DECATUR — While city leaders approved a spending plan for 2018 that includes a $3.2 million deficit, it's likely they will amend it before the end of next year.
The Decatur City Council voted 5-2 on Monday to approve the $67.9 million general fund budget, saying they planned to appeal to state lawmakers who were blamed for causing much of the gap. In passing a state budget for the first time in two years, lawmakers in July approved a 10 percent reduction in local governments' share of the state income tax and allowed the state to collect a 2 percent fee to manage local sales taxes.
For Decatur, that means a loss of $1.4 million from last year.
Here are four things to know about the city's budget and the path forward:
Council has ‘little appetite’ to raise taxes.
One option that does not seem to be on the table to help offset the deficit is a tax increase, as several council members made clear Monday night that they had no interest in doing that.
The council's last significant property tax increase came in 2015 after years of keeping the levy relatively flat. At that time, members raised the levy from $11.8 million to $13.5 million, a nearly 15 percent increase. In the past five years, the council has also increased water fees and added a storm water utility and local motor fuel tax, among other revenue streams, in an attempt to address deferred maintenance of Decatur's aging infrastructure.
Speaking Monday, Councilwoman Dana Ray said residents already have enough to worry about taxes from the federal, state and other local governments.
“To have that conversation again, it’s the wrong message to send,” Ray said. “They're getting it from everywhere. ... I don’t want it to be part of our discussions.”
Councilwoman Lisa Gregory agreed, saying she would not play any part in raising taxes again on residents.
“We are going to be a taxing body that is not going to go back to (residents) and ask them for increased taxes just so we can say that we balanced the budget,” Gregory said. “As Dr. Ray said, we did that two years ago, and I won’t be doing it at all again.”
Councilman Pat McDaniel also indicated that he would not support any efforts to raise taxes "for the time being."
The council is set to consider a property tax levy of $13.87 million, which is close to the 2017 levy. City staff estimate that the property tax rate would equal roughly $1.65 per $100 of equalized assessed valuation. No residents spoke at a public hearing on the subject Monday night, and the levy is expected to be approved at the council’s Dec. 18 meeting.
Decatur Mayor Julie Moore Wolfe said she doubted the majority of council could "stomach" the idea of increasing taxes. Barring an unexpected emergency situation, she said the council will have be creative about how to offset the deficit.
'Significant cuts' are likely next year, but there's a reason the council didn't make them yet.
City Manager Tim Gleason said the idea behind the deficit budget was to prevent a "knee-jerk" reaction to the lack of state dollars. To balance the budget, the council would need to employ some combination of cuts to services and personnel and increases to taxes and fees. Doing those changes this month would have them take effect Jan. 1, but council members could then find themselves seeking to undo them if lawmakers take action.
There’s an understanding on the council that "significant cuts" will have to occur down the road, Moore Wolfe said, and the deficit budget allows more time for both the council and the agencies that rely on city dollars to determine what direction to take going forward.
“I hate to do that right out of the box with organizations that depend on us for their very livelihood,” Moore Wolfe said. “To just give them a few weeks notice rather than six months or so to say, ‘look, what can we do to increase revenue on our end?’”
About two-thirds of the city’s workforce is either in the police and fire departments, and Councilman Chuck Kuhle said during the meeting he would be not be comfortable voting for a budget that would lay off employees in those two departments.
The two council members who voted against the budget, David Horn and Bill Faber, had different reasons for opposing the deficit budget.
Faber mentioned several times that he felt the council was rushing to approve a budget and asked repeatedly to table the vote so they could see what a "balanced budget" would look like and how severe the cuts would need to be.
“I just feel that not only me, but our citizens would like to have an understanding for what that alternative might be,” he said during the meeting. “So they can understand what we’re doing, or why we’re doing what we’re doing. I don’t think that understanding is out there.”
Horn, in explaining his ‘no’ vote, cited a recent report from Moody's Investors Services that downgraded the city's credit rating from A1 to A2 with a "negative outlook" for improvement. Moody's said its rating was based on factors including the city's limited cash reserves, high debt, ongoing financial pressures and high pension costs, Moody's said Friday.
Horn added that he saw little in the deficit budget that addressed the concerns raised by the Moody’s report, and he said he was worried it would put the city in a weak financial position going forward. But Gregory and Moore Wolfe said that Moody’s has downgraded other Illinois municipalities and colleges in the past year, in part because of the two-year-plus budget stalemate in Springfield.
The deficit isn't all the state's fault.
Council members on Monday repeatedly described the budget as a message to state lawmakers, but officials acknowledge that local factors also contribute to the $3.2 million deficit. Other deficit costs include $1.25 million in estimated back pay owed to Decatur police, who have worked without a union contract for more than a year. A combination of declining receipts from local revenue like the sales tax, cable tax, and the hotel tax, plus a 1.5 percent increase in the cost of the existing services has put the city another $500,000 in the red.
Assuming the state does approve plans that would return some money to municipalities, Gleason said the existing deficit could be covered through options such as tapping into the city’s cash reserves.
Council members rejected some fee increase proposals, but more could be coming.
Discussions on how the city can offset the deficit are expected to continue well into the coming year. Gleason said city staff would monitor statehouse action closely, but would likely have a better idea in late spring about what state lawmakers will do and return to the council with recommendations at that time.
Horn brought several alternate ideas for revenue to the table at Monday's meeting, recommending three amendments that he said would help to balance the budget. One would have increased the city's utility tax, but Horn pulled that amendment after Gleason was unable to tell him whether the increase would be offset by decreased costs for residents through a new electrical aggregation contract. A measure to cut $1.6 million in discretionary expenses died after no council members supported a motion to discuss it.
Another amendment would have increased the video gaming terminal fees from $250 to $1,250, among other license fee increases. It was voted down, with only support from Horn and Faber, but council members’ objections were more about the timing of Horn’s proposal rather than the idea of it.
“I would consider this down the road, maybe,” said Councilman Chuck Kuhle. “But to just hear it right now, I don’t have enough time to absorb everything (Horn said).”
Fee changes are a way the city can look at ways to save money, said Moore Wolfe. Previous items brought before the council for reductions or elimination includes $70,000 for the security and clean-up of the Decatur Celebration, $71,000 to the Senior Center, and $7,000 to the Sister City Program.