CFO calls for city budget restraint

Marty Lyons

Evanston's chief financial officer urged aldermen Monday night to increase fund reserves and put more projects on a pay-as-you-go basis to gradually bring down the city's debt.

Marty Lyons said that for capital improvements that are ongoing expenses -- like replacing the city's aging water mains -- it would save the city money to avoid the cost of borrowing to fund the projects.

Even with inflation rates as low as 2 percent, Lyons said, it still costs the city 3.5 to 4 percent a year in interest payments to borrow money for capital projects.

And with $4 million to $5 million worth of nearly 100-year-old water mains needing replacement each year, he added, it's not the sort of one-time cost that logic suggests should be financed.

By contrast, he suggested, it could make sense to borrow money to purchase a $1 million fire department ladder truck. Those typically last 20 years and the city only has two of them, so the city can smooth out the cost over time with a loan.

While the city has very high ratings from municipal bond rating agencies, it has been criticized in ratings reports for having a higher than average level of debt, and Lyons said the pay-as-you-go approach would help gradually bring debt levels down.

Alderman Ann Rainey, 8th Ward, raised objections to the change -- saying it makes sense to to let future taxpayers -- who will enjoy the use of the new water mains -- pay for them. And, she said, higher costs now would hurt today's residents.

But Alderman Coleen Burrus, 9th Ward, said it's important to use the pay-as-you-go approach to reduce the city's debt. "It's something we've been putting off for years," Burrus added.

Mayor Elizabeth Tisdahl said that under current policies, "We're leaving our children with huge amounts of debt, and pay-as-you-go is the way to go."

City Manager Wally Bobkiewicz said the other option to reduce debt "is to stop doing things."

He said it the council could agree on some city activities and programs that could be scaled back, it would "free up some cash to further more important council goals."

Lyons also called for increasing the level of reserves in most city funds to the equivalent of two month's worth of spending -- or 16.6 percent of their annual budgets.

Council policy now sets reserve levels of some funds at about one month of spending and the city lacks policies for how much should be maintained in reserves in other funds.

Setting higher reserve levels, Lyons said, would help the city manage more effectively through economic shocks like the recession that hit a few years ago.

Aldermen took no action on the proposals Monday night, but are expected to act on them this fall as they adopt a budget for 2015.

Comments

Budget restraint? NO - just more taxes and fees!

The presentation was nothing more than stating we want to have 2 months of extra funds for numerous items in the budget. The water fund last night is now over budget - as reported last night - and passed by the council. If they had the reserves they would have just covered it up.
Where will these extra funds come from? Increases in water bills, for sewer fees, garbage and water. If anyone is listening these funds are in trouble, due to poor management. The water fund is a huge mess that drawfs the police and fire pension problem. The garbage fund is screw up, due to mispresentation from staff about yard waste stickers several years ago.
Pay as you go, the reason is simple - the city has over borrowed so it can't continue to borrow to cover the debt - also the city is covering up the huge capital mess if has - which it is not dealing.
How are they going to fund Robert Crown - remember Wally claimed it would pay for it self several years back, then they recently claimed it would not at all, I stated it would amount for a 4-5% property tax increase for a New Robert Crown, the city budget director agree with my numbers and even stated so at council. I recently have heard off the record through a citizen that there is mismanagement at Crown which appears they are not even collecting the fees in some cases for ice time - while I can't verify this - I am quite aware of recent mismanagement at the Ecology center, which is running the program down.
Last night Wally stated a few citizens are claiming the city is mismanaged, and he pointed to the fact the medical benefits program was paying staff back this year. OK - Wally you did something right, you claimed $4 million in saving - you have 100 less employees, numerous older employees have retired lowering costs and final you stop about 3% of the employees who were stealing benefits, Ok you did something right- I should have clapped my hands, along with staff when you stated this, but I don't work for the city, so I don't depend on my city pay check.

Pay as you go and reserves its interesting NOT one council member asked the question how will this increase taxes, one alderperson claimed this was great - I am sorry - you should be asking more intelligent questions.