City Manager Julia Carroll says Evanston faces a structural budget problem, with expenses increasing at 4 to 5 percent per year but revenue rising only about 3 percent.
She told aldermen Monday night that if cuts aren’t made, the city would need to increase the property tax levy next year by nearly $3 million — or about 8 percent — to cover general fund expenditures.
In addition, she anticipates having to make major increases in contributions to the separate police and fire pension funds to cover shortfalls that have accumulated over the years. That money also comes from property tax revenue.
Ms. Carroll said the city has contributed as much to the pension funds as its actuaries have recommended. She said the shortfall has developed because the state legislature has increased retirement benefits for public safety employees and the investment returns on the funds, which the city doesn’t control, have been below projections.
That shortfall has led bond rating agencies to question whether Evanston can keep its top Triple A bond rating if it doesn’t solve the pension funding problem.
City Budget Director Pat Casey said, “We have to maintain the bond rating because it saves us money on interest rates.”
Ten months ago Ms. Carroll said the city would need to increase the property tax levy by 6.8 percent for the current fiscal year to cover general fund and pension costs, but by increasing building permit fees and making other adjustments, the property tax increase was ultimately shaved to 2.9 percent. Nearly two-thirds of that amount went to increased pension contributions.
The general fund budget this year totals $85.8 million.
Ms. Carroll said Monday that 80 percent of general fund expenses are for payroll and that without increasing revenue the city might have to lay off up to five percent of its work force — about 38 employees.
She said the city needs “to closely examine the ways services are provided.” She said some cuts could be made in next year’s budget, but that other reductions might require a year or more of additional planning.
She listed several possible changes for next year, including:
- Reducing clinical health programs for a possible savings of up to $600,000. The city is negotiating to have the two major hospitals in the city pick up some of the health department’s programs.
- Increasing efficiency in the sanitation department that she said could save nearly $300,000.
- A possible early retirement incentive program that she said could reduce salary costs if it is properly managed.
Ms. Carroll said that for the following year she wants to explore saving costs by outsourcing some city services, but only after unionized city workers have had a chance to demonstrate whether they can match savings the city might achieve by outsourcing.
Longer range, she said, the city needs to consider selling some assets, like its parking garages, and also consider selling buildings it owns that it now leases to others.
She said selling such facilities could provide funding needed for capital projects including the Civic Center and the Robert Crown Recreation Center, which would reduce the debt the city otherwise would need to take on to finance those projects.
She said she expects to have additional details on several proposals for aldermen to discuss when they hold their next Budget Policy Committee meeting on Nov. 6.