In 2015, the Naperville City Council enacted a temporary Home Rule Sales Tax (“HRST”), with the understanding that it would be used only to strengthen the City’s financial position by increasing cash reserves and paying down debt.
The HRST generated $6.5 million for the City in 2016, and is expected to generate $8.5 million in 2017. We’ve previously pointed out that the tax was in fact used for other purposes, and that the non- Enterprise debt balance of the City is forecasted to remain roughly the same since the HRST was passed.
A City Council workshop on August 28th reviewed the options regarding the HRST as leaving the rate at 0.5%, or increasing the rate to either 0.75% or 1.0%. The actual sunset the tax envisioned when it passed was never presented.
At the September 19th City Council meeting, a proposal was made to make the HRST permanent and increase it from 0.5% of sales to 1.0% of sales. The proposal was made before presentation of projected expense levels, and without discussion of any decreases in spending levels. With the inclusion of the HRST at the current level of $8.5 million, the ‘known funding pressures’ of the City are estimated at $6.0 million. Worth noting is the $6 million is the projected amount expenses will exceed revenues in 2018, not the projected increase in spending. How much 2018 budgeted revenues and expenses are increasing has not yet been specified by the City, so it’s not yet clear how much expenses are projected to increase in 2018, only that budgeted expenses at this point are projected to exceed budgeted revenues by about $6 million.
Several Council members expressed the thought that expenses needed to be looked at before the tax was not only extended, but increased. Councilman Krummen made a motion to extend the tax for two years at the current rate. In response to a question from the Mayor, City Manager Doug Krieger expressed how he would direct City departments, in response to the looming issue of expenses exceeding budgeted revenues:
Per City Manager Krieger, across the board reductions may be necessary, including the library and Naper Settlement. (Again, those reductions would not be from current levels, but from the anticipated 2018 budgeted levels.).
Seems the folks running Naper Settlement may not have gotten the message from Mr. Krieger, as a week later they announced a new hire for a newly created position, a “director of innovation and experiences” at a starting salary of $95,000 a year. That person may be the best “director of innovation and experiences” in the history of mankind, but it seems reasonable to ask if that was a necessary hire given projected expenses exceeding revenue by about $6 million, and that Naper Settlement seems to have gotten by all these years just fine without a “director of innovation and experiences.”
Moves like that can cause a reasonable person to question how serious the City is about taking a hard look at expenses.
The Council ended up extending the HRST at 0.5%, with another sunset in two years (what do you think the odds are that it will actually sunset?). In the meantime, Council will look at expenses and other possible tax increases, including real estate taxes, or possibly increasing the HRST in 2018, if necessary.
Councilman Coyne who, like Mayor Chirico considers himself a fiscal conservative, summed up his thoughts:
We have an idea for the Mayor and Council: Call Dan Cronin, Chairman of the DuPage County Board, and ask how it is that the County can come up with expense reductions.
The proposed DuPage County budget is $439.6 million, with general fund spending of $176.9 million. The City of Naperville’s 2017 budget totaled $441.4 million, with general fund spending of $121.9 million. Chairman Cronin is proposing departmental budget reductions ranging from 2% to 4%. A comparable reduction in Naperville would seem to address the issue.
"The easy thing to do would have been to simply raise taxes, but that's not what we're about here," (DuPage) county board member Jim Zay said. "The tough thing is to find where to make cuts and to run a lean government."
Indeed it is. Perhaps the new “director of innovation and experiences” can help the so-called fiscal conservative Mayor and others on Council on that ‘lean government’ idea.