By Bob Seidenberg
With $43.1 million in federal COVID recovery funds at the start of their terms, Evanston City Council members weren’t pressed to find revenue to meet budget goals in their first three years in office.
That may not be the case later this year as council members begin fashioning the 2025 fiscal year budget, with officials predicting a sizable deficit between expected revenues and expenses. A majority of the nine-member council is acknowledging Evanston will need to increase revenue if the city is to be financially responsible.
At Monday’s City Council meeting, two members said the city would need to do both – increase revenues and decrease expenses. Two others said decreasing expenses and finding efficiencies was preferable.
City finance staff gleaned the views from a series of one-on-one conversations with council members in February. Council members took no action at the meeting, with the report on the meetings intended for discussion only.
First meeting of the year
Officials held the meetings for the first time this year, hoping “to frame a discussion around the council’s goal of responsible and sustainable stewardship of city assets,” said city Budget Manager Clayton Black, reporting the results of the exercise at Monday night’s council meeting.
Black, along with Hitesh Desai, the city’s chief financial officer and treasurer, head up the city’s financial staff.
With the first major budget update not due until midsummer, officials hope to get “an early understanding of individual council goals and priorities for the upcoming budget season as well as collect ideas from the City Council how best to challenge on how to balance the the budget in future years,” Black said.
How relevant the early conversations will be when budget memos start flying and the city’s active citizen force make their views known (in a once-in-every-four-years election season) is anyone’s guess.
Top goals
In conversations with staff, council members listed sustainability, achieving the city’s Climate Action Resilience Plan (CARP) goals, affordable housing, spending efficiencies, and managing the city’s facilities and assets as their top goals.
If additional revenue is the answer, staff should do a comprehensive review of all city licenses and fees, some council members suggested. The focus should be on fees that haven’t been changed in 10-plus years, Black said in his report, distilling what officials heard.
Council members don’t want “to nickel and dime residents with several new small revenue ideas,” Black said staff took from the conversations. “We should not use one time revenue [stadium permits or potential building sales] to balance the budget,” he said in his memo.
Black reported there was no consensus on potentially increasing the property tax levy in the pre-budget discussion.
“In a world where there is a property tax increase,” Black reported from the conversations, “that property tax increase should be tied to a program/expense.”
He gave public safety pensions, parks and the city’s new community responders program as ideas heard for where the revenue could go.
No tax increase last year
Evanston council members pulled back from a 7.8% increase in the city’s portion of the property tax last budget season, instead dipping into city reserves, which for the time being are fairly robust thanks in part to the infusion of federal American Rescue Plan Act money.
At the city’s Finance & Budget Committee last November before the budget was passed, David Livingston, chair of the city’s Finance & Budget Committee, argued that property tax increases are never popular.
Nonetheless, the City Council’s decision in recent years to steer away from using property taxes as a main revenue generator in recent years could actually be injurious to the city’s financial health in the long run, creating a structural deficit.
Other council members, however, have different views, noting the high property tax burden residents and businesses are already laboring under.
Black noted that throughout finance staff meetings with council members “we shared a series of graphs with council members showing that the city is working with essentially the same amount from out property tax levy to cover basic operating expenses as we did 10 years ago,” and that “the city’s portion of the property tax levy has increased at rates well below the cost of living during that 10-year period.”
Schools raise tax levy
In the one-on-one conversations, he said some council members expressed frustration that the school districts typically raise their property tax levy year after year and the city gets blamed for it.
Schools account for roughly 70% of the total property taxes residents and businesses pay compared to under 20% for the city. Unlike the city, however, which can levy fees and fines in a multi-fold areas, from license fees to parking tickets, property taxes are the main tool for the districts to raise revenue.
Nevertheless, there was no consensus on potentially increasing the property tax level in the council members pre-budget discussions.
In brief discussion at the meeting, Fourth Ward Council member Jonathan Nieuwsma signaled that may be different in the 2025 fiscal year budget discussion.
‘Not if, but when’
He predicted that council members will have to make some tough calls on the tax issue. “I think the question is not if, but when,” he said.
He posed a philosophical question to his colleagues: “Would you rather do kind of small incremental increases year over year or hold flat and take a bigger jump less frequently.”
Council Member Clare Kelly (1st Ward) didn’t subscribe to the basic premise. “I’m particularly interested in seeing more of a commitment to cost-saving measures, efficiencies, as opposed to looking for new revenues,” she said.
“New revenue is always something worth discussing, but I think we want to look at things like reduction in the reliance on consultants, which costs us an exorbitant amount of money and other expenses.”
Budgets from other cities show them “constantly looking at ways to save money, cost-saving measures, efficiencies and I want us to lean more into that. And I think we also have to have a real transparent discussion about our excess reserves, our unassigned or unencumbered money which is well over $27 million.”
Biss: ‘Tough choices’
Several officials, including first-term Mayor Daniel Biss, who was one of those interviewed, expressed positive views about the early attempt to get ideas out in discussion.
Biss noted that as part of his immersion into city government he was initially surprised that when staff proposed a budget in late summer that “represented a tremendous amount of work, which was largely done without input from elected officials and just left us in a tough spot where there was a misalignment between the council and finance staff.
“And that misalignment was significant,” he said, “and came kind of close to the end of the road [the budget is normally adopted the week before Thanksgiving] so it’s hard to make any significant changes.
“So I thought it would be an annoying homework problem,” he said to finance staff, “of sitting down with us one at a time trying to kind of of canvass the council, understand what our key priorities were as input to the work you do throughout the spring and summer, leading into the unveiling of a staff budget.”
The mayor acknowledged that while the process didn’t achieve consensus, “but I think it’s really important that we’ve kind of surfaced some of the areas of shared interest and I think it’s also important that we’ve surfaced some of the challenges,” he said. “And the thing that I would just urge everybody up here to bear in mind as we continue to interface with staff as the budget is prepared, but especially as we discuss the budget and eventually vote on it, there’s tough choices coming. And what I hope we don’t do is fail to make any of those tough choices and kick a bigger problem down the road to the council making the 2026-27 budgets and beyond.”
He noted that finance staff in their report noted that some council members were interested in finding efficiencies, but didn’t recommend a lot of specifics. The mayor included himself in that group.
He said, while he was interested in finding efficiencies, he didn’t supply officials with a giant list of specific cuts to recommend.
From that, he encouraged staff members to keep up efforts throughout the summer of bringing back options to the council to begin to address some of these long-running financial challenges.
“My commitment to you as one person up here,” he said, “is I’ll do my best to encourage everybody to think kind of clearly about those unpleasant options and choose between them and push us to avoid just picking none of the above, skating through on just enough reserves and find ourselves with a bigger structural problem come next year…”
