City of Wheaton City Council met Aug. 28.
Here are the minutes provided by the council:
I. Call to Order
The Wheaton City Council Planning Session was called to order at 7:00 p.m. by Mayor Suess. The following were:
Physically Present: Mayor Suess
Councilman Barbier
Councilwoman Bray-Parker
Councilman Brown
Councilman Clousing
Councilwoman Robbins
Councilman Weller
Absent: None
City Staff Present: Michael Dzugan, City Manager
John Duguay, Assistant City Manager
Robert Lehnhardt, Director of Finance
Jolanta Moryl, Assistant Director of Finance
Halie Cardinal, Public Relations Coordinator
II. Public Comment
There were no public comments.
III. Approval of Planning Session Minutes – August 14, 2023
The City Council approved the August 14, 2023 City Council Planning Session Minutes.
IV. Wheaton Benchmark Study
City Manager Dzugan stated that City staff conducted the Wheaton Benchmark Study, which offers revenue and expenditure guidance for the City in preparation for the 2024 Budget.
City Manager Dzugan stated that the study used normalized data from seven peer communities: Carol Stream, Downers Grove, Elmhurst, Glen Ellyn, Hoffman Estates, Lombard, and Mount Prospect. Financial data excluded from the study included Enterprise Funds, Tax Increment Financing (TIF) Districts, Economic Development Areas, Internal Service Funds, and Trash Disposal Service. City Manager Dzugan showed a comparison of the rates each of the peer communities charge for a variety of taxes compared to Wheaton.
For general governmental funds, the study compared Wheaton to the peer communities in terms of revenues, which showed the City of Wheaton is: 6% above peer communities for property tax and 5% below peer communities for sales tax. In terms of total governmental funds revenue growth from 2018 to 2022, the City has not had a rate or tax increase during this period. Therefore, the growth within this timeframe is “organic” and attributed to funds received in association with the COVID-19 pandemic. The benchmark study showed Wheaton with the lowest government fund revenues raised per capita compared with the peer communities, with Wheaton collecting $278 per capita in property taxes and $719 per capita in other revenues. The City’s property tax distribution is similarly aligned with peer communities. In terms of combined state and local sales tax revenue per capita, the City receives $236 per capita, which is the lowest of the peer communities. City Manager Dzugan showed the correlation between the major revenue sources for the communities studied, which generally showed the communities with lower sales tax revenue collected more revenue in property tax.
For governmental expenditures by type, comparing Wheaton to the peer communities, the City spent 4% less than peers for general government; 4% more for police and 1% more for fire (due to the bonds issued for pension funds); 5% more than peer communities for public works; and 6% below peer communities for capital and MFT in 2022. In terms of total governmental funds expenditures growth from 2018 to 2022, the City placed in the middle of its peer communities with 9.4% expenditure growth during this period. However, this dataset is difficult to normalize due to the timing of significant projects.
In terms of governmental funds expenditures per capita for 2022, the City’s expenditures were $303 per capita for police and $227 per capita for fire, which were among the lowest of the peer communities. For general government expenditures, Wheaton was the lowest among its peers at $114 per capita; and public works/engineering per capita was in the middle of its peer communities at $150 per capita.
City Manager Dzugan reviewed the City’s full-time staffing levels from 2007/2008, which was 287 full-time personnel, compared to the present, which is 267. Following the recession in 2009, the City reduced its number of full-time personnel and has gradually increased the number of employees since that time. City Manager Dzugan stated that full-time employees per 1,000 residents in 2023 is 4.66, which is among the lowest in comparison with peer communities. However, this data point does not include contract employees such as paramedics.
The benchmark study also reviewed library services, and Wheaton Public Library revenues per capita in 2022 were $119, which was among the lowest of the peer communities, and the expenditures were $126 per capita, among the midpoint of its peer communities.
In response to Council question, City Manager Dzugan stated that the library has a fund balance, which is why the expenditures appear to be greater than revenues.
V. 2024 - 2028 Financial Forecast
Director of Finance Lehnhardt recognized the efforts of the Finance Department in creating the five-year financial forecast, including Assistant Director of Finance Jolanta Moryl and Finance Analyst Kyle Moss. The goal of the 2024 - 2028 Financial Forecast is to meet Strategic Priority 1A of the City's Strategic Plan, to prepare a long-term financial forecast. The desired outcomes are to control expenditure increases, achieve a structurally balanced budget, minimize operating expenditures, and focus on infrastructure investment.
In terms of revenues, City staff have the following general assumptions: moderate growth in most major revenue sources; no new taxes or increases in taxes, rates, or fees; no issuance of bonds; and the annual property tax levy is assumed to be flat over the next five years. In terms of expenditures, City staff have the following general assumptions: no new positions; pension funding policy considered with current methodology; other assumptions range from 1-6.8%; and the forecast considered the proposed CIP projects.
In terms of the General Fund, revenues from 2020-2022 had an average increase of 4.5%, whereas 2024- 2028 is projected to increase 0.6%. Expenditures from 2020-2022 had an average increase of 3.7%, whereas 2024-2028 is projected to increase 3.6%.
In response to a Council question, Director of Finance Lehnhardt stated that the rationale behind the 0.6% revenue increase from 2024-2028 was based on evaluation of revenue sources such as sales tax and income tax, which are not projected to have significant growth. He stated that the property tax levy has a major impact. There is a drop-off in terms of general corporate property taxes in 2025, which decreases revenues over that time period.
The forecast estimates expenditures exceeding revenues from 2026 through 2028. For major revenues, 76% of General Fund revenues consist of property tax, sales tax, income tax, and utility tax. In 2020, there was a significant decrease due to the COVID-19 pandemic and then in 2021, sales tax legislation brought an increase in revenue. In future years, revenues are predicted to level and remain relatively flat. Utility tax revenue – which consists of gas, electric, and telecommunications – is often dependent on weather conditions. Electricity charges are at the maximum rate the City can charge, gas charges have the potential to increase if needed, and telecommunications taxes have had the largest impact on the decrease in utility tax revenue overall.
In response to a Council question, Director of Finance Lehnhardt stated that City staff estimate the following: property tax to decrease, sales tax to stay level, income tax to stay level, and utility tax to decrease. From 2020 to 2022, there was significant growth in income tax. City staff did not add additional State allocation on a per-capita basis to the income tax. The estimates are contingent on the economy.
In response to Council question, Director of Finance Lehnhardt stated that there is a concern regarding potential future government solar power incentives in relation to the electricity tax revenue.
In response to Council question, Director of Finance Lehnhardt stated that the projections did not factor in any new large residential developments being built and capturing the growth in the property tax levy.
In terms of General Fund operating expenditures, personal services have a 2.2% average annual increase, 9.4% average annual employee benefits increase, supplies and materials remain relatively flat, and 3.6% interfund transfers increase.
Regarding the transfer to the Capital Projects Fund, City staff predicts 2023 will be $2.1 million; 2024 will be $2.31 million; 2025 will be $0.64 million, and 2026 through 2028 will be $0. The General Fund policy target reserve is 40% of operating expenditures. Staff projects the following regarding the target reserve: 2023 to be 47.5%; 2024 to be 45.3%; and 2027 to be 36.1%.
Regarding the Capital Projects Fund, revenues come from transfers from the General Fund and grants with $6.2 million since 2021. Expenditures are for sidewalks, roads, bridges, and other capital projects not in the City’s Enterprise Funds. Through the ARPA grant, the City received $4.9 million, which was allocated to new sidewalks and flood improvement projects.
In response to Council question, Director of Finance Lehnhardt stated that the FAUS (Federal Aid to Urban Systems) funds are shown as expenditures as opposed to revenue because the City is only required to pay its portion of the project costs.
Regarding the Motor Fuel Tax Fund, approximately $2.4 million in MFT funds support the annual road program, with the remaining $1.6 million coming from the Capital Projects Fund. MFT revenues have increased from 2019 to today and are projected to continue that trajectory. In July 2019, the State doubled the motor fuel tax rates which, in turn, doubled the City’s MFT revenue. The Motor Fuel Tax Fund has a policy target of 50% of annual revenues. In 2024, projections indicate the fund will be at 41.6% which is $0.2 million below the target reserve. However, projections indicate that from 2025-2028 the fund will be on target.
Regarding the Water Fund, the projections have no rate increases over the next five years, with the last increase having occurred in 2015. In terms of expenditures, the DuPage Water Commission (DWC) has increased rates by 11.1% since 2015. For 2022 and 2023, the DWC rates have increased 4% each year which resulted in a $0.3 million annual increase in operating costs. The forecast projects a 4% increase in 2024 and 2% for the remaining years. The forecast anticipates operating expenses will meet the level of operating revenues by 2028. The Water Fund has a policy target of 25% of operating expenses. The forecast projects 2025 to be $1.7 million below the policy target; 2026 to be $2.8 million below the policy target; and 2027 and 2028 to have deficit balances.
Regarding the Sanitary Sewer Fund, there are no rate increases in the forecast, with the last increase having occurred in 2007. In terms of expenditures, the main impacts are the Sanitary Sewer Reimbursement Programs, with a recent budget increase of $300,000 to match resident participation. The Sanitary Sewer Fund has a policy target of 25% of operating expenses. From 2024-2027, the projections indicate the fund balance to be above target, with 2028 having a deficit balance.
Regarding the Storm Sewer Fund, the projections incorporate the proposed stormwater utility fee change. There is no increase in total revenue, and the average revenue from previous rates is $1.75 million annually. The projections indicate that from 2024-2028 expenses exceed revenues. The Storm Sewer Fund has a policy target of 25% of operating expenses. In 2023, the fund is projected to be above target and from 2024-2028 the fund will have deficit balances. Director of Finance Lehnhardt reiterated that these forecasts include proposed capital projects, and the City will be further exploring funding options and which projects the Council is interested in completing in coming years.
Regarding the Parking Fund, the forecast has no increases in revenues. Director of Finance Lehnhardt noted that leased parking permits’ revenue decreased 24.6% from 2019 and parking daily fees and meter fees’ revenue decreased 40.9% from 2019. The comprehensive parking study is currently in progress. In 2019, the Parking Fund had revenues exceeding expenses by $0.1 million, and the forecast shows 2020-2028 expenses exceeding revenues. The Parking Fund has a policy target of 25% of operating expenses and parking garage renewal reserve. From 2022-2024, the projections indicate the fund balance to be below target, with 2025-2028 having deficit balances.
Some Council members noted that evaluating the rates and funds related to water, sanitary sewer, and storm sewer of peer communities would be beneficial for the City’s budgeting efforts.
VI. 2024 Budget Framework
Director of Finance Lehnhardt stated that the objective of the presentation is to receive the Council’s direction on the City staff’s recommendations for the 2024 Budget’s revenue and expenditure framework. The 2024 Budget Framework intends to further the Strategic Priority 1A, Initiative 2, which is to annually prepare a budget decision-making framework. Key points of the budget framework include the City being rated as a AAA community; providing essential services and programs to the community; adhering to strict expenditure management; maintaining a flat property tax levy; no increases in enterprise funds’ rates; receiving grants and one-time revenues; a TIF #3 Surplus Distribution; and the High-Level Excess Liability Pool (HELP) being dissolved.
In response to Council question, Director of Finance Lehnhardt stated that there are no further pending liability claims at this time in relation to HELP. However, certain claims do not have a statute of limitations.
Staff will continue to analyze operations to identify opportunities to reduce costs while ensuring the services provided to the community are not significantly impacted. Staff will also perform a review of the City’s fund balance reserves to identify any reserves over policy targets. Staff will continue to pursue Federal, State, and Local grant funding opportunities.
He stated that the following pressure points exist for the City: personnel and pension costs; DuPage Water Commission rate increases; vehicle replacement costs; infrastructure construction costs; the building renewal fund; and enterprise funds.
For the General Fund in 2023, staff project $1.9 million in surplus in terms of revenues compared to expenses, and the fund is $3.7 million above the reserve policy target. The total revenue increase is $2.8 million, with sales and income tax representing $1.3 million of that increase; charges for services represent $0.4 million; and miscellaneous revenue largely consisting of TIF #3 representing $0.4 million. The State and Local sales taxes have increased significantly starting in 2021. Income tax significantly increased starting in 2021 and is projected to flatten in 2024.
The 2024 General Fund is projected to have revenue and expenditures at $53.5 million; 45.3% of operating expenditures; and $2.7 million above reserve policy target. The 2024 General Fund’s total revenue is projected to increase $0.5 million; taxes will increase $1.2 million; intergovernmental will decrease $0.3 million; and miscellaneous revenues will decrease $0.4 million. The total expenditures are projected to increase $2.4 million; which includes increases in personal services by $0.6 million; employee benefits by $1.4 million; interfund transfers by $0.5 million; and interfund transfers-capital by $0.2 million.
In response to Council question, City Manager Dzugan stated for the City’s pension contribution, the 2024 Budget will use the current methodology as previously discussed with the actuary.
Some Council members noted that in terms of new initiatives, they would like to explore increasing the part-time social worker position to full-time, potentially increasing economic development efforts, completing work on Roosevelt Road, completing the parking study, environmental sustainability, Boards and Commissions funding, streetscape maintenance, and potential additional personnel for marketing.
In response to Council question, City Manager Dzugan stated that the main areas that staff believe need financial focus on are parking, storm water, and water.
Council members discussed the City’s efforts to provide quality services with consideration of costs, noting the City is doing more projects for the community than ever before, providing value to its residents through its projects, programs, and services.
VII. City Council/Staff Comments
There were no comments.
VIII. Adjournment
The meeting was adjourned at 8:28 p.m.
https://www.wheaton.il.us/AgendaCenter/ViewFile/Minutes/_08282023-2367
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