Town of Normal staff proposed a budget of $205.4 million for the next fiscal year. The increase over the estimated budget of $185.7 million for the current year is 19.6%.
City chief financial officer Andrew Huhn said during a day-long budget workshop for city council on Tuesday that much of that jump would be funded by projected double-digit revenue growth, mostly sales. and tax revenue.
“We’ve set the budget at 12% and 4% (increases) for those revenue streams, which seems a bit low, honestly. We’re always cautious because if we go into a recession in 23, then what are the real revenues now can change very quickly,” Huhn said.
Revenue from fees for services such as garbage collection, ambulance runs and the Illinois State University contract for fire services will all increase by a modest amount. Huhn said the ambulance and garbage lines reflect continued growth in Rivian and elsewhere in the city.
Most years, the revenue forecast is relatively firm. Huhn thinks the next cycle will be unusually flexible on the revenue side as the city continues to see strong cash flow.
“This is my 31st working session on the city’s budget. This one is really strong. There are a lot of good stories in this budget,” said City Manager Pam Reece.
On the expenditure side, part of the increase comes from $2 million to allocate past surpluses. There’s $6 million more for pension funds, $1.5 million more for additional roadwork, $1.2 million more for parks and facilities, and nearly $4 million in debt reduction by the end of the fiscal year. Utility costs are expected to increase by $1 million. Utility costs have doubled, Huhn said, noting there will also be a separate increase of $268,000 just for street lighting costs.
The budget continues to move away from exclusively using property tax money to pay for police and fire department pensions and Illinois municipal retirement fund obligations. The general fund takes on more of that burden as pension contribution requirements increase, Huhn said.
“What we’re trying to do is be sensitive to property tax issues. We’ve kept the levy flat. We think going forward the general fund will absorb a lot of what the levy was paying to try to maintain a reasonable levy for citizens,” Huhn said.
Addition of 5 full-time positions
The draft spending plan includes five new full-time jobs in the second year of a plan to restore positions cut during the pandemic and past economic downturns. Last year, the city added 23 positions. Most of them have been filled. The new jobs in demand would be in the city clerk’s office, the cultural arts, finance, public works and engineering departments.
Insurance costs continue to rise, although Huhn said he expects the post-pandemic claims spike to level off. Salary expenditures increase by the consumer price index for non-unionized workers and by contract for unionized police and firefighters. Huhn called wage growth “light.”
Salaries and benefits represent 48% of budgeted expenses; most of them are firefighters and police.
“In service organizations, payroll and social costs typically make up more than 50% of the budget,” said board member Karyn Smith. “I think Normal does a great job of being efficient in its workforce.”
Vehicles, water utility chemicals, and other operational items are experiencing significant inflationary increases.
Water and sewer rates will remain stable in the new cycle, although there will be 2% jumps in the later years of the five-year projection.
Even though the proposed spending increase is 19.6%, Huhn said it’s conservative relative to the revenue growth the city is experiencing. The city forecasts less than 60% of the current year’s revenue growth and more than 100% of the current year’s increase in expenses. He said they also allow other reservations.
“We budget at full employment and that never happens. We have vacancies during the year. That gives us automatic coverage. “Investment and gas and utility costs. be surprised by an unforeseen shortfall,” Huhn said.
“This has to be the strongest budget I’ve seen in 10 years,” board member Kevin McCarthy said. “I appreciate how well this plan is suited to the current situation. We are doing more work due to our position of strength, we are also reimbursing overhead costs because we can at this time and it is prudent to And we also aim to keep certain locally defined sources of revenue stable, all responsible and prudent actions.”
The actual increase in state shared sales tax revenue in 2022 over 2021 was 21.7%.
“It’s just incredibly high, compared to what we’ve seen. Historically, it was normally between 2 and 3%. The local (sales) tax is an increase of 18.8%. We are currently seeing almost those numbers in our current period of actual numbers for this year,” Huhn said.
Huhn said a potential recession later this year may or may not be a problem, but the city is going into it from a position of strength. He said he wasn’t too concerned about the State Farm layoffs. The current layoff of IT workers, he said, does not appear to be as big as the wave of years ago when the Bloomington-based insurance giant terminated the work of contractors following a digital transformation program.
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