‘Unexpected success’ of food and beverage tax to help shrink city’s pension hole
By Susan Frick Carlman firstname.lastname@example.org March 11, 2013 8:28PM
Naperville City Manager Doug Krieger speaks during the annual State of the City address at Tellabs in Naperville on Monday, January 24, 2011. | Brian Powers~Sun-Times Media
Updated: April 14, 2013 6:07AM
It’s a good problem to have.
Faced with a municipal share of the city’s wealth from food and drink sales exceeding projections, by a consistent and comfortable margin, Naperville officials plan to channel some of the windfall into filling the pension gap. Other extra income will help fund social services that have seen their funds dwindle in recent years.
The city’s one percent food and beverage tax, established in 2004, has outperformed expectations every year. Initially expected to bring in $1.3 million annually, the revenue stream is now flowing at a rate of about $3.3 million each year. City Council members this week agreed to make several adjustments to the policies that govern their use of the tax income.
Since 2011, when the economy remained in a protracted slump, one quarter of the revenue from the food and beverage tax has been diverted to the city’s general fund, while the remaining 0.75 percent received has been used for the original intent of fueling the city’s Special Events and Cultural Amenities fund.
Calling the excess income an “unexpected success,” City Manager Doug Krieger said the city no longer needs the allocation to cover routine expenses. The .25 percent portion could, he said, be directed at an accelerated retirement of the city’s $97 million public safety pension shortfall instead.
“It’s a great cash flow stream to chip away with some pretty significant chunks for a [purpose] like an unfunded pension liability,” Krieger said.
With six years taken off the current 20-year paydown timetable, the city would save some $65 million, according to staff calculations.
“That’s a big number,” Councilman Steve Chirico said, echoing the response of several others on the dais at Monday’s SECA workshop.
The group also agreed, subject to their vote at an upcoming business meeting, to draw the line on the SECA fund at $2 million. They awarded more than $2.5 million to 79 of the 87 nonprofits that applied for allocations in this year’s round, including $600,000 for the last of three years of earmarks for retiring the debt incurred by construction of the Millennium Carillon.
In addition, the Council members plan to change their fund balance policy for SECA to reserve $400,000 at year end, double the current sum.
Also potentially in the works is a funding boost for local efforts to fight suicide and drug abuse.
The Council, which last month agreed to add $100,000 to its 2014 social services grant program for that purpose, will use reserves from the current year’s SECA program to cover the cost. Chirico, alluding at the time to the numerous incidents of fatal drug overdoses and suicides in Naperville in recent years, said the problem shouldn’t be put off for next year.
“By the time we do this, maybe it will be worse, maybe not. I don’t know,” he said. “But we do know that we have a problem now.”
Council member Grant Wehrli said social service funding needs were part of the conversation when the SECA fund was being discussed nearly a decade ago. Councilman Paul Hinterlong was reluctant to make a sharp detour from the fund’s original purpose — “funding special events, artistic entities, and cultural amenities in Naperville that express the character of the community and provide cultural experiences that are open to all residents and visitors,” according to the city — and he and Wehrli concurred with other Council members that clearer definitions are needed for what the fund is and is not designed to do.
Chirico said the Council is able to change the ordinance as it deems necessary to meet the needs of the day.
“We have the funds,” he said. “Social services is closely connected to this type of fund, with cultural amenities. Just amend it.”
The Council members acknowledged that the numbers, and the policies, are subject to continuous shift — and that it demands their response.
“We never seem to come up with the perfect solution. Every year there’s some little tweak,” Councilwoman Judith Brodhead said.
Councilman Bob Fieseler marveled at the restaurant and bar volume necessary to generate a one percent tax share that exceeds $3 million every year.
“One-third of a billion … that’s a lot,” he said.
According to Christine Jeffries, president of the Naperville Development Partnership, aside from Chicago, the only city in Illinois whose taverns and eateries bring in more revenue than Naperville’s is Schaumburg.
Officials appeared OK with that distinction.
“We all want the region and the state to prosper,” Councilman Joe McElroy said. “But we want Naperville to prosper more.”