City faces multi-million dollar budget crunch

Wally Bobkiewicz.

Evanston City Manager Wally Bobkiewicz says the city is facing revenue shortfalls and expense increases that could leave it with a general fund budget deficit of more than $5 million this year -- even with nearly $2.5 million in spending cuts already under consideration.

In a memo to aldermen to be discussed at Monday's City Council meeting, Bobkiewicz and Assistant City Manager Marty Lyons say general tax revenues driven by the economy have all been lower than projected this year.

In addition, the Police, Fire and Parks departments are all running over budget because of service demands and personnel issues.

The projected shortfalls, after planned savings, still range from about 2.5 percent to nearly 5 percent of total general fund spending -- which was budgeted for $118.8 million this year.

The biggest revenue shortfall -- and among the most difficult to predict -- is in building permit income. It had initially been budgted at $9.2 million for the year. But officials think it now will fall somewhere between $4.5 million and $6.5 million.

Income tax revenue is now expected to be 5 percent to 10 percent below budget and sales tax down 7 percent to 12 percent because of the state economy. 

And utility tax revenue may be down 20 percent to 46 percent -- depending on whether there's a repeat of last winter's warmer weather late this year.

City officials fear that if they can't get the general fund balance back up to the two-months reserve level set by Council policy it is likely to lead to a downgrade by rating services which would increase the city's borrowing costs.

Any budget deficit this year would send that fund balance in the wrong direction.

Bobkiewicz says city staff is considering proposing a range of ideas for increasing revenue -- including raising parking ticket fines and increasing the gasoline, liquor and home rule sales taxes.

But those changes, at the levels being considered would add less than a million dollars to revenue for this year.

Bobkiewicz says that after getting discussion of the issue started on Monday, staff will return to the City Council with potential solutions for closing the deficit at its July 24 meeting.

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Comments

Funding of potential Federal lawsuits

If Evanston approves their drone ordinance, a lawsuit in Federal court could cost the residents of Evanston tens of thousands to defend.

Yeah, that's the key

Raise taxes so people go to other places for liquor and gas and to shop elsewhere. Keep money pits like the Mansion open [how many visit and for free?] and off tax rolls, limit B&B, discourage business with taxes and regulation. Give special deals to 'arts' groups----and build more of them. Pick 'winners' to dole out gifts. How has that gone ? Reminds me of the old saying "we lose money on every sale but make it up in volume."

Fellow residents fear not.

Fellow residents fear not. Wally will simply hold salary increases he promised non-female inner-circle employees. 

Budget Crunch

Building permit revenue is never easy to estimate a year in advance; however the estimate of $9M is ridiculous based on historical revenues. The former Community Development Director should have known this, so it is no wonder he left quickly. There is an overwhelming culture of fear that runs rampant throughout the organization and nobody wants to talk about it. The bottom line is it's a dysfunctional organization and a change in leadership at the senior level is sorely needed.

Personnel Issues ???

What is this?  Parks,Fire and Police have gone over budget due to personnel issues - how vague is that?

What about Ann Rainey's $1.6 million to Howard Theater

How does Ann Rainey pull off a $1.6 million TIF fund (which could have instead gone to our schools--hello referendum) going to a small theater company currently has only 40 seats? No way they will come close to meeting their end of the deal re: monthly lease, etc. How does she get all of this, meanwhile we raise taxes, taxes and many other things are cut. Responsible governing?

About the mansion...

Don't mix that up in this conversation. In fact, the Evanston Lakehouse plan calls for their group to raise the money for renovation. (In addition to their primary focus on D65 educational and community programming) holding some private events there will pay for it ongoing, as seen in the models the group is basing this on in other communities. In fact, these mansions are actually profitable. Can't you imagine a venue for weddings on a mansion on the beach would be very desirable and people would pay top dollar to have?  

Why don't you focus on looking into the likely clerical error that caused building permits $ to be over-estimated.

It's a money pit, unfortunately

It think that it would be virtually impossible to recover the cost of re-habbing the Harley Clarke mansion. I have some experience with this sort of project and can tell you that it will cost in the neighborhood of $450 per square foot. The building is reported to be 37, 700 square feet, so that means the renovation cost will be around $17 million. How many weddings/events will it take to pay for this? 

We need more more more

Since 80% of the votiing citizens of Evanston so readily agreed to the school districts need to increase property taxes to fund their pensions why wouldn't the city government think it would be a good idea to ask the same citizens for more of their generosity due to poor planning and mismanagement?  I have been waiting for this story and how it would be presented.  Didn't take long. I love Evanston but it is time to go.

We voted against the Referendum, and moved away 2 months ago...

...just before the 19% tax increase was mailed out. We are pleased that we got out relatively early, before the tax increase hit the mailbox. Sellers may have more of a challenge now that the cat is out of the bag.

Evanston Democrats: you are driving out good, productive people away with the toxic combination of wealth distribution, tax increases, and failing liberal ideologies such as sanctuary city status. My family is politically neutral, but will not silently endorse these policies by staying and paying.

Fall on their sword !

The school Board members and Council/Administration that got us here should do the honorable thing and fall on their sword---resigning would be the first step. The over spending and promises and mis-management are not excuseable. 

Residents who supported this mis-management, taxing and spending should be ashamed of themselves---and probably fall on their sword and make a donation of an equal amount of the taxes---i.e. if their property tax is $5000, add on another $5000.

at fault

Is this what Wally saw was coming, and wanted to move to Tacoma?  the blame starts at the top...this is not new news!

Or was it an accounting error?

Word on the street is that the "planning" figures were so far off due to a line item from last year (NU payments to the city--permits?) was accidentally carried over for thisbyear. Meanwhile, it was a one time thing. Bill, can you please dig into this? We deserve to know.

In the red...

Gosh, maybe it's time for another aldermanic pay raise - no wait - higher salaries for police and fire administrators - and the school superintendant.  Anyone with any common sense will sadly be looking for a different town to move to, Wally already tried and failed.  Wonder if anyone will want to buy my house - I didn't get a housing allowance like Wally did so I'll probably lose money.

City Potential Deficit

Here go again with budget deficits !

Let's let our new Mayor & previous Mayor step up to the plate & demonstrate true leadership.  Between Hagerty & Tisdahl, they can easily donate a combined $2 million or so to bail

out the City they both love so much.

Time to show personal leadership & dedication "to the cause."

That's why you each ran, in your time, isn't it?

Perils of Assumptions

Not enough information is available at this time to make any conclusions but hopefully many more details will emerge tonight and hopefully all the Alderman will be ready to ask questions.

One issue very evident is the "Perils of Assumptions." No one has a crystal ball, but the process and integrity of the assumptions used to derive this budget should be thoroughly examined and reviewed.

There are some revenue and expense items that are easier to forecast, and others that are more inconsistent and variable, i.e. smaller & larger standard deviations. Is there a pattern of using optimistic assumptions?

Over the last 5+ years, I have hightlighted the aggressive use of assumptions used for the City of Evanston's Police and Fire Pension Fund. And the unfunded liability continues to grow. (By the way, Cook County also has a major pension problem, and is also using very aggressive assumptions, most notably a 7.5% rate of return) 

One key question to understand is the rate of salary growth over the last decade and future assumed salary growth for all City employees. According to the City's website, the median household income has been growing at about 1% for the City of Evanston residents, but the average salary growth for City employees seems to have grown at a 3-4% compounded rate.

Can or should this differential be maintained, decreased or increased in the future? Will the City Manager provided details about contract negotiations that have concluded or will conclude in the near future that will impact the budget? Personnel costs, including salary and fully loaded benefits are the majority of cost of City of Evanston government.

Should be an interesting and informative meeting tonight.

Good points.  When companies

Good points.  When companies are reluctant to make difficult decisions around their cost structure, they oftentimes inflate their revenue assumptions -- essentially trying to 'justify' the need for higher costs.  This serves to kick the can down the road in making tough cost decisions.  We also see this in reflecting higher than realistic rates of return for pension calculations.  

It is an accounting gimmick, and does nothing to address the true cash flow issue until too late -- likely with URGENT requests for tax increases when better up front analysis would have helped.  

This is how taxes go up, with no attendant structural change to costs.


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