01, 32.45″ minaxis=”17″]
The gap between spending and tax revenues will probably not be as large in FY2015 as shown here, because the new Finance people project revenues fairly conservatively. Even so, the trend is clear: Expenditures are increasing and core/tax revenues are not keeping up like they used to.
So what is covering the gap?
[easychart type=”line” width=”420″ title=”DeKalb Non-Tax Revenues in Millions” groupnames=”Licenses and Permits, Service Charges, Fines and Forfeitures, Other Income” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”.847, .618, .599, .448, .364, .354, .346, .499, .396, .493, .555″ group2values=”1.47, 1.41, 1.55, 1.49, 1.48, 1.56, 1.71, 1.81, 1.94, 1.6, 1.82″ group3values=”.639, .654, .697, .672, .767, .729, .648, .639, .605, .679, .897″ group4values=”.286, .271, .305, .341, .388, .601, .517, .516, .675, .539, .765″ minaxis=”.27″]
Notice that non-tax revenues are more zig-zaggy, less reliable than the taxes. How do you faithfully cover relentless annual contractual raises with variable performances like that? Nevertheless, DeKalb is trying.
In fact, let’s pull service charges out of the chart to better see the try. Service charges are mostly about DeKalb Fire recouping expenses from covering NIU home games for potential emergencies and providing ambulance services. It’s an actual response to demand, which is pretty unobjectionable, plus the collection level is so much higher it’s partially masking what’s going on with the other non-tax categories.
Yank.
[easychart type=”line” width=”420″ title=”DeKalb Non-Tax Revenues in Millions” groupnames=”Licenses and Permits, Fines and Forfeitures, Other Income” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14” group1values=”.847, .618, .599, .448, .364, .354, .346, .499, .396, .493, .555″ group2values=”.639, .654, .697, .672, .767, .729, .648, .639, .605, .679, .897″ group3values=”.286, .271, .305, .341, .388, .601, .517, .516, .675, .539, .765″ minaxis=”.27″]
Now with FY2015 projections included:
[easychart type=”line” width=”420″ title=”DeKalb Non-Tax Revenues in Millions” groupnames=”Licenses and Permits, Fines and Forfeitures, Other Income” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14, ’15” group1values=”.847, .618, .599, .448, .364, .354, .346, .499, .396, .493, .555, .762″ group2values=”.639, .654, .697, .672, .767, .729, .648, .639, .605, .679, .897, .955″ group3values=”.286, .271, .305, .341, .388, .601, .517, .516, .675, .539, .765, 1.14″ minaxis=”.27″]
And finally:
[easychart type=”line” width=”420″ title=”Nontax Rev as Percentage of Total Gen Rev” groupnames=”Percent of Gen Rev that is Non-Tax” valuenames=”’04, ’05, ’06, ’07, ’08, ’09, ’10, ’11, ’12, ’13, ’14, ’15” group1values=”15.9, 13, 12.8, 11.7, 11.1, 11.8, 12.1, 11.8, 12.4, 11.5, 13.1, 16.5″ minaxis=”10″]
[Clarification of method: I’ve included all revenue categories in the general revenue total, but excluded investment interest from the non-tax revenue total used in the calculation. The interest amount comes in well under $100,000 for all years so point made with less maths.]
FY2014-15 looks a lot like FY2004 when it comes to the non-tax percentage of general revenues, but there is a crucial difference. What passed for a housing boom in DeKalb was reaching its peak in FY2004, and the city collected about 45% more than it had projected for Licenses & Permits, or $846,571, most of it due to building-related permits. Permit revenue has recovered some from its FY2010 low, but much of the non-tax growth currently gobbling a larger piece of the revenue pie comes from punishments, especially administrative tow fines.
Bottom line is we’ve had councils over the past few years that are reluctant to raise taxes and simultaneously just as unable to cut expenditures. Instead, they’ve allowed a third path to balanced budgets.
But this should not go without comment. Besides the relative unreliability of fee/fine/permit revenues, there are limits to how much you can criminalize behavior and burden the business community. And besides the unsustainability of this approach, there are policy implications such as how this type of revenue-chasing could damage the mission to promote the general welfare and turn DeKalb into a smaller, meaner place.