City Council Planning Sessions

MEMORANDUM TO: Record FROM: Susan Bishel, Public Relations Coordinator SUBJECT: November 27, 2017 City Council Planning Session Minutes DATE: November 28, 2017 CC: Mayor and City Council, City Manager, City Clerk, Department Heads The Planning Session took place in the Council Chambers, Wheaton City Hall, 303 W. Wesley St., Wheaton, Illinois. Those attending the Planning Session included: Councilwoman Fitch, Mayor Gresk, Councilman Prendiville, Councilman Rutledge, Councilman Scalzo and Councilman Suess. Councilman Barbier was absent. Also in attendance were City Manager Dzugan, Assistant City Manager Duguay, Director of Finance Lehnhardt, Director of Planning & Economic Development Kozik, Library Director Adamowski and Public Relations Coordinator Bishel. The session began at 7:00 p.m. and concluded at 8:14 p.m. The following items were discussed: I. Call to Order The Wheaton City Council Planning Session was called to order at 7:00 p.m. by Mayor Gresk. II. Public Comment There were no public comments. III. Approval of November 13, 2017 Planning Session Minutes Councilman Suess stated the minutes should be revised to note that he was not in attendance at the Nov. 13 Planning Session. IV. Property Tax Levy City Manager Dzugan noted that the next budget City staff is preparing is an 8-month budget, as the City transitions its fiscal year to align with the calendar year. Many of the projections used in the memo regarding the property tax levy are based on 20-month projections due to this transition. City Manager Dzugan expressed concern with flat or declining revenues for some of the major categories of revenue for the City, including sales tax and income tax. He stated if the City had not increased the levy last year, the City would be in a less favorable position in terms of revenues. The City did realize additional revenue from real estate transfer taxes, an increase in ambulance fees and permit fees. However, City Manager Dzugan stated the City is forecasting a convergence of operating expenses and revenues, which would limit the City’s ability to fund future capital projects. In addition, the State of Illinois may implement property tax freezes and reduce the revenue the City receives from the Local Government Distributive Fund. The state already implemented a 2% service fee on sales tax and withheld 10% of income tax from municipalities, and future state actions could negatively affect the City. City Manager Dzugan stated the Council could raise the tax levy to address these concerns. If the City does not end up needing the additional revenue, there is the opportunity to abate the levy increase up until March 2018. City Manager Dzugan stated staff has prepared several tax levy alternatives, and City staff sought direction from the Council. The Council will be presented with a first reading at the Dec. 4 meeting. City staff recommends at least capturing new growth in the tax levy. Director of Finance Lehnhardt stated the City is required by state statute to provide estimates before setting the property tax levy, and it must be filed with DuPage County by the last Tuesday in December. He stated the City’s portion makes up approximately 13% of a property owner’s overall property tax bill. Director of Finance Lehnhardt presented four alternatives for property tax amounts the City could levy for the Council’s consideration. Alternative 1 would capture new growth. It would increase the tax levy $117,671, including $22,650 for library operations, $95,021 to the General Fund and a $47,324 reduction in debt service levy. Director of Finance Lehnhardt stated this amount is an estimate capturing new construction in the City, using 2016 new construction as an estimate for construction revenue. In this alternative, the average homeowner would not see a change in their property tax bill. In response to Council questions about the assumptions the City used in calculating the Estimated Assessed Value rate, Director of Finance Lehnhardt stated City staff contacted the DuPage County Assessor to develop this assumption. Director of Finance Lehnhardt stated in Alternative 1, the City projects it would not have much additional revenue to use for capital projects in future years. Alternative 2 would capture the amount needed for pension and library increases, with a total increase of $202,432 levied. In this scenario, the City would have slightly more revenue than Alternative 1 available for capital projects in future years. In Alternative 2, the average property owner would see an approximate increase of between $4 and $6 annually. 11/27/17 Planning Session 2 Alternative 3, a flat levy, would include a $47,324 reduction in the debt service levy. In this scenario, the average property owner would see an approximate decrease of between $8 and $12 annually. Director of Finance Lehnhardt stated that in this scenario, by 2019, the City estimates only about $0.3 million in revenue would be available to go to capital projects. Alternative 4 would capture an increase of $297,454 for pension and library increases and $95,000 in growth for the General Fund. The average property owner would see an increase of between $9 and $13 annually. As a result, the City would be able to put approximately $1 million in revenue into the Capital Projects Fund. In response to Council questions about the City’s recent financial audit, which showed revenues exceeding expenditures by more than $1 million in the past fiscal year, Director of Finance Lehnhardt stated this was due to savings from a very mild winter and transfers into the General Fund. He stated he is concerned with the losses the City is realizing now, such as less sales tax and income tax, which will over time draw down fund balances. Director of Finance Lehnhardt stated he does not project revenue sources to grow enough in the future to continue exceeding expenditures. City Manager Dzugan stated the City estimates the Annual Road Program will need $3.5 million per year to keep the condition of the City’s roads in line with its average rating set by Council policy, and the City will need to have additional revenues for this and other capital needs. Some Council members expressed concern with raising the property tax levy and stated they would like for the City to look at cutting expenditures rather than raising property taxes. Some Council members expressed support for Alternative 1 so that property owners would not see an increase in their property taxes. In response to Council questions about what would happen if the City did not raise the property tax levy but instead drew from General Fund reserves, Director of Finance Lehnhardt stated he estimates the General Fund reserves would go from 44% in annual operating reserves to closer to 40%. City Manager Dzugan stated the City estimates it will need approximately $3 million in additional revenue each year for capital projects. While the City has built up a reserve of approximately $11 million in the Capital Projects Fund, the City has not yet budgeted for large- scale projects such as stormwater infrastructure improvements. The City will consider this project once studies of the stormwater system are complete. He stated there also is a backlog of approximately $40 million in streets that need reconstruction in the future. 11/27/17 Planning Session 3 Other Council members expressed the opinion that the City should plan for naturally increasing costs and voiced support for Alternative 4. Some Council members expressed the opinion that the City has been fiscally responsible and should continue to do so by making the increase suggested in Alternative 4. Some Council members also expressed an interest in considering a 0.25% increase in the sales tax in the fall. Director of Finance Lehnhardt answered a Council question by stating after the downtown streetscape project is paid for, the City estimates an additional sales tax of 0.25% would bring in approximately $900,000 per year in revenue. At the conclusion of the discussion, Councilman Rutledge, Councilman Prendiville and Councilman Scalzo expressed support for Alternative 4, and Mayor Gresk, Councilwoman Fitch and Councilman Suess expressed support for Alternative 1. City Manager Dzugan stated that before the meeting, Councilman Barbier expressed support for increasing the levy in the amount of the pension increases, which is closest to Alternative 2. City Manager Dzugan stated City staff would prepare an ordinance for first reading, and the Council can discuss and amend it at the Dec. 4 meeting. Director of Finance Lehnhardt also presented staff’s recommended tax levy amounts for Special Service Area 2, 3 and 7. Special Service Area 2, which is for Central Business District Parking Enforcement, recommends a levy of $39,000, which is a 1% reduction. Staff recommends a levy for Special Service Area 3, which is for maintenance of open areas in the Streams Subdivision, of $12,000, which is a 1.4% decrease. For Special Service Area 7, which is for the management, maintenance and promotion of the Central Business District, staff recommends a tax rate of $0.45 per $100 of assessed value, which would bring in approximately $110,000, an increase of 1% from 2016. The Council expressed support for the Special Service Area levy suggestions. V. City Council/Staff Comments Councilman Prendiville and Mayor Gresk thanked the Downtown Wheaton Association, local business owners and participants in the annual Christmas Parade for creating a great event on Nov. 24. VI. Adjournment The meeting was adjourned at 8:14 p.m. 11/27/17 Planning Session 4