The state of Naperville’s finances is solid. Officials are casting a cautious eye down the road, however.
A special City Council meeting this week spotlighted the city’s five-year financial outlook and the upcoming tax levies.
The economy has been a particularly bright spot in the past year, Finance Director Karen DeAngelis said, trickling down to sales tax income and other commerce-driven revenue that has readily outperformed projections.
After taking a 10 percent hit in 2010, the city’s income from local sales taxes began to climb upward again in the following two years. DeAngelis related that for fiscal 2013, which ended April 30, sales tax revenue added up to a record $30 million.
During the meeting, the first of four budget workshops planned in the coming months, DeAngelis also reported that municipal revenue from income taxes has returned to its previous levels as unemployment has declined in the past year.
And while home values have dropped more than 20 percent since the onset of the economic downturn, houses and businesses in Naperville have begun selling again. The first five months of fiscal 2014 show a 70 percent increase in real estate transfer tax receipts over the same period in the previous year.
“That’s an ‘oh my god!’” DeAngelis said. “If you want to talk about recovery, that’s hugely dramatic.” Despite interest income on the city’s assets remaining low, predictions suggest the budget year will end up with $2.2 million worth of improvement on the revenue side. Lowered health care, worker compensation and other insurance costs have saved the municipality an additional $1 million.
“Overall, fiscal year ’14 is $3.3 million better than we had expected,” DeAngelis said.
The near future doesn’t look half bad, either. Coupled with the unanticipated surplus, a recent audit found excess funds that bring to $5.8 million the balance that will transfer to the 2015 spending plan. That improves the picture painted a year ago that foresaw a $10.7 million shortfall in next year’s budget.
“The gap right now is $2.2 million,” DeAngelis said. “We’ve seen bigger gaps at this point in time.”
Also fueling general optimism are projections that revenue streams driven by the economy, such as s Sales taxes and real estate transfer receipts, will grow 3 percent to 4 percent yearly.
“That could end up being as much as 8, 9, 10,” she said. “We’ll see.”
On a less cheery front, DeAngelis said assessors in the five townships that include portions of Naperville have retracted some of their confidence that the decline in local property values is finished.
“That view has now changed. They are now looking at a 3 percent decline in (equalized assessed valuations) this year and another 2 percent the following year,” she said. Recent commercial property reassessments are now making their way through the system, as are foreclosures for which the processing was delayed until recently. The city’s costs for debt and its pension obligations that year are expected to add up to $24.2 million.
“For me, that is kind of our watch period,” she said. The assessed value of city properties could head back up again by that time, DeAngelis said, or income from sales taxes could approach two-digit growth. Those things would help offset the loss in general fund revenue. She’s not ready to push any panic buttons at this point. “This is not a crisis situation,” DeAngelis said. “But this is an alert, so I think we need to look at everything, to see how much the economy’s improvement has helped us to fund these requirements.”