Danville officials examining ways to deal with expenses
DANVILLE – City officials have heard the plea many times in recent weeks from private citizens and aldermen: Don't increase property taxes.
But the city faces a problem.
The expenses paid by property tax dollars will increase next year, and the city has no control over the majority of those rising costs.
Mayor Scott Eisenhauer delivered the numbers during last week's budget study session.
Levy-funded expenses are expected to increase next year by about $700,000, meaning the levy would have to increase from this year's $6.9 million to $7.6 million, according to Eisenhauer.
That means the city's property tax rate would increase from the current $1.88 per $100 of assessed value to at least $2 per $100 assessed value, Eisenhauer said. The owner of a $120,000 house would pay an additional $48 in property taxes.
City officials and aldermen meet again today at 6 p.m. at the municipal building, 17 W. Main St., for a second budget and tax levy study session.
Alderman Mike Puhr chaired the communitywide finance committee that met through the summer and made several financial recommendations, including not increasing the property tax levy.
Puhr said the committee discussed the possibility of creating new revenue sources in conjunction with property tax relief, but the committee was unanimous about not increasing the burden on property taxpayers.
The property tax is the largest revenue source for the city, generating $6.95 million this year compared to the city's other top revenue generators: state sales tax, $5.2 million; city sales tax, $4.5 million; state income tax, $3.1 million; corporate replacement tax, $1.7 million; and the food and beverage tax, $1.1 million.
The property-tax levy covers several expenses: Almost 50 percent goes to police and fire pensions, and the rest to retirement benefits, bond and interest payments and the Danville Public Library.
The library is the only one that's not a fixed expense.
By state law, the city must provide fire and police pensions, and the amount the city pays is determined by a third-party actuarial, and the city must provide retirement benefits for other employees through the Illinois Municipal Retirement Fund, Eisenhauer said.
But the majority of the $700,000 increase in property tax levy expenses comes from pension costs. The police pension is expected to increase from $1.3 million to $1.7 million next year, or 25 percent, and the fire pension is expected to increase from $1.8 million to $2.1 million, or 20 percent, Eisenhauer said.
Eisenhauer said the library's portion of next year's levy will not increase. But, he said, he also will not support a decrease.
The communitywide finance committee suggested reducing the library's portion of the levy by $200,000, because the library has an $800,000 reserve.
Eisenhauer said the city has few dollars available for any infrastructure improvements or repairs at the library, so the library's policy has built a reserve fund for that purpose. Although the library's portion of the levy won't increase next year, it has every year since 2003.
The police pension has steadily increased from $615,000 in fiscal 2001 to $1.37 million this fiscal year; the fire pension has steadily increased from $829,000 in FY2001 to $1.81 million this year; the bond and interest payments have steadily increased from $521,000 in FY2001 to $1.44 million this year; and the public library has increased from slightly more than $1 million in FY2001 to $1.43 million this year.
Ten years ago, some property tax money went into the city's general fund, the main operating account through which the city pays for all wages, salaries, health insurance and day-to-day operations of the city.
But as the pensions, retirement benefits and other tax levy items increased in the last 10 years, the city gradually reduced the amount of property tax revenue that went into the general fund. That allowed the city to keep levy increases from being even greater.
As a result, the city stopped putting any property tax revenue into the general fund two years ago.
But other city expenses paid by the general fund, including wages, salaries, health insurance and commodities, have also increased at a rate that has outstripped general fund revenues.
The general fund is fed mostly by state and city sales taxes, state income taxes, corporate replacement taxes, food and beverage taxes and the liquor tax.
General fund expenses have been increasing annually at an average of 7 percent to 9 percent over the last several years while general fund revenues have been increasing at a rate of 3 percent or less, according to city officials.
As a result, the city's general fund reserve is running dry.
In 2001, the city had a $3.5 million general fund balance. At the end of this fiscal year in April, Eisenhauer said the hope is for at least a $100,000 balance.
Eisenhauer told aldermen last week that the city's biggest disadvantage in this recession is the lack of a general fund reserve.
"I'm not sure everyone understands how important that is," he said.
Auditors recommend that the city should have enough reserve to cover four months of operation, Eisenhuaer said, which would be a $3 million reserve.
Danville City Property Tax 101
Total property tax levy: $6,959,252
Total tax rate: $1.88 per $100 of assessed value
What the property tax levy DOES fund
— Police officer pensions: By state mandate, the city must contribute to a retirement fund for current and retired police officers.
— Firefighter pensions: By state mandate, the city must contribute to a retirement fund for current and retired firefighters.
— Bond and interest payments: Covers payments for the city's debt, including 2007 and 2009 bond issues.
— Illinois Municipal Retirement Fund: Like police and fire pensions, the city contributes to a retirement fund for current and retired employees.
— Danville Public Library: The city levies property tax dollars for the library; the library requests an amount each year and the city determines the final amount, which is included in the city's total property tax levy.
What the property tax levy DOES NOT fund
— Employee wages or health insurance. Personnel costs make up 79 percent of the city's total expenses.
— Day-to-day operations of the city, including maintenance of streets, sewers, parks and other public property, including the municipal pool and Harrison Park Golf Course.
Also on this date
- Deputies looking into apparent Mahomet area death
- Two arrested for almost 1,500 pounds of marijuana in truck
- Man dies when car goes into pond along I-57 near Tuscola
- Coroner identifies body of Mahomet woman
- Fire in Mahomet only a training exercise
- Car hits tree in northeast Champaign County
- Pumpkins flung far in fundraiser for schools foundation
- Road repairs will cause traffic disruptions in Urbana
- Hike in parking fines on Urbana council's agenda
- Obituaries