Palos Heights is looking to sell naming rights to its nature preserve. Schaumburg, the retail jewel of the northwest suburbs, increased its sales tax to offset a rare deficit. Even Gurnee, the land of roller coasters and outlet malls, is keeping its options open.
The budget woes afflicting the state are rolling downhill as municipalities look to plug gaps in their spending plans for the next fiscal year by imposing cuts and raising taxes and fees on services ranging from ambulance rides to parking and utilities.
“Everything’s on the table,” said Mark Fowler, executive director of the Des Plaines-based Northwest Municipal Conference.
This is crunch time for local officials: Most communities with a fiscal year starting May 1 approve budgets by that date. The financial vise is especially painful this year because the weak economy has been a major drag on tax revenues for the state and municipalities.
For local governments, the primary sources of shared revenue with the state are the income tax, personal and corporate, and to a lesser extent, the sales tax, said Mike Klemens of the Illinois Department of Revenue. Roughly 10 percent of income tax revenue and 1 percent of sales tax revenue are returned to local governments, he said.
Income tax revenue, doled out to municipalities based on population, fell 8.5 percent this fiscal year, to $65.34 per person from $71.40, according to an Illinois Municipal League report.
Municipal officials consider income tax revenues to be a key gauge of how an economic slowdown affects local governments, said Larry Frang, Illinois Municipal League assistant executive director.
There is good news, Frang said. Economists are forecasting that the recession is “wrapping up.” The league is predicting a 1 percent increase in income tax revenue by the end of this coming fiscal year, Frang said.
In the meantime, few municipalities are banking on rosier forecasts to shore up immediate shortfalls. For local governments, the projected 1 percent growth would follow a 16 percent decline in income tax revenues over two years.
Municipalities cannot bank on a cash infusion from the state. Gov. Rod Blagojevich has vowed not to increase sales and income tax rates even as the state faces its own $5 billion deficit.
Mark Baloga, executive director of the DuPage Mayors and Managers Conference, said this is one of the toughest budget years he has seen since he began working for the Oak Brook-based group.
“This is without a doubt the worst economic situation that both state and local governments have found themselves in, definitely, through the last eight years that I have been here,” he said.
Hiring, wages are frozen
Most municipalities will cut spending by reducing travel and training, freezing hiring and wages, putting equipment purchases on hold, and delaying street repairs and other capital improvements deemed non-essential, officials said.
Elk Grove Village, for example, is leaving 14 positions vacant, while East Dundee is not filling 30 jobs, officials said. Park Ridge plans to delay an increase in aldermen’s salaries and cut $100,000 in funding for legal battles to prevent O’Hare expansion, City Manager Tim Schuenke said.
But across the region, many municipalities–even those normally sustained by a strong retail base–are seeking increases in revenue via taxes and virtually every fee imaginable.
In Schaumburg, officials approved a local sales tax increase of 0.5 percentage points to address a projected budget shortfall of $5.1 million. From 2000 to 2003, sales taxe revenues fell 6.4 percent, Village Manager Ken Fritz said. “It started slowing down before the Sept. 11 terrorist attacks but really started falling after that,” he said.
Like Schaumburg, Gurnee does not levy a property tax, instead relying heavily on sales-tax revenue generated by 26 million yearly visitors, primarily to Gurnee Mills mall and Six Flags Great America theme park. Sales tax receipts posted a much smaller increase than forecast, but Gurnee so far has been able to respond to the disappointing numbers with spending cuts, officials said.
Officials have raised the subject of the property tax–Gurnee abolished it in 2001–but reinstating the tax remains a last resort. They planned to pass a budget next week with no new revenue sources and to evaluate fees during the year.
Carol Stream instituted its first-ever home-rule sales tax of 0.5 percent, projected to raise $835,000, said Village Manager Joe Breinig. “We recognize this is not a great time to be levying additional taxes, but we don’t sense that anybody wants services cut back either,” he said.
Downers Grove scaled back expenditures and enacted its first sales tax of 0.5 percent, increased its electricity tax to 3.5 percent from 2.3 percent, and raised its gasoline tax to 1.5 cents a gallon from 1 cent, said Dave Van Vooren, a deputy village manager. “There is no doubt it was a difficult year for us,” he said.
Van Vooren said the tax proposals generated “full house” meetings, but many attendees were concerned about potential cuts to services.
Elk Grove Village and Carpentersville are among the suburbs that will increase their home-rule sales tax by 0.25 percentage points effective Jan. 1, officials said.
Park Ridge raised property taxes. “We tried to strike a balance between cutting services and raising fees,” Schuenke said. “There isn’t a department that hasn’t been affected. Everybody had to take a hit.”
Naming rights for lake
One of the more unusual routes for raising revenue in the suburbs is Palos Heights’ hopes for selling naming rights to Lake Katherine, the city’s 158-acre nature preserve. Voters approved a $750,000 property tax increase this month, but the city won’t see that revenue until next year, and it won’t cover a $1.2 million deficit and the cost of operating Lake Katherine, officials said.
The preserve “is a gem in our town, and we’ve got to look for some way to pay for it,” said Palos Heights Mayor Bob Straz, who is expected to form a committee to seek corporate sponsors.
The pickings are even slimmer for non-home-rule communities–towns with populations under 25,000 that lack voter-approved home-rule authority. Caps limit their ability to raise property taxes, and they cannot increase the sales tax without voter approval.
In fact, most suburbs do not have home-rule authority, so they must come up with other funding sources, said Christine D. Wilson, executive director of the Lake County Municipal League.
“Fees are something totally different, and I think what we’re seeing is communities are being more aggressive at making sure the fees they charge cover the expenses they’re supposed to cover,” Wilson said. “Instead of looking at it every 10 years, communities are now looking at it every year or two.”
Libertyville is bringing a series of fees–permit, water and sewer collection–“in line with other communities,” Finance Director Steve Noble said.
Flossmoor raised water fees, vehicle sticker fees, parking ticket fines and fees charged for animal licenses and building department services.
Numerous towns were creating or raising ambulance fees. Oak Forest began charging a $400 fee each time firefighters are called to put out car fires and $250 for extricating people from vehicle accidents, double for non-residents.
Sometimes, though, towns run out of money wells to tap. In Prospect Heights, village staff rosters have been plundered to the “bare bones,” said zoning and planning director Steve Skiber, who’s down to one part-time worker.
“If we didn’t sell vehicle stickers, we’d go broke,” Skiber said.
