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Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
October 13, 2009
I have commented on numerous occasions how the City of O’Fallon has responded to the economic crisis and recession. In August 2008, we cut 5% out of the budget, laid off one employee, instituted a hiring freeze, and cut out-of-state travel. For our annual budget that began on May 1, we cut an additional 6% for a total of $1.3 million in cuts. There are vacancies in 12 positions, which is a 14% reduction in our full-time staff.
We were surprised to discover in this month’s Illinois Municipal Review that the Municipal Income Tax Shared Revenue from the state has decreased 15.5% as of July 1. The City receives a portion of the state’s income tax revenue on a per capita basis. We had recently increased our income tax revenue due to last year’s Special Census.
That increase has now been eliminated with the reduction in the state’s per capita revenue to municipalities. For our budget, the income tax decrease translates to a reduction of $421,368 from what we estimated. In addition, the state has delayed paying us $485,000 in income tax revenues going back to July 1, so our total shortfall is $906,368. We will cover the delayed payments with cash reserves, but the $421,000 will have to be cut from the current budget.
We have identified projects that can be deferred to cover the deficit, but that is a good news/bad news story: the projects cannot be deferred forever and we will need to find the $421,368 again in next year’s budget. As a practical matter, we are now back to FY2005-06 revenue levels with 4,000 more residents to serve. We are evaluating opportunities to diversify our revenue sources so we are not so dependent on sales tax and income tax.
In addition, our October sales tax numbers are not any better. This month’s sales tax covers August, so it should be better due to the “Cash for Clunkers” program. However, our revenue for the month ($514,534) is the lowest since 2004-05 and $37,961 lower than the same month last year ($552,495). Perhaps the paperwork for “Cash for Clunkers” delayed the sales tax payments and we will see a bump in the November sales tax. If not, then “Cash for Clunkers” did very little for our local economy and I am fearful to see the auto sales tax revenue for September after the program ended.
In addition to making spending cuts, City departments have achieved some significant savings and efficiencies:
- Wastewater Treatment Plant: We cut almost 4,500 overtime hours resulting in approximately $135,000 in savings. This was accomplished by modifying plant operations and rotating employee schedules.
- Police Department: Funded through the General Fund, we faced a situation where we would not be able to purchase new patrol cars. However, we found a way to purchase new cars with drug forfeiture money, thus relieving the General Fund.
- Energy Savings: We have saved $17,000 on electrical efficiencies through rate negotiations with AmerenIP and through purchasing real-time electricity rates off the grid for the Wastewater Treatment Plant.
- Investments: The City Council approved a resolution its October 5 meeting to move the City’s investments to the Illinois Municipal Investment Trust (IMIT). We have traditionally placed our short-term investments in the State Treasurer’s Illinois Funds Investment Pool, which is currently offering 0.07% interest. In contrast, IMIT is offering 4.7% and we estimate an extra $20,000 in interest income.
Our budget continues to be a moving target as we adjust to the shifting economic landscape. Economists report that the country is moving out of the recession, but it has been demonstrated that government revenues generally lag behind the economy by a few months. We are hearing that significant growth will not occur until late 2010, which means we may not see any budget relief until 2011. I don’t think this will be my last blog on budget cuts.
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