Finance Advisory Committee

MINUTES SPECIAL JOINT MEETING OF THE CITY COUNCIL AND FINANCE ADVISORY COMMITTEE The City Council and Finance Advisory Committee of the City of DeKalb, Illinois, held a Special joint meeting on November 15, 2021, in the Yusunas Meeting Room of the DeKalb Public Library, 309 Oak Street, DeKalb, Illinois. A. CALL TO ORDER Mayor Barnes called the meeting to order at 6:00 p.m. B. ROLL CALL 1. City Council Executive Assistant Ruth Scott called the roll and the following members of the City Council were present: Alderman Carolyn Morris, Alderman Barb Larson, Alderman Tracy Smith, Alderman Greg Perkins, Alderman Scott McAdams, Alderman Mike Verbic, Alderman Tony Faivre, and Mayor Cohen Barnes. 2. Finance Advisory Committee Executive Assistant Ruth Scott called the roll and the following members of the Finance Advisory Committee (FAC) were present: Lance McGill, Ron Partch, Tom Teresinski, Dytania Washington, and Chair Lynn Neeley. C. PUBLIC PARTICIPATION Mark Charvat spoke regarding the DeKalb Public Library’s proposed tax levy of 14%, noting his disdain that Council may “rubberstamp” the document. He encouraged Council to request that the library revise the levy and extend the deadline to vote for final approval to December. D. CONSIDERATION OF THE PROPOSED FY2022 BUDGET. City Manager Nicklas began his overview of this item by stating that 2021 has been a recovery phase from the 2020 fiscal year. At this point in the meeting, Mayor Barnes noted that he had two public participants wishing to speak to this item. Referencing the proposed FY2022 budget, Mark Charvat stated he finds it problematic that Council voted to give the Kishwaukee Water Reclamation District (KWRD) and the DeKalb Park District grants from the American Rescue Plan (ARP), noting that both taxing bodies can levy their own taxes to deal with any shortfalls. He added that money could have been used to lower the tax burden on DeKalb residents, as well as adding streets lights in the First Ward or fixing potholes in the Fourth Ward. Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 2 of 8 Continuing, Mr. Charvat expressed his opinion regarding the hiring of 16 fulltime employees in 2022, yet there’s nothing in the proposed budget that addresses the long-term pension obligations taxpayers will have to pay for the new hires. He also noted that Special Service Area #3 (SSA 3) collects $1,000 a year but residents of the area only receive $500 in services while the other $500 is transferred to the City’s general fund. He recommended that SSA 3 be eliminated, or Council should ensure that the residents who live there are refunded the overpayment. Earnell Brown spoke about funding for crime reduction in DeKalb and asked what efforts are being made to assist those wanting to acclimate themselves to life outside of the criminal justice system. He noted there were 70 individuals on parole that lived in DeKalb but are now living in in Chicago because there was no mechanism in place to welcome them back home. He further noted there are currently 156 incarcerated individuals coming back to the community over the next three years and asked what DeKalb is going to do to make sure they’ll be okay. Mr. Brown continued, stating that as a social service rich community, he believes DeKalb can do better. He invited Council, the FAC, and the community to join him in conversation about these issues and how we can be more responsible for our fair share. MOTION: Alderman Perkins moved to bring the consideration before Council for discussion; seconded by Alderman Verbic. VOTE: Motion carried by an 8-0 roll call vote of the City Council and a 5-0 roll call vote of the FAC. Aye: Morris, Larson, Smith, Perkins, McAdams, Verbic, Faivre, Barnes, McGill, Neeley, Partch, Teresinski, Washington. Nay: None. Mayor Barnes declared the motion passed. City Manager Nicklas stated the transmittal letter at the beginning of the budget document is intended to be a quick overview of the general fund. He added he would be highlighting a few items from the budget, including new funds, one of which is the American Rescue Plan (ARP), Fund 110, which are monies provided by the federal government. City Manager Nicklas stated that with this budget document, he’s made an effort to present a budget that prudently shows how revenues the City has now thanks to funding from federal and state governments can be utilized over multi-years rather than just one year. City Manager Nicklas proceeded with his overview of the proposed FY2022 budget document, stating an important part of the City’s financial policies addresses fund balances. There has been a very strong Council intention to exceed the 25% minimum balance of the general fund, which has been done. He added that over the next couple of years, by prudently expanding the federal monies we will receive over the next couple of years and investing them wisely, we can continue to see very solid fund balances in the general fund. City Manager Nicklas then spoke of the proposed staffing plan, noting that in 2018 the City employed approximately 226 fulltime and parttime employees. That staffing got leaner in 2019 as a matter of necessity to deal with a fiscal crisis in terms of general operations. Then last year because of challenges brought on by the COVID pandemic, staffing was lowered to 205, which was untenable. Therefore, this budget includes a plan for replacing frozen positions. Continuing, City Manager Nicklas provided Council and the FAC with an overview of the budget document as follows: The Community We Serve. This section includes some general observations about where the City is demographically in terms of some of the strategic goals and strategies that have been  Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 3 of 8 developed in recent years and what’s being done to meet them, as well as some new things that have been identified as top priorities. Sales and Use Taxes. This section includes Home Rule Sales Tax, State Sales Tax, Restaurant and Bar Tax, Local Use Tax, and Hotel/Motel Tax. City Manager Nicklas noted there are projected increases in most of those categories over the next 12 months. Intergovernmental Revenue. Over the last 12 months, despite the COVID pandemic, the City’s state income tax payments have been higher. It’s assumed that DeKalb didn’t lose as many residents as reported in the 2020 Census report. The decision to request a special Census is premature, but it’s an option. Typically, communities will wait about a year following the Census report to see if there’s evidence that shows the count is incorrect. Gross Receipts Taxes. This section includes Municipal Utility Tax, Telecommunications Tax and Franchise Tax. The City has seen modest increases in this area over the past few years. Property Tax. This portion of the budget is derived from a tax levy on real estate within the corporate limits of DeKalb. Property taxes will account for 15.8% of general revenue FY2022. For FY2022 (tax levy year 2021), the City estimates a 4.95% increase in the tax levy in order to capture new Equalized Assessed Value (EAV) growth. Because of the one-time recovery of Tax Increment Financing (TIF) District #1 and the positive impact of Ferrara’s new EAV, this levy increase will still result in a projected City rate decrease of about 8%. It’s anticipated that the 2021 levy will generate $6,845,217 in general fund revenue, all of which will go toward the funding of Fire and Police pensions funds. City Manager Nicklas commented that a change in the actuarial method of calculating pension obligations needs to be done at the state legislature level. FAC Chair Neeley stated the pension crisis is a serious problem we’ve been trying to lobby for years and encouraged citizens to reach out to the state legislature for action. She stated that unless it’s addressed soon, it’s going to come back in an ugly way. She further stated that not just Fire and Police pension, but all Illinois pensions are in trouble. City Manager Nicklas continued his overview of the budget document. Legislative. This portion of the budget includes activities of the City Council, as well as the Municipal Band. It was noted that this is one budget that decreased. City Manager’s Office. This portion of the budget includes not only the City Manager’s Office, but also activities of the Human Resources, Finance, Information Technology (IT) Departments. A brief description of the activities and goals from each of these departments was provided and it was noted that the number of staff within the City Manager’s Office will remain the same. Police Department. This is the largest department within the City of DeKalb in terms of funding support. The staffing goal for 2022 is 65 sworn officers. In that process, there will be more strength added for the Community Support Division that will include two imbedded social workers. City Manager Nicklas briefly recognized the proposed Citizen Review Board (CPRB), noting we look forward to serving and working with that board in the future. Fire Department. City Manager Nicklas provided a brief overview of the Fire Department staff. He stated that the Fire Department is in the process of looking for a replacement for retiring Fire Chief Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 4 of 8 Jeff McMaster, as well as candidates to fill the vacant firefighter positions. He then explained the process of how the Board of Fire and Police Commissioners (BFPC) selects candidates. Public Works Department. City Manager Nicklas provided a brief overview of this department, stating the water division and streets division work effectively together on various projects throughout the year, including snow removal, leaf pickup, watermain repair, street patching, etc. Community Development. City Manager Nicklas provided a brief overview of this department, noting that staffing will remain the same for 2022 with seven staff members. This department plays a big role in the business attraction and retention process, as well as the rehabilitation of older properties, some of which are TIF supported. The Community Development Block Grant (CDBG) program is part of this department and assists families trying to stay in their homes by rehabbing and/or winterizing or order to make the homes habitable. Building and Code Enforcement is also part of this department. There has been an increase in permits in 2021 over 2020, with Project Barb the biggest new entry into the city’s development. The Planning and Zoning Commission (PZC) is supported by this department as well General Fund Support. City Manager Nicklas noted that this portion of the budget is a conglomeration of spending categories that touch all pieces of the City organization, such as health insurance, tax sharing agreements with DeKalb County or local retail development promoted by County and City incentives. It also includes transfers out to various funds, including pensions. Special Revenue Funds. This section includes various funds. City Manager Nicklas provided a brief overview of each of the following funds: American Rescue Plan (ARP) Fund (Fund 110). This fund is provided by the federal government in response to COVID public health emergency in 2020. The funds are filtered through City departments to assist with filling positions and providing services. The federal government also wants communities to invest in water, sewer, roads and broadband. Council has already approved the transfer of funds to the water fund for a program to assist homeowners with replacing their lead service lines. A survey was recently mailed to DeKalb citizens in order to identify where those might be located. The ARP money has to be spent in qualified census tracts in terms of household income, etc. SAFER Grant (Fund 120). SAFER stands for “Staffing for Adequate Fire and Emergency Response”. This fund is a federal grant in the amount of $2,721,256.47 the City was awarded after an application was submitted by the Fire Department, issued to assist with the hiring of Fire Department staffing shortages. Funding will be allocated in three installments in 2021, 2022 and 2023. The City has already hired four new firefighters/paramedics of the nine committed to. GEMT (Fund 130). GEMT stands for “Ground Emergency Medical Transportation”. This program pays the difference of what the City might receive in Medicaid funds for ambulance transports and the actual cost of the service. Transportation Fund (Fund 200). This is one of the City’s biggest funds in terms of annual spending and supports our transit program. It will also help fund the location and building of a new transit center. Motor Fuel Tax Fund (Fund 210). The City receives per capita based allocations of the Illinois Motor Fuel Tax revenues, not to be confused with the local fuel tax revenues. In the last couple  Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 5 of 8 of years, the state legislature has passed a capital bill that involves their issuance of bonds of which local municipalities can receive revenue. These funds will assist the City with tentative bridge replacement projects in 2022. Referencing the decrease in the City’s population, Mr. Teresinski asked when the state would begin working with the new population percentage of 8.5%. City Manager Nicklas replied it may happen with the December payment. Brief discussion ensued. Special Service Area (SSA) Funds. These funds are created to pay for various public maintenance and utility items, including mowing, maintenance of cul-de-sac islands, electrical costs of streetlighting, etc. DeKalb SSAs include Heritage Ridge Subdivision SSA#3 (Fund 223), Knolls at Prairie Creek Subdivision SSA#4 (Fund 224), Greek Row SSA #6 (Fund 226), Heartland Fields SSA#14 (Fund 234), Market Square SSA#29 (Fund 229), and Hunter Ridgebrook SSA#30 (Fund 230). It was noted that the 924 Greenbrier SSA#28 (Fund 248), created to assist the location with the installation of a fire sprinkler system, has been repaid and so the fund will be closed. Central Area TIF #1 Fund (Fund 260). Established in 1986, this fund will be terminating as of December 31, 2021. Remaining uncommitted funds will be transferred to TIF #3 and a residual amount will be held over to cover any pending property tax appeals. Central Area TIF #3 Fund (Fund 262). This fund was adopted in 2019. In 2022 this fund will provide for private rehab projects such as Agora Tower and Johann DeKalb Suites. It also includes the Architectural Improvement Program (AIP) and the Downtown Route 38 (Lincoln Highway) reconfiguration. Ms. Washington left the meeting at 7:16 p.m. and did not return. Community Development Block Grant (CDBG) Fund (Fund 280). This fund is provided by the U.S. Department of Housing and Urban Development (HUD) and provides support for a variety of services, including low in come children, daycare, summer meals program, elderly homeless, survivors of domestic violence, etc. Local social service agencies apply for the funding the City receives via guideless set forth by HUD. In 2020 the City received additional funding to respond to the COVID pandemic. Housing Rehabilitation Fund (Fund 285). This fund is used to assist very low and extremely low- income residents with home repair costs that exceed the $5,000 CDBG program limit. It’s also used to demolish residential structures. Foreign Fire Insurance Fund (Fund 290). This is a state statute operated fund where a 2% tax is imposed on the gross receipts of the fire insurance premiums provided by insurance companies not located in Illinois. Expenditures from the fund are used for the improvement of the Fire Department, such as station improvements and repairs, furniture, personal protection equipment and physical fitness equipment. Expenditures planned for 2022 include the preservation of historical department memorabilia, the replacement of furniture at station one, the replacement of emergency medical supplies and breathing apparatus, etc. General Fund Debt Service (Bonds) (Fund 300). City Manager Nicklas provided a brief overview of this section. Bonds include the General Obligation Refunding Bonds of 2010C, General Obligation Bonds of 2012A, General Obligation Bonds of 2013A, General Obligation Bonds of Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 6 of 8 2013B, General Obligation Refunding Bonds of 2019, and General Obligation Taxable Series 2020. Capital Projects Fund (Fund 400). For FY2022, a lot of the street maintenance program will be funded out of this fund. The City has a local fuel tax rate of 9.5 cents per gallon, which is split three ways 7 cents goes to streets, 1.5 cents goes to the airport, and 1 cent goes to vehicle replacement. Tentative 2022 projects include not only the annual street maintenance program, but also the IL-23/Gurler Road intersection upgrade, and the Afton Road construction completion. Capital Equipment Replacement Fund (Fund 420). This fund has existed for some time to cover the cost of new purchase or replacement of major equipment and vehicles for the City. In recent years the City has embraced leasing to solve fleet problems that have occurred over time. Water Operations Fund (Fund 600). This fund provides for the supply, treatment, storage, and distribution for the City’s potable water system. City Manager Nicklas provided an overview of user fee increases and how those funds are being utilized. Mr. Teresinski commented that overall, the water fund is in excellent condition. The program as was adopted to build the capital fund, allocate it for capital purposes, and ensure it was segregated from operations. With the help of the Water Department and City staff that objective has been accomplished almost to its complete intent. Mr. Teresinski continued, stating that from an operational standpoint, the policy, when adopted, called for 25% of the reserve balance in the water operations to cover any interruptions or problems that would occur and anything above that 25% balance would be transferred to the capital fund. By the end of 2022, we’ll be very close to the 25% balance. City Manager Nicklas briefly noted that the Joanne Lane watermain project is complete, but the street paving will be done before the end of 2021. It will be maintained for drivability and then completely repaired in the spring of 2022. Watermain replacement will continue in 2022 at a variety of sites. There was brief discussion between Alderman Smith, City Manager Nicklas, and Director of Utilities and Transportation Bryan Faivre regarding watermain replacement on N. 13th Street and N. 14th Street. Airport Fund (Fund 650). City Manager Nicklas stated the airport has had some challenges this year, resurfacing of both runways and some of the taxiway areas being one of them. There was a total of 79 days in which there was some construction going on and 16 consecutive days in which both of the runways were closed. Those closures and the resulting loss in fuel money and hangar lease refunds (as required by the hangar lease) cost the City somewhere between $75,000 to $100,000, which wasn’t budgeted for. The two major sources of revenue for the airport are hangar rent and fuel. Workers Compensation and Liability Insurance Fund (Fund 700). City Manager Nicklas briefly discussed this fund, stating the Council recently awarded the contract to a new vendor. We’ve seen an increase in costs in recent years and the price received from the new vendor is less than last year’s cost. Health Insurance Fund (Fund 710). City Manager Nicklas explained that the City works with a third party for health insurance. The City has a committee of employees that meets on a quarterly  Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 7 of 8 basis to track spending, services provided, and contributions. Current policy requires a minimum of two months reserves of the annual cost. Our monthly cost is over $400,000. Police Pension Fund (Fund 830) and Fire Pension Fund (Fund 850). Noting this topic was discussed earlier in the meeting, City Manager Nicklas briefly discussed this section, stating both fund balances are large because the City is obligated through actuarial requirements defined by the State of Illinois. DeKalb Public Library Fund (Fund 900). City Manager Nicklas briefly explained that the City performs financial services for the library. Noting the amount of public conversation regarding the issue of the library’s proposed tax levy (14%), City Manager Nicklas stated that he and Mayor Barnes are scheduled to meet with library representatives this week. City Manager Nicklas then provided a brief overview of the Appendix, which includes the Staffing Plan, Chart of Accounts, Budget Policies, and the Glossary of Terms. Discussion ensued following City Manager Nicklas’ budget document overview. Alderman Perkins asked why Forestry Services was increased. City Manager Nicklas stated the City maintains trees within DeKalb inhouse to the best of its ability, however, it’s sometimes necessary to hire outside firms to assist with trees with higher elevations. This is due in part diseases that have hit the city’s trees, such as the Emerald Ash Borer. Alderman Perkins then asked why Training/Travel expenses increased. City Manager Nicklas explained that some of our sworn services (police/fire) have to attend required continuing education training. Noting the impact the Census results had on the budget, Alderman Verbic asked what would be required to pursue a special Census because numbers aren’t lining up. For instance, in Ward 6 there are no available apartments or homes for sale, there’s an increase in the number of calls for public safety and increased school district enrollment. He thinks it would be worthwhile to pursue a special Census sooner rather than later. City Manager Nicklas stated a special Census would be more of a fall activity in order to capture college student numbers. He further stated that staff can research what’s involved for a special Census and bring the information back to Council at a later date. Alderman Verbic asked if money should be set aside for a special Census, and City Manager Nicklas replied that the budget could be amended if necessary or take money from the reserve. Mayor Barnes stated that he and the City Manager Nicklas have had discussions regarding a special Census, with City Manager Nicklas adding that employees would have to be hired to do the work. Alderman Smith asked if the money budgeted for forestry services is enough. City Manager Nicklas replied that Andy Raih, Director of Streets and Facilities, is careful with budgeting for those services and they’re right about where they should be. Alderman Smith then asked if the number of training hours for the Police Department had to be increased, with City Manager Nicklas stating they had. Joint City Council & Finance Advisory Committee Meeting Minutes November 15, 2021 Page 8 of 8 There was brief discussion regarding a special Census that was done following the 2010 Census, possibly in 2012 or 2013. Regarding the forestry discussion, Alderman Morris asked about the possibility of more deliberate tree replacement planning and possibly engaging the Citizens’ Environmental Commission (CEC) for assistance. Mr. Teresinski provided additional comments regarding the presentation and documentation of the budget, noting it has improved over the last few years. He further noted that the City’s financial position has improved substantially with the aid and assistance of the federal government. The growth of the fund balance to 45% is also a positive. Noting concern, he stated that one time money is one time money. If we build an operating budget with increased staffing, a five-year financial plan should be put in place prior to the 2023 budget. Mr. Teresinski continued, commenting on the water rate study completed regarding the City’s water rate and the increases recommended. The water system is in excellent condition, and the community appreciates that. He also stated that from a property tax aspect, Facebook should generate an incremental tax that will cover the police and fire pensions. Mayor Barnes agreed with Mr. Teresinki’s comments, stating there are a lot of moving parts. Mayor Barnes then thanked City Manager Nicklas and City staff for the informative information provided in the budget document. E. ADJOURNMENT MOTION: Mr. McGill moved to adjourn the FAC; seconded by Mr. Partch. VOTE: Motion carried by a voice vote of the majority of FAC members present – McGill, Neeley, Teresinski. FAC Chair Neeley declared the motion passed. MOTION: Alderman Morris moved to adjourn the Council; seconded by Alderman Faivre. VOTE: Motion carried by a voice vote of the majority of Council members present – Morris, Larson, Smith, Perkins, McAdams, Verbic, Faivre. Mayor Barnes declared the motion passed and adjourned the meeting at 8:13 p.m. Respectfully submitted, _______________________________ Ruth A. Scott, Executive Assistant Minutes approved by the City Council on December 13, 2021. Minutes approved by the Finance Advisory Committee on October 19, 2022. Click here to view the agenda packet for the November 15, 2021, Joint City Council and Finance Advisory Committee meeting. Click here to view the video recording of the November 15, 2021, Joint City Council and Finance Advisory Committee meeting.