DeKalb may raise taxes, but the structural budget issue remains

DeKalb’s Financial Advisory Committee (FAC) will be recommending that the city council raise the property tax levy by $954,000, and its local (home rule) sales tax by one cent, in the fiscal year starting January 2018.

The property tax recommendation was approved by the FAC in early October, and the sales tax during a meeting November 2.*

Even if the city council passes the recommended increases, FAC members acknowledge it would not fix the basic operations budget problem. The hikes, if approved, would balance the General Fund budget for this year, and maybe next. But without a major intervention to eliminate the structural issue, they would not constitute a long-term solution.

Indeed, the city’s own five-year forecast has the General Fund in deficit of nearly $2.9 million by 2022 — and that forecast is now due for an update because of DeKalb’s recent purchase of the condemned Edgebrook property and the latest downwardly-revised projections for state income tax revenues. On this trajectory, we could be looking at a hole of $3.5 million or more in operating revenues. And the forecast doesn’t cover grimmer scenarios, such as what happens to income tax revenues (distributed on a per capita basis) if DeKalb’s population has shrunk to fewer than the currently-claimed 40,030 residents, or how we’ll end up if recession hits in the next couple years.

Speaking of which, after the market crashes of 2008, City of DeKalb raised a half-dozen taxes and fees. No matter what anybody thought of these moves, back then DeKalb was at least responding to actual, serious losses in revenues. That is not the case now, with low overall inflation and annual revenue growth of about 2.5%.

FAC member Tom Teresinski spoke at length and voted against recommendations for higher sales taxes, citing concerns that approval of the proposals would allow the city to postpone a reckoning with the structural budget issues. Teresinski’s alternative recommendation, which did not reach a vote, is for the city to make permanent cuts of $1.5 million in this General Fund budget, and he suggested the city could accomplish the cuts by eliminating six or seven full-time, non-public safety positions. Teresinski also said he was willing to meet regularly during the first three months of the year to help prepare and finalize FAC recommendations for adjustments to the budget next spring.

*The sales tax proposal ended up getting complicated, split up into two separate FAC recommendations/votes.

Link to the City Barbs Facebook Group discussion is here.