JOLIET – One challenge facing the Joliet City Council as it reviews its proposed budget Monday will be how to avoid a tax hike without spending more money out of its rainy day fund.
The city’s reserve funds are dipping to the point that City Manager Jim Hock has proposed issuing a bond, or borrowing money, to build up the city savings accounts.
The council meets at 5:30 p.m. at City Hall in a budget meeting where some will expect to see alternatives to a proposed 5 percent hike in property taxes.
At the same time, city officials want to rebuild reserve funds – money set aside for unexpected budget shortfalls.
Reserves in the city’s general fund, which covers most city services, has been falling since 2013, according to the budget proposal the council reviews Monday, as the city has borrowed from its own savings to pay for annual operations.
The 2016 budget proposal forecasts another drop in the reserve fund to the point that it will be half of what it was in 2013.
The cash balance in the general fund stood at nearly $48 million in 2013. The 2016 budget proposes a cash balance, or reserve fund, of just under $24 million.
The city already had planned to use up $8 million in reserves at the start of 2015 to cover a budget deficit. Then $15 million from reserve funds was spent on the acquisition of Evergreen Terrace, the low-income housing complex that the city condemned in federal court after a 10-year legal fight.
Hock has proposed issuing bonds, which amounts to borrowing money, once the city wins the appeal of the Evergreen Terrace case and establishes an income stream from the property. The bonds would reimburse the reserve fund for money used to buy Evergreen Terrace.
He acknowledged the city was essentially borrowing money to put into a savings account. But, Hock said, “You’ve got a known income source that is paying the bond and the interest on that bond.”
Meanwhile, the city also is looking for ways to cover expenses in 2015, which is why the property tax was proposed.
The budget does not include money for pay increases, which doesn’t mean there won’t be any. The city has just begun to discuss union contracts that expire at the end of 2015. But any pay increases could end up coming out of reserve funds, Hock said.
Meanwhile, Mayor Bob O’Dekirk and some council members already are telling Hock that they do not support the 5 percent property tax increase, which would generate $1.6 million and is factored into the proposed budget.
“We are a ways off before we even consider that,” said Councilman John Gerl. “We have to look at the expense side before we look at a tax increase.”
But Gerl and others also are concerned about the reserve funds, too.
Gerl noted that the city had built up its reserves to 16 percent of the general fund, which provides two months of spending if needed to run basic operations, before the city began using savings.
“I’m concerned about that,” he said. “We worked very hard to get to the point of that two-month reserve.”
JOLIET GENERAL FUND RESERVES
• 2016 Proposed: $24 million
• 2015 Year-End Estimated: $30 million
• 2015 Budgeted: $36 million
• 2014: $44 million
• 2013: $48 million