City of O'Fallon, IL - FY2009-10 Budget Expense Summary

Now that we have talked about the budget structure and revenues, we can move on to proposed expenditures in the annual budget. Unlike the federal government, cities cannot budget in a deficit and revenues must meet expenses. Therefore, we are required by law to have a balanced budget. This is more difficult in some years than others, depending on how your revenues are structured.

O’Fallon is more vulnerable to economic downtowns than most cities in the U.S. The largest revenue source in most cities is the property tax, which is consistent and stable. Only 2% of our General Fund comes from property tax, and we rely primarily on the sales tax (48% of the General Fund). Sales tax revenues can fluctuate widely from year to year, bringing years of plenty or paucity depending on the regional economy and economic development opportunities. This year is one of paucity.

As I have mentioned in previous blogs, our budget adjustments began much earlier than usual. Our budget year begins on May 1, but we had determined by August of last year that we were not going to make our revenue estimates. As a result, we laid off one building inspector, instituted a hiring freeze, and slashed our budget by 5%. We made additional cuts in December and prepared to make more cuts in the next budget.

The proposed budget includes $1.5 million in cuts compared to the current year’s budget. The budget reflects expenditures in all funds of $45,513,175 which are equally balanced by revenue. This represents a decrease of approximately 4% compared to the previous year. The reason for the decrease is downturn in the economy and the corresponding decline in tax revenues. FY2010 does not include many large capital projects and operational expenses have been substantially curtailed.

The General Fund is projected to decrease 8%. The total payroll for all operations, including all fringe benefits, is $14,981,820. Payroll is 52% of the total operating expenditures in the General Fund. Despite the 8% decrease in the General Fund, Union contracts call for a 4% pay increase and are in the last year of their three-year contracts. Accordingly, the budget also includes a 4% across-the-board increase for non-union employees effective May 1, 2009. No new employees are budgeted in the General Fund. As a result of the budget cuts made in August 2008, six General Fund positions are being held vacant: three in Planning and Zoning, two in Streets, and one in Police.

Administration is only 3% of the General Fund, totaling $373,290. The City continues to improve efficiency and expand financial management through technology. With the hiring of an IT Manager in FY2008, the city will continue to invest in Information Technology in FY2009 with several major computer system upgrades. Over the years, we have found that investing in technology has increased employee efficiency and reduced the need to create new positions.

The Police Department is the largest budget in the General Fund, totaling $5,696,730. There are no new operational changes in the Police Department. With Captain Scott Battoe’s retirement in 2008, one police officer position is being held vacant due to revenue shortfalls. EMS is budgeted through a dedicated property tax and totals $2,232,470. This budget includes the purchase of a replacement ambulance that will cost around $150,000.

Engineering staff will be involved in reengineering and rebuilding major arterial and collector roads and intersections, and improving capacities to handle increased traffic volumes in growing parts of the city. The only major road project in FY2009-10 is the reconstruction of Old Collinsville Road from I-64 to Milburn School Road. Two street maintenance worker positions are being held vacant due to revenue shortfalls

The Water Fund is budgeted to decrease from $10,672,000 to $9,558,245, although that is primarily because the FY2009 budget included the construction of a new pump station and two new water tanks (as mandated by the Illinois Environmental Protection Agency (IEPA)) and those projects should be completed in FY2010. No water rate increase is proposed. One water meter reader position is being held vacant due to revenue shortfalls.

The Sewer Fund is projected to increase 2% from $3,656,000 to $3,733,350, and also is subject to mandated improvements from the IEPA. Sewer projects concentrate primarily on the aging underground infrastructure improvement program and expansion of capacity to meet demands of a growing system. We will make some repairs to the Wastewater Treatment Plant in this budget, but a major upgrade to the plant is needed soon. Depending on grant opportunities and EPA mandates, a sewer rate increase may need to be considered in the next fiscal year. One sewer plant position is being held vacant due to revenue shortfalls.

Quality building and sustainable development are keys to the future of O’Fallon. Residential growth has slowed from its record pace of 2006 and we are budgeting for fewer building permits than in previous years. Commercial development also has declined significantly. However, code enforcement and occupancy inspections have increased as foreclosures and rental activity has increased with the poor economy. One Building Inspector was laid off in August 2008 as a result of the construction decline and we do not anticipate filling the position in this budget year. One Planner position and one Administrative Assistant position also are being held vacant due to revenue shortfalls.

The first full season of the Family Sports Park occurred last budget year and $561,875 is budgeted for general operations of the new park, including salaries, maintenance, and equipment. The general Park budget totals $2,659,215 and continues the department’s terrific recreation programs for all ages. Two Park positions are being held vacant due to revenue shortfalls.

O’Fallon’s rapid growth also impacts the effectiveness of our volunteer Fire Department. After the Fire Department’s first full-time Fire Chief was hired in April 2008, an agreement was negotiated to consolidate the City Fire Department and the rural fire district into one organization. As a result, this is the first budget with both the City and rural district combined into one organizational unit. The Fire Department budget totals $1,881,065 and is funded through a dedicated property tax.

Overall, this budget is balanced and meets the needs, goals and demands of the City in all service areas. O’Fallon is an exciting community and is doing a good job to balance the service demands of historic and new residential neighborhoods, regional shopping and interstate highway development, and newly growing centers of employment. Particularly in our uncertain economy, the demands for resources in such a fast growing and diverse community are significant and pose significant budgetary challenges. While we strive to manage the growth in our community’s infrastructure, we must also manage the growth and capacity of the organization to maintain the City Council’s high performance expectations. The strong working relationship between City Council and staff in these areas has proven O’Fallon to be a special community.

I would like to acknowledge the hard work of the employees of the City and the special effort of the Management Team in programming and preparing this budget, particularly Finance Director Dean Rich and Assistant Finance Director Sandy Evans. I would also like to thank the Mayor and City Council for their input that helped to formulate the goals and priorities around which this budget was programmed.

The Finance and Administration Committee is holding a special budget meeting on April 2 at 5:30 p.m. to address any last minute questions and concerns by the aldermen. The first reading of the budget ordinance is scheduled City Council consideration at their April 6 meeting. Second reading will be on April 20 and the new budget will be into effect on May 1.