2023/05/01 - Walter's Blog: Budget Expenses

In previous blogs, I discussed the budget structure and revenues, now I 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 our revenues and the state of the economy. 

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. The City Council recently eliminated the property tax levy for the General Fund, and we rely primarily on the sales tax (45% 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. Our sales tax revenue declined dramatically during the 2007-2009 recession, but our revenues have recovered over the past few years. As mentioned above, the City Council recently reduced the property tax levy and increased the sales tax by ½%. 

The budget reflects expenditures in all funds of $103,546,657, which are equally balanced by revenues. This represents a decrease of approximately 2% compared to the previous year. As we continue to recover from the COVID-19 pandemic, most of our local revenue sources are improving. 

Here is a chart showing our Budget History. The budget fluctuates from year to year due to capital projects:

If you take out capital projects, our budget trend looks like this: 

Here are how the non-capital expenses are spent: 

Here is a chart that where all expenses are allocated: 

Here is a chart that shows where General Fund expenses are allocated: 

Expenditure Highlights 

Payroll 

The total payroll for all operations, including fringe benefits, is $27,840,651. Payroll is 26.9% of the total operating expenditures for the entire budget. There is one new full-time Public Works Maintenance-Sewer Plant and four new Emergency Medical Technicians included in this budget. 

Administration 

Administration expenses are 8% of the General Fund budget totaling $2,144,296, which represents a 9% increase from last year’s amended budget. This increase is mostly due to increases in the Resident Assistance Program, which provides resources for citizens who have difficulty paying water/sewer bills and Ameren utility bills. There are also increases in general liability insurance, health insurance, and employee engagement. Administration is composed of the City Council, Administration, Finance, Human Resources, and the City Clerk’s Office. 

Community Development 

Quality building and sustainable development are keys to the future of O’Fallon. Both housing and commercial construction continue to be strong and have stabilized over the past two years. An additional part-time code enforcement officer is included in this budget to keep pace with increasing code enforcement complaints. 

Economic Development 

In response to the City Council’s priority to strengthen economic development, the Economic Development budget is intended to strengthen and grow the local economy, attract visitors, and improve the business climate. Projects include improvements to O’Fallon Station and marketing efforts for commercial development in O’Fallon. 

Information Technology 

The Information Technology budget is $2,036,111, an increase of 3% to FY2023. After an overhaul of the City’s phone system, IT does not have any major projects this year. 

Parks and Recreation 

The general Parks budget totals $2,775,043 and continues the department’s outstanding recreation programs for all ages. This is an increase of 17.3% from FY2023. Revenues include a new ¼% sales tax that replaces the Park Fund property tax. Two Park projects in this year’s budget will be funded through the Build O’Fallon Trust Fund: a new all-abilities playground at Community Park and new pickleball courts at Hesse Park. The replacement of the Community Pool is also a major project that will begin this year. 

With the Family Sports Park entering its 17th full season, there are major tournaments scheduled for soccer, baseball, and softball. $2,123,184 is budgeted for general operations of the park, including maintenance and equipment. Projects for the Sports Park include a new truck, replacement toro mower, and adult fitness equipment around the trail. In addition, the highly successful Vine Street Market will continue for its fifth year and other events will help stimulate the Downtown District. 

Public Safety 

The Police Department is the largest budget in the General Fund, totaling $8,353,518. The budget includes three new vehicles, cameras, tasers, and a reserve amount for future capital expenses. The Combined Dispatch Center (MECOMM) totals $1,739,886 and makes up 6.5% of the General Fund budget. MECOMM provides 911 dispatching for Shiloh and Fairview Heights through intergovernmental agreements that help reduce costs.  

EMS is budgeted through a dedicated property tax and totals $3,638128. This is $245,599 more than FY2023. Four additional EMS employees will be hired in this year’s budget to utilize a third ambulance over all shifts. 

FY2024 includes roof and HVAC replacement at the Public Safety Facility. The Police and EMS departments will each apply $300,000 of their capital reserves toward these repairs. 

The Fire Department budget totals $2,115,070 and is funded through a dedicated property tax. This budget includes purchase of general equipment and minor improvements to the training grounds. 

Public Works 

The Public Works Department is the largest budget in the City of O’Fallon and consists of Streets/Stormwater, Water, and Sewer. The primary feature of the Streets budget is $2 million for the Pavement Management Program, a multi-year initiative to improve O’Fallon’s streets. In addition, the budget includes the continuation of the Presidential Street reconstruction program with the West Presidential Streets Phase 2 and 3 improvements. Stormwater improvements include the State Street drainage project. 

The Water Fund is budgeted at $16,334,292. This is a 5% increase from last year, primarily due to capital projects and maintenance. This budget includes water main replacements for Longacre/Ashland and State Street. 

The Sewer Fund decreased 25% from last year. The $13 million Wastewater Treatment Plant expansion is the largest project and has carried forward from FY2023 due to delays in state funding approval. The budget also includes purchase of a single axle dump truck, vactor truck, and a boom mower all shared with other departments. Projects include the W Presidential Streets phase 2 and 3, south trunk phase 1, and continuation of the sewer lining program. 

Summary 

The City of O’Fallon has recovered well from the COVID-19 crisis. Reductions in the Hotel/Motel Tax and Food/Beverage Tax have rebounded, and the local economy appears to be strong. 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. 

We are living in an extraordinary time, and I would like to acknowledge the hard work of City employees to provide outstanding services under difficult circumstances. I would also like to thank the Leadership Team in programming and preparing this budget, particularly Finance Director Sandy Evans and Accountant Robin Costello. 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 strong working relationship between City Council and Staff in these areas has proven O’Fallon to be a special community.