financial advisory committee

Snapshot of DeKalb’s pension trends through 2020

The chart below tracks the unfunded liabilities of DeKalb’s Illinois Municipal Retirement Fund (IMRF), police (PD), and fire (FD) pensions.

unfunded-pension-liabilities-thru-2020

We expect total pension liabilities will go up with raises, cost of living adjustments, etc. However, the unfunded portions of the liabilities should not. Actuarially determined annual pension contributions are supposed to ensure they don’t rise. Yet you can see by the chart that unfunded liabilities for police and fire climbed steadily for a generation. We’ve now accumulated some $126 million in liability debt. One of the consequences is this year’s contribution total of $9.7 million, which will gobble more than a quarter of the city’s operating budget.

However, the chart also indicates that someone began applying the brakes in 2018. It’s important to explain this so we can support policies that continue the trend to reduce unfunded liabilities.

DeKalb’s financial forecast through 2023

You need to know what that hole is, even if you can’t solve it right now. ~Larry Kujovich, Executive Partners, Inc., addressing the DeKalb city council on strategic planning (2013).

Last week, DeKalb’s finance department shared an operating budget forecast through 2023 with the finance advisory committee. Having obtained a copy, I’ve created a graphic to show operating fund (General Fund) highlights.*

Continue reading DeKalb’s financial forecast through 2023

DeKalb’s finance advisory committee may be treated with more respect this year

Have you ever heard of the sheep-and-collie routine? It’s when one or more collies nip at the heels of a flock of sheep, to force them toward a destination the sheep really don’t want to go.

Sheep-and-collie applies to both human and animal activity, and in both cases it’s a fact that the “collie” does not respect the “sheep.”

Now, DeKalb’s finance advisory committee (FAC) is nowhere near being a flock of sheep, but over the past 10 years it’s been clear to me that city managers and their minions have worked hard to become successful collies. When Mayor Van Buer reconstituted the committee in 2008, new appointees were treated promptly to threatening letters from the city attorney regarding the Open Meetings Act, and from there the intimidation tactics have never totally stopped. Continue reading DeKalb’s finance advisory committee may be treated with more respect this year

A fresh look at “old” financial advice for DeKalb

At a recent budget meeting, DeKalb city manager Anne Marie Gaura (AMG) stated that she references the “EPI reports” frequently in financial planning.

Because the city’s finance advisory committee might likewise like to revisit EPI findings when it (the committee) reconvenes in 2018, I’d like to introduce EPI to our newer readers (and help refresh memories).

EPI stands for Executive Partners, Inc., which is the former name of an organization of financial consultants who, in 2009 and 2013, tried to help DeKalb think more strategically about its finances.

Here’s EPI’s Larry Kujovich in the spring of 2013, talking about DeKalb’s gigantic financial hole.

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. Continue reading DeKalb’s growth in personnel expenses

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