Sycamore City Council kicks off discussions on FY2018 budget
Sycamore City Council met Jan. 17.
Here is the agenda as provided by Sycamore:
SYCAMORE CITY COUNCIL AGENDA January 17, 2017
CITY COMMITTEE MEETINGS No Meetings are Scheduled
REGULAR CITY COUNCIL MEETING 7:00 P.M.
1. CALL TO ORDER
3. PLEDGE OF ALLEGIANCE
4. APPROVAL OF AGENDA
5. AUDIENCE TO VISITORS
6. CONSENT AGENDA
A. Approval of the Minutes for the Regular City Council Meeting of January 3, 2017. B. Payment of the Bills for January 17, 2017.
7. PRESENTATION OF PETITIONS, COMMUNICATIONS, AND BILLS.
A. Recognition of Sgt. Justin Kness for his designation as "Master Tactical Patrol Officer" by the Illinois Tactical Officers Association.
8. REPORTS OF OFFICERS
9. REPORTS OF STANDING COMMITTEES
10. PUBLIC HEARINGS
A. Resolution No. 690—A Resolution Authorizing the Participation in the Northern Illinois Municipal Electric Collaborative (NIMEC) and Authorizing the City Manager to Approve a Contract with the Lowest Cost Electricity Provider for a Period of Up to 36 Months.
For the past ten years, the City has worked with the Northern Illinois Municipal Collaborative (NIMEC) to procure electrical energy after Commonwealth Edison moved away from fixed rates for medium and large accounts. These larger accounts include sewer and water pumping and street lighting.
The City has a contract at 5.20¢/kWh that is set to expire in May 2017 for water and sewer pumping. Purchasing electricity through collaborative with other municipalities has helped save the City and adds predictability over the fluctuating hourly rates that ComEd offers. When the current two-year agreement was executed ComEd’s standard rate was over 7¢/kWh and currently sits at 6.31¢/kWh. NIMEC watches the energy trends in an effort to find the optimal time to go to the market for pricing and makes recommendations as to whether a 1, 2 or 3-year term is optimal.
Street lighting prices are bid each summer in the same manner as water and sewer pumping. Some street lighting accounts are still classified as small accounts and are eligible for the ComEd fixed rate. NIMEC waits to bid these accounts until the summer after the fixed rate is published.
Given that electricity is a commodity, pricing is only valid for business day that it is quoted on. As pricing comes in staff discusses rates and length of term internally and with NIMEC representatives before executing an agreement with the lowest bidder. This resolution authorizes the City Manager to execute an agreement with the lowest cost provider when NIMEC goes to bid, likely at some point in the next 90 days.
City Council approval is recommended.
B. Resolution No. 691—A Resolution Authorizing the City Manager to Designate 2017 Freedom of Information Act Officers Pursuant to the Freedom of Information Act and Open Meetings Act of the State of Illinois.
Illinois law requires municipalities and other governmental agencies to designate at least one individual to handle Freedom of Information Act (“FOIA) requests. FOIA officers are required to complete electronic training on an annual basis through the Illinois Attorney General’s office. The names of the FOIA officers must be displayed on the City’s web site.
The City Manager recommends the designation of the following officers for 2017:Candy Smith, City-wide FOIA Officer;
Adam Orton, City-wide FOIA Officer;
Megan Petit, Police Department FOIA Officer.
Because of the daily and frequent requests for case information from the Police Department, a FOIA officer with special training has been designated to aid the public in such requests.
City Council approval is recommended.
A. Consideration of an Administration Request for Direction Regarding the 2017- 2018 General Fund Fiscal Year Budget.
The City’s annual budget process begins each January with preliminary assumptions about revenue trends and spending priorities for general operations in the upcoming fiscal year. The assumptions are made using the most current financial information available and are offered to invite Council direction as the City staff begins the process of preparing a new fiscal year budget that will take effect on May 1st. The culmination of this effort is a preliminary budget for review in mid-March. The following report summarizes projected revenues and spending goals for FY2018.
General Fund Revenues
There are several sources of general operating revenues but the main sources are sales and use taxes, intergovernmental revenue—including the local share of the state income tax, and property tax, which collectively make-up 77.9% of all general operating revenues. The amounts collected from minor revenue sources such as fees, fines and other miscellaneous revenues round out the funds available for general operations. The total estimated general fund revenues, including pension pass through funds, are $16,387,375 in FY18.
A breakdown of revenue sources and assumptions are as follows:
1. Property Tax: 17.63%
The Council has maintained static property tax levies for general operations for the past six years. This year the levy was increased to offset additional required contributions for the police and fire pensions. Property tax is expected to generate $595,926 toward the fire pension, $528,471 toward police pension and $337,175 toward social security and Illinois Municipal Retirement Fund (IMRF). When pension contributions for police, fire and IMRF are removed, property taxes only make up 9.56% of the remaining general fund budget.
Over $700,000 of debt service obligations are abated from the property tax levy. These obligations are met primarily through the use of other dedicated sources of revenue.
Historically, the City has levied $155,000 toward debt service beginning with the 1999 General Obligation Bond.
2. Sales and Use Taxes: 47.07%
Sales and use taxes make up nearly one-half of the City’s general operating budget. These taxes include the state 1% sales tax, home rule sales tax, restaurant and bar tax and telecommunications tax. Without police and fire pension pass thru funds these sources account for 50.54% of all general fund revenues.
State Sales Tax. This 1% tax is applied against all retail sales within the City and accounts for about 25% of all annual general revenues. Tax receipts are processed by the Illinois Department of Revenue before funds are remitted to the City. This process takes three months from the sale to when the City receives the funds. Using month on month comparisons to establish a trend line, it appears the state 1% tax will yield about $4,051,112 by April 30 which is slightly below the FY17 projection ($4.068 million) for this line item. Based on current trends and economic variables the projection for FY18 would put the 1% receipts at about $4,132,331.
Home Rule Sales Tax. The City’s home rule sales tax funds general operations, capital projects and the street maintenance program. Home rule sales tax is applied to general merchandise sales but not to items such as grocery, medical supplies and automobiles. Currently, the City’s home rule tax is 1% for general operations, .25% for capital projects and .50% for street maintenance.
Current trends suggest the home rule sales tax revenue of the $2,009,029 will come in narrowly above the budget for FY17 ($2.004 million). The past four years the City has not received a 13th accelerated home rule sales tax payment from the State. Home rule tax proceeds estimated to be $2,049.210 will comprise 12.50% of all General Fund revenues in FY18.
Restaurant/Bar Tax. In 2002, a 2% restaurant/bar tax was implemented to support general operations and to fund debt service for the 2002 bond issue. This is considered a local tax, meaning it is administered and collected by the City. In FY18, tax revenues from this source ($1,125,397) are projected to constitute 6.87% of general revenues.
Telecommunication Tax. In 2003, a 5% telecommunication tax was implemented. This tax applies to both land-lines and cellular phones and is charged against the caller’s billing address. This tax is collected by the Illinois Department of Revenue and remitted monthly to the City. Telecommunication tax revenues are trending considerably lower than the recent receipts. As a result, the expected FY18 telecommunication tax revenue estimate has been reduced to $406,890 which will constitute 2.49% of the total budgeted operating revenues.
As a point of reference the total of all sales and use tax revenues for the General Fund are illustrated below:
Fiscal Year Total Difference Percent FY2008 $5,095,440 - - FY2009 $4,961,610 ($133,830) -2.63% FY2010 $4,808,188 ($153,422) -3.09% FY2011 $5,540,647 $732,459 15.23% FY2012 $6,273,774 $733,127 13.23% FY2013 $6,914,746 $640,972 10.22% FY2014 $6,897,681 -$71,746 -.25% FY2015 $7,361,236 $72,211 1.05% FY2016 $7,508,864 $147,628 2.01% FY2017 (Estimate) $7,562,386 $53,522 .71% FY2018 (Budget) $7,713,828 $151,442 2.00%
Budgeted FY18 sales and use tax revenues are expected to increase over FY17 estimates by roughly 2%.
Sales and Use Tax Breakdown
Telecom Rest/Bar Total
FY17 Budget 4,068,406 2,004,390 492,485 1,126,407 7,691,688 FY17 Estimate 4,051,112 2,009,029 398,915 1,103,330 7,562,386 FY18 Budget 4,132,134 2,049,210 406,890 1,125,397 7,713,828
3. Licenses: 0.76%
Licenses are modest fees charged to offset the administration and enforcement of specific programs. These include revenue for liquor licenses, dog tags, electrical and other licenses.
4. Intergovernmental Revenue: 13.22%
Intergovernmental revenue includes funds that come from agreements with other taxing bodies such as our boundary agreement with the City of DeKalb, any grant revenue and state shared revenue, notably income tax. Intergovernmental revenue is expected to produce $2,166,419 in FY18.
Income Tax. A percentage of all state income tax receipts are deposited into the Local Government Distributive Fund through the Illinois Department of Revenue and distributed to municipalities on a per capita basis. This percentage has historically changed on a proportionate basis to reflect the current State income tax rate. The City budget projections for FY18 is based on an Illinois Municipal League estimate of $97.20 per capita as published in January 2017. Given the City’s population of 17,519, Sycamore’s share of income tax receipts is estimated to be $1,769,419. This is a decrease of $17,59 or $1.00 per capita from the FY17 budget. It should be noted that this assumes that the State of Illinois will not make reductions to the formula by which income tax is distributed to local governments.
5. Service Charges: 5.55%
Service charges include ambulance fees, fire and ambulance protection district fees and development fees. Service charges are expected to generate $908,978 in FY18. The largest revenue source in this category is fire user fees which are estimated to be $499,200.
On average development fees made up approximately 3.8% of general fund revenues (roughly $400,000 per year) from Fiscal Year 2004 through 2009. As the chart below indicates, since the beginning of the economic downturn in 2008 and 2009 development fee revenue has been dramatically impacted.
Development Related Fees Line Items 3510- 3515
Percentage of General Fund Revenues FY18 $109,500 (Budget) 0.72% FY17 $105,500 (Estimate) 0.70% FY16 $101,696 0.56% FY15 $72,160 0.49% FY14 $63,167 0.45% FY13 $74,880 0.52% FY12 $49,752 0.37% FY11 $72,381 0.60% FY10 $82,413 0.72% FY09 $146,782 1.29% FY08 $317,919 2.74% FY07 $417,509 3.51% FY06 $707,823 6.24% FY05 $422,591 4.36% FY04 $437,661 4.64% Represents actual audited numbers unless noted; less pension pass thru.
6. Fines and Fees: 1.46%
Fines and fees are generally associated with revenue received from court fines, ordinance violations, parking meter fees and other fines associated with administrative adjudication. These sources are estimated to generate a total of $238,740 in FY18.
7. Other Income/Transfers: 14.32%
The majority of the other income category involves revenue generated from trash removal services. This allocation ($1.51 million) is offset by a corresponding expense paid to Waste Management for garbage collection. Other sources include franchise fees, reimbursements,
capital transfers and operating transfers. Operating transfers are made to offset the services performed by the General Fund on behalf of one of the other funds.
City finances were significantly impacted by the 2008-2009 recession. The City was able to navigate through the depths of the recession and work toward General Fund independence as follows:
FY10: The General Fund budget was balanced by shifting $485,000 in conventional General Fund spending to capital and special funds, and by bringing in transfers totaling $500,000 from the Hotel/Motel Tax Fund ($250,000) and General Fund reserve ($250,000). The shortfall in general operating revenues between May 1, 2009 and April 30, 2010 was not offset by departmental spending cuts in the amount of $240,456. As a result, there was significant erosion in the City’s General Fund reserve in the amount of $1,091,544.
FY11: $228,358 was transferred into the general fund from the capital assistance fund to present a balanced budget. However, revenues came $624,013 short of budget expectations further eroding the general fund reserve. As of the beginning of FY12 (May 1, 2011) the City’s General Fund reserve was down to 24% of the year’s planned expenditures.
FY12: To shore up revenues without tapping General Fund reserves, an additional $728,000 in capital funds were transferred from the Capital Assistance Fund (228,000), the Hotel/Motel Tax Fund ($50,000) and the Sales Tax Distributive Fund ($450,000). FY12 saw the start of a rebound for key revenue sources which resulted in a narrower gap of $246,890 before capital transfers. The budgeted transfers were made and the City’s General Fund balance started the year at 26.5% of expenditures.
FY13: The City Manager discussed a multi-year plan to slowly bring the general operating fund back to financial independence by neutralizing or reducing capital transfers in. Discretionary spending remained relatively static and staffing levels constant. FY13 capital transfers were reduced from $728,000 to $710,000.
FY14: The transfers were reduced by $175,000 and the half of the City Engineer salary that had been shifted to a capital fund was restored to the General Fund.
FY15: Another $100,000 of capital transfers were reduced and a percentage of Public Works salaries that had been shifted to enterprise funds were returned back to the General Fund.
FY16: Capital transfers were reduced by $185,000, eliminating the General Fund reliance on the Sales Tax Distributive Fund. In addition, another 5% of the Public Works salaries were returned to the General Fund.
Overall, revenue projections assume a continuation of modest growth and development. The projections do not anticipate any impact either positive or negative based on the economic climate and revenue sharing models of the State or Illinois. Based on the trends and projections the total of $16,387,375 will offset expenditures associated with general operations and pension obligations of the City in FY18.
General Fund Expenditures
On the spending side, the proposed FY18 budget assumes a reduction of certain operational expenses that were transferred to special and capital funds in FY10. Redirecting the cost shifts continue to be part of the plan to return the general operations budget to where it was pre- recession. This process, much like the plan to bring the general fund to financial independence, is being phased in over a number of years. Public Works labor assigned to the water and sewer funds have been reduced from 25% to 12.5% for each fund over the past few years.
The more substantial remaining cost shifts are as follows:
FY17: An additional $100,000 of transfers were removed leaving only $100,000 of capital transfers coming into the General Fund. Public Works salaries continued to be moved back to the General Fund.
FY18: The General Fund’s reliance on capital transfers has been completely eliminated. This has been completed without impacting service levels the community has come to know and expect. Another reallocation of Public Works salaries back to the Street Division budget is planned in FY18. Over the next few budget years the transfers back should be completed. The chart below highlights the significant reduction in reliance on capital and reserve transfers over the past five years:
Approximately $105,000 in consulting engineer costs are shifted from the Building & Engineering Department and spread across the funds that will use engineering services for street maintenance and capital projects in FY18.
Additionally, a portion of MFT funds spent on street maintenance each year will include associated consulting engineer costs. Currently, MFT guidelines identify that portion as 11% of the MFT eligible costs.
Approximately $320,000 was removed from the personnel budget of the Public Works Street division and assigned to the Water and Sewer enterprise funds. FY15 marked the beginning of the process of gradually returning these expenditures back to the General Fund. In FY18, an additional 5% (2.5% from water and 2.5% from sewer) of these expenditures will be returned to the General Fund. Over these four years, roughly 50% of these costs have been moved back to the General Fund.
Personnel expenses (wages, salaries, FICA, Medicare, IMRF, Police and Fire Pension pass thru) will again account for over half of the overall General Fund budget (56.37%). This includes cost of living adjustments based on collective bargaining agreements. When combined with the cost of insurance coverage (health, life, work comp and liability), employee costs reach 72.15% of the planned General Fund expenditures. Insurance costs are assigned to the General Fund Support budget, which consists of expenditures common to the entire General Fund. The preliminary FY18 General Fund Support budget is 2.41% less than the FY17 General Fund Support budget. This is primarily due to the anticipated fulfillment of an economic development agreement.
The total estimated general operating expenditures in FY18 are $16,385,944 which represents an overall increase of 1.87%. The majority of the increase can be attributed to the process of returning the expenses outlined above back to the General Fund, increases offset by corresponding revenues such as the trash removal contract, increases in the pension pass thru and contractual wage increases.
The General Fund’s reliance on capital transfers has been eliminated while another 5% of the Public Works salaries have been reallocated. Combined this represents a fiscal move of roughly $120,000 in the right direction. The primary goal of reducing the reliance on transfers has been accomplished. Over the next few years the remaining cost shifts will gradually be reduced.
The preliminary FY18 General Fund budget is balanced as presented. Moving forward in this process, City management will continue to monitor trends and look to solidify these assumptions and make changes where necessary for final presentation in April. Over the next few meetings, preliminary assumptions for the different funds will be presented as follows:
February 6th: Water and Sewer Funds
February 20th: Capital Funds and Capital Improvement Plan
March 6th: Special and Bond Funds
March 20th: Preliminary Budget
City departments continue to provide high levels of services while working within the resources available. The City’s property tax levy for general operations has been flat, service levels remain strong and the General Fund is not reliant on capital transfers in FY18.
A detailed breakdown of individual FY18 revenues and expenditures by department is attached.
City Council direction is requested.
14. OTHER NEW BUSINESS