Decatur City Council's deficit budget vote leaves city weak and vulnerable, dissenting councilman Horn says
Decatur has been left in a weak and vulnerable financial position following city council's split vote earlier this month to adopt a 2018 budget that runs a $3.2 million deficit, a city councilman said during a recent interview.
"Lower cash reserves make the city of Decatur more vulnerable to unexpected emergencies," Councilman David Horn said during a Macon Reporter email interview. "Moreover, the budget does little to ameliorate other challenges that were pointed out by Moody's including 'a declining population, shrinking labor force, elevated unemployment, and below-average resident income levels.'"
Decatur City Council voted 5-2 during its regular meeting Dec. 4 to approve the city's $67.9 million 2018 annual budget. The council was divided over whether to pass a budget that included a deficit, Horn said.
"For me, the deficit budget puts the city of Decatur in a weaker financial position, makes us less able to respond to financial emergencies, and reduces our ability to invest in initiatives such as neighborhood revitalization that can ultimately bring us into a better financial position," he said.
Horn, a Millikin University biology professor, is serving his first term on Decatur City Council after winning his seat during the past April's consolidated general election.
Earlier this year, state lawmakers in Springfield shored up the state's budget by including a 10 percent reduction in local governments' share of the Illinois income tax and added a 2 percent local sales tax management fee. The resulting revenue loss for Decatur is estimated to be about $1.4 million compared to last year.
In June, the Macon Reporter published a list of the 50 highest-paid city of Decatur employees based on 2015 Illinois Municipal Retirement Fund (IMRF) records.
Horn said he had three reasons for opposing the deficit budget. "One, by adopting a deficit budget, at the end of 2018 the cash reserve of the general fund is predicted to be $1.66 million," he said. "According to the most recent city treasurer's budget report, 'The best practice reserve is a 45-60-day cash reserve or $8-11 million.' In my view, we should be striving to meet best practices, and not pass a budget that reduces our current reserve (around) 65 percent.
"Two, If 2018 financial projections of Decatur's general government taxes are not correct, the deficit budget could be even larger than projected. As one example, the most recent city treasurer's budget report indicates that revenue is down 1 percent, or approximately $700,000 below projections for the year. A shrinking cash reserve paired with imprecise revenue projections may limit our ability to respond to budgetary emergencies."
Horn's third reason was prompted by Moody's Investors Services' announcement a few days before the city council vote to downgrade Decatur's credit rating from A1 to A2. Horn cited the portion of Moody's Investors Service announcement that said Decatur's "negative outlook reflects the city's relatively limited reserves with ongoing operating pressures that may create an operating deficit in fiscal 2018. The outlook also reflects the city's elevated and growing pension burden."
The City Council adopted the deficit budget despite a motion made by Horn and seconded by Councilman Bill Faber to table the budget until it could be assessed further.
The council did not adopt three amendments Horn proposed to the budget, including a change for "other licenses" from $221,000 to $621,000.
"One way to achieve this additional license revenue would be to increase the fee of each video gaming terminal in Decatur from $250 to $1,250 and receive an additional $400,000 in revenue," Horn said.
"The second amendment was to increase the utility tax by 0.25 percent by raising $275,000. My assumption was that residents will see a forthcoming decrease in electric costs due to new electric aggregation rates, and that reduction in costs would offset any increase in utility tax thereby having no net impact on residents. However, the city manager was not able to determine how much money individuals would save from new electric aggregation rates, and I subsequently pulled the amendment from consideration."
Horn's third amendment would have cut all general fund discretionary expenses by a total of $1.6 million, though he said his "preferred approach would be for each department head to make proposed cuts to their department for the council to consider."