City Council Reviews Financial Forecast

The city council looked at the five-year financial forecast prepared by the city's finance department in its planning session yesterday, Monday, Dec. 13 at City Hall.

The city altered the budget for fiscal year (FY) 2011 by eliminating 18 city staff positions, increasing the 2009 property tax levy by $1 million, reducing the library tax levy portion an additional $300,000 and approving an increase in utility taxes. 

The main focus of the forecast includes the general fund and the waterworks, sewerage and parking revenue funds, which provide the main revenue sources to the city. The city will aim to maintain a fund balance of 30 percent, an unreserved fund balance of 25 percent and a cash balance of 20 percent of annual operating expenditures, excluding capital improvements and transfers. 

The actual ending fund balance for 2009-10 was 28.3 percent of the fund balance policy. In FY 2009, the fund balance was 23.9 percent, which led to city action to reduce expenditures. 

Robert Lehnhardt, director of finance for the city of Wheaton, presented the forecast and said that sales and income taxes for Wheaton have dropped $1.8 million combined over the past two years and appear to have bottomed out. Further, he said that revenues are not anticipated to return to amounts received prior to the recession in the next five years.

Revenue sources for FY 2011-12 include property taxes from the library (6.45 percent), police pension (1.34 percent) and fire pension (-3.45 percent), in addition to sales, local sales, use, income, utility and real estate transfer taxes. Other revenue sources include court fines - moving violations, ambulance services and building permits.

Expenses include union personnel, non-union personnel, contractual services, dental, medical and liability insurance, medical and liability claims, administrative costs, commodities and supplies and materials. Dental and medical insurance are the highest expense at five percent. 

The state of Illinois proposed a 30 percent reduction in the distribution of income taxes to local governments. If this passes, the city would lose an estimated $1.2 million in income tax, which was not included in the forecast, Lehnhardt said.

 "There doesn't seem to be much open discussion on that," City Manager Don Rose said of the proposed legislation. He added that he doesn't anticipate much change in the delay of payments from the state because the state continues to take in a lot less revenue. "That is going to be something Bob (Lehnhardt) watches as far as cash flow is concerned," Rose said.

The state currently owes the city $1.7 million. Lehnhardt said the city would be looking at a cash flow problem if that number doubles in payments owed from the state. Rose said that while the state said they'd make distributions to city governments, "any money from the state is questionable." The monies owed to the city form the state is something the city has "no control over" whatsoever, Councilman Tom Mouhelis said later in the planning session.

The majority of the city's revenues—57.51 percent for the fiscal year (FY) of 2010—are elastic, Lehnhardt said. Elastic revenues are responsive to economic conditions, including sales taxes, income taxes and utilities. Elastic revenues will remain flat over the next five years with the stabilization of revenues projected for FY 2012, and no significant increases in property tax revenues, Lehnhardt explained.

"On the revenue side, we were extremely cautious in our projections," Rose said. A large number of the city's revenue sources are related to the economy, he said, which is an uncertain factor affecting the future of the city's revenue.

The fund balance has improved from its recent low, and the city's expenditure fund ended higher than projected. Further, the expenditure forecast is "conservative," and does not look at any significant changed, Rose said. It assumes a 3.7 percent increase for the general fund expenditures in FY 2011.

In addition to the general fund, the council discussed the capital projects, waterworks, motor fuel tax, sewerage and capital equipment replacement funds.

Capital projects fund

The city issued $6 million in general obligation debt at the end of fiscal year 2010 to finance the North Main Street flood control project, Manchester/Wesley Street bridge reconstruction project and other capital improvements. The city expects the Manchester/Wesley Street bridge project will conclude in early summer. The North Main Street flood control project will begin in the spring of 2011 with an expected completion date of fall 2011, at a cost of $3 million.

The Butterfield Road widening project is a $62 million Illinois Department of Transportation project, which will begin in April 2011. The project will widen Butterfield Road starting at Naperville Road and moving west through the city limits.

Waterworks fund

The waterworks fund is projected to have a deficit balance in FY 2014. Since October 2008, the DuPage Water Commission has increased the cost of water by $0.83. The city increased the water rate by $0.25 in July and will increase the rate an additional $0.25, effective May 1, 2011.

Motor fuel tax, sewerage and capital equipment replacement funds

Lehnhardt said that the city will receive a total of $1.2 million over the next two and a half years for the motor fuel tax fund, distributed in five installments of $240,654.

The sewerage fund unrestricted net assets are projected to be sufficient over the next five years to cover current projected capital improvements.

The city expects to spend $835,000 for the implementation of the new wireless fire alarm network. Over the next three fiscal years, the general fund will repay the fund, plus three percent interest.