DeKalb’s growth in personnel expenses

There’s another special city council meeting, specifically a budget meeting, set for this evening. It’s apparently a follow-up of what they discussed last week.

On Thursday, the council held a joint meeting with the finance advisory committee to outline a proposed 5 percent reduction in city department budgets for fiscal 2018. This equates to nine full-time positions and 11 part-time positions being dropped and nearly $20 million being cut.

I watched the joint council-FAC meeting that the newspaper is referring to, and it did not look like there was much cutting of staff happening. With few exceptions, department heads talked about cutting expenses in a one-off manner. For example, they suggested simply not contributing the usual $12,000 to IHSA this year, and cutting non-critical training, and putting off purchases of equipment and software. In other words, the show was pretty much the same juggling act they do every year.

The problem is simple to explain. The city only has so much in revenues, and at this point in time, they’ve been growing at the rate of about 2-1/2% a year at best. However, expenses have grown well past these modest organic increases, especially personnel expenses (wages, insurance, pensions, etc.), which make up 80% of the operations (General Fund) budget.

Because personnel take up 80% of the operations budget, and because each full-time hire impacts several personnel line items (and one or two contractual ones as well), the best way to limit increases in expenditure growth is to limit hires, and the best way to cut expenses dramatically is to cut personnel.

growth of personnel expenses

By the way, the chart makes it look like they were getting a grip on things in FY16, but the real story is that the city moved $560,000 in personnel expenses from the General Fund to the Water Fund. Though the move made sense (assuming that all the personnel now covered by the Water Fund actually work for the water utility), it has also helped conceal the extent of the hiring going on during city manager Anne Marie Gaura’s tenure.

The FY18 numbers are, of course, only projections of what staff want at this point. The city council has the last say. But as they stand now, wages would grow from FY17 to FY18 by $650,000, or 6.8%, while personnel costs on the whole would rise by $2.76 million, or 9.8%. These expenses are clearly unsustainable.

Anatomy of DeKalb’s proposals for a sales tax hike

That’s not a typo in the headline. There are, I believe, two proposals for a sales tax hike of one cent for fiscal 2018. One comes from DeKalb city administrators, the other from the city’s finance advisory committee (FAC).

Here’s the proposal staff put into the draft budget:

proposed increase of sales tax

Sales tax for hiring police officers? Sales tax for “operations stabilization?” These people have run out of money for day-to-day expenses. The hiring spree chickens have come home to roost. Continue reading Anatomy of DeKalb’s proposals for a sales tax hike

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. Continue reading DeKalb may raise taxes, but the structural budget issue remains

DeKalb’s Shortage of Magic Rabbits

As the city ponders a property tax hike of 37% as well as water rate and fee “adjustments,” you may wonder how DeKalb has got itself mired in financial straits.

It’s actually nothing new. DeKalb’s budget issues are — and have been since at least 2005 — the result of snatching nearly every penny of revenue growth and putting them into more staff and higher salaries, to the detriment of other areas such as street maintenance.

Worse yet, DeKalb has to come up with, at minimum, a half-million new dollars in revenue each budget cycle just to stay abreast of annual personnel cost increases. It’s rendered the financial gurus unable to look ahead more than 12 months at a time because they continually need to chase the next rabbit for the proverbial hat.

Want proof? The stated Number One strategic priority of the City of DeKalb is “Infrastructure,” yet capital improvements are precisely the area that’s been starved in the current budget. That’s pretty messed up.

And a proposed 37% hike in property taxes bespeaks the latest shortage of bunnies for the hat trick. Continue reading DeKalb’s Shortage of Magic Rabbits

Numbers to Consider During the Budget Process

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.*

[easychart type=”line” width=”420″ title=”Full Time Equivalent Employees by Fiscal Year” groupnames=”FTEs” valuenames=”01, 02, 03, 04, 05, 06, 07, 08, 09, 10, 11, 12, 13, 14″ group1values=”224, 231, 240, 237, 250, 254, 261, 262, 249, 241, 211, 209, 217, 225″ minaxis=”208″]

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. Continue reading Numbers to Consider During the Budget Process

Half of DeKalb is Doing Well Enough to Compare to Others

The agenda for last night’s joint meeting between DeKalb city council members and the city’s Finance (sic) Advisory Committee included a list of 14 communities besides DeKalb and their “comparable economic data.”

The argument seems to be that DeKalb taxpayers can afford to pay more in property taxes than the “bargain” they are currently getting relative to residents of other towns.

The comps had DeKalb’s median family income as $61,806. I laughed.

Don’t get me wrong — DeKalb’s median family income really is $61,806.

But you only come up with that figure if you leave more than half of DeKalb’s households out of the calculation. Continue reading Half of DeKalb is Doing Well Enough to Compare to Others

“Conversation with an Engineer” by Strong Towns

The following is a production of StrongTowns.org.

Advisory:

Note: Strong Towns is not responsible for any mental duress resulting from repeated watching of this video. We are also not responsible for angry reactions from planners and engineers confronted with the illogic of their world view. If watching as part of a group, we recommend having a padded room or some type of physical restraint system available to keep those that develop a temporary feeling of hopelessness from doing damage to themselves or others.

As DeKalb tries to figure out how to come up with $6 million a year more to repair our neglected streets without chasing out more of our population, there are ways to put together better answers. For our city, it means a major shift away from its Edifice Complex (public spending on buildings that don’t contribute to the tax base) and development of a grownup’s appreciation for basic infrastructure.

Pension Discussion Reveals Council’s Dysfunction

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

A New Community Development Department

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. Continue reading A New Community Development Department

    Stop Wasting the Financial Advisory Committee on Budgets

    From a Northern Star article this week:

    City manager Anne Marie Gaura said the finance committee typically reviews the budget and looks at policy recommendations and general fund balance.

    “The goal is to utilize the finance advisory committee in the most effective means of how to benefit the budget and the community,” Gaura said. “It’s an incredibly talented group, and we want to make sure we’re utilizing their talents to the maximum.”

    If we REALLY want to utilize the talents of the city’s Financial Advisory Committee (FAC) to the max, we need to move it past budgets. Continue reading Stop Wasting the Financial Advisory Committee on Budgets