The City of Evanston appears to have six major options for closing its projected $8 million budget gap next year.
To simplify the mind-numbing budget detail from Monday’s special City Council meeting, here’s a top-level look at the ideas that each might conceivably each save $2 million — enough to plug a quarter of the budget gap.
Contracts with three of the four city employee unions expire at the start of the new fiscal year. City Finance Director Marty Lyons said that if all employees agreed to accept a freeze on base wages and skip merit or step pay increases next year, that would save $2 million.
Ten furlough days for all staff would save the city $2 million, according to Lyons’ estimate.
The average full-time city employee costs about $80,000 in salary and fringe benefits. Laying off 25 of the city’s 840 full-time equivalent employees would save $2 million — although because of severance costs, the full savings might not be realized in the first year.
The aldermen didn’t discuss where possible layoffs might fall, but in the past the city has considered such options as closing the branch libraries, eliminating health department services that are also provided by Cook County and privatizing garbage collection.
City Manager Wally Bobkiewicz introduced a new term to the discussion Monday — “insourcing” — which he defined as collaborating with nearby communities to share services. He said he has had some talks with nearby towns, but had nothing specific to suggest yet.
Defer capital spending
The city has planned to make $40 million in capital improvements next year. Some of those projects will be funded by grants or service charges, but Lyons says that, to cover the rest, the city will need to issue about $15 million in general obligation bonds, which would require $1.2 million in annual payments for the next 20 years.
The city also spends nearly $2 million a year to buy new fleet vehicles, an expense it covers from current revenue rather than by issuing bonds.
Some combination of trimming spending on fleet vehicle purchases and capital projects funded by general obligation bonds might save $2 million.
But as aldermen including Melissa Wynne, 3rd Ward, pointed out Monday, deferring infrastructure work today can mean higher costs down the road.
Reduce general fund reserves
The city is already planning to reduce its general fund reserves from $14.3 million to $12.7 million to get through the current budget year. If it drew another $2 million from reserves next year, that would leave reserves of $10.7 million. The city’s budget policy requires it to maintain reserves of 8.3 percent of the general fund budget, or about $7.5 million. It is required to maintain at least a 5 percent reserve under agreements with its bondholders.
But cutting reserves in a time of declining revenues could lead to a more severe budget crunch down the road.
Mayor Elizabeth Tisdahl asked during the budget meeting what a 3 percent increase in the property tax levy would generate in new revenue. Lyons said it would bring in about $1.2 million and would cost the owner of a home valued at $400,000 about an extra $40 a year in property taxes.
So, to generate $2 million in new revenue from property taxes would require a 5 percent increase in the tax rate.
The city could also raise other taxes — like the Real Estate Transfer Tax — or increase fees — such as the ones it charges for building permits.
But so far the idea of raising taxes and fees during a recession hasn’t seemed to be very popular among the alderman.