City Manager Julia Carroll say Evanston’s expenses are rising faster than its revenue. Without adjustments, she says, the city faces annual general fund deficits that would grow to $10.5 million five years from now.

That would be about 12 percent of the city’s total current general fund budget.

The problem, Finance Director Matthew Grady said, is that major revenue categories are growing an average of about 2 percent per year, while wages are rising 4 percent per year and fringe benefits are increasing between 3.5 and 10 percent per year, with health care costs showing the biggest increase.

Wages and benefits total 74 percent of the city’s general fund budget.

If the budget crunch was solved by raising property taxes, they would need to increase nearly 22 percent next year and between 8.2 and 13.5 percent in each of the four years after that, Grady said.

“We know you don’t want to increse property taxes,” Carroll told aldermen at this evening’s special City Council budget meeting, “but we need to find permanent solutions to the budget deficits we’re likely to face over the next five years.”

Carroll said she’s asked her department heads to prepare proposals for how they’d handle a three percent reduction in their budgets next year, which would save $2.2 million. But she said she’s still reviewing those proposals.

Grady said the city will see one sizable increase in revenue in 2010-11, when money from the expiration of the Downtown II tax increment financing district starts to flow into the general fund. That will add about $2.3 million in revenue for the city, and also boost revenue for the two local school districts — $4.5 million for Distrct 65 and $3.2 million for District 202.

He said the city hopes to be able to pick up nearly $2 million a year by raising the home-rule sales tax and increasing other revenues starting with the 2009-10 fiscal year and estimates that the city’s early retirement incentive program will cut costs by $0.6 million a year.

But those steps, along with the proposed 3 percent spending reduction, still leave the city looking at a deficit of  up to $5.7 million five years out.

Carroll said the city also plans to create a process for internal competitive bidding to encourage city employess to find ways to do their jobs more efficiently and meet the efficiencies of private-sector competitors.

Bill Smith is the editor and publisher of Evanston Now.

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6 Comments

  1. Bill does the city factor in the pensions funding?
    Bill – did they factor in the pension funding into the projected increases?

    1. Pensions
      Hi Junad,
      The financial outlook document shows sizable increases in police and fire pension payments in its calculation of the potential property tax increase.
      How those increases relate to the actuarial projections of what is supposedly needed for the pensions, I can’t recall off the top of my head.
      Most of this budget discussion, though, was just about general fund items. (The pension payments are not part of the general fund.)
      — Bill

      1. Pensions and Benefits
        With the majority of the budget tied to pensions and other benefits, when will the City begin looking at eliminating/freezing pensions and retiree health benefits as has been done by most companies in the private sector?

        1. State matter
          Hi Pat,
          For better or worse, the pension benefit requirements for city employees are set by state law and only the state legislature could change that.

          The city could reduce its future pension obligations by reducing the size of its workforce. That would require either cutting services or farming out some functions to private contractors.

          Neither step is likely to be wildly popular.
          — Bill

          1. Bill, I think it would be in
            Bill, I think it would be in the best interests of the City (on behalf of the citizens and taxpayers that they serve) to work with the state legislature to encourage these changes. We can’t be the only city with pension problems. Unfortunately, the people who would have to lobby for freezing/reduction of pension benefits are ones who would be directly affected by the outcome. It would certainly take fortitude on the part of these people to be successful. I also don’t think farming out functions to private contractors is such a bad idea (if we can save money in the process).

  2. Duh?
    We are now waking up to the fact that we are spending more than we take in?

    Most of us mere citizens can’t increase our revenue by raising taxes and fees, we have to make do by cutting our expenses. Increasing taxes and fees decreases our net revenue even more. Now you know why it is called the People’s Republic of Evanston.

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