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Yes, and you better be paying attention, because this one deals mainly with revenue sources needed to make up for existing shortfalls.

On Tuesday August 4 village staff laid out the next step in getting workable budgets.  Village Manager Dave Fieldman again led the Long Range Financial Planning meeting, and outlined a multi-year game plan to get Downers Grove past the current recession.  The big question?  The graph on the right is The Chart of Pain, showing that at the rate DG is going, we’re going down.  How do you stop that?

Fieldman laid out a three year plan that would require cuts in expenses and increases in revenues, and would tap reserves for a year that would be paid back in starting in 2012.

2010

• Reduce Expenses by $2.0 Million
• Increase the Property Tax Levy for General Fund Operations by $500,000
• Increase Other Revenue Sources by $1,000,000 (6 months)
• Use $1.0 Million of Reserves

2011

• Contain Expenses
• Increase the Property Tax Levy for General Fund Operations by $500,000
• Capture Full Year of Other Revenue Increases (Additional $1 Million)
• Maintain Reserves

2012

• Contain Expenses
• Increase the Property Tax Levy for General Fund Operations by $500,000
• Begin Replenishing Reserves

To pull this off alternate revenue sources have to be tapped; it can’t all come just from cuts to the budget.  While that might include bulk annexations, Deputy Village Manager Mike Baker broke it down similar to what staff had done early last year when they first identified the coming budget problems.  He laid out every possible tax and tax fee for consideration and showed what the revenue input would be.

Home Rule Sales Tax- Currently it adds .75% (.50% for the Capital Projects Fund, and .25% for the Stormwater Fund).  Adding on another .25% would pull in $1,990,000.  This is a no-brainer for a council that kept expressing concern that they had just raised taxes for stormwater project bonds, and didn’t want to get the rap of tax-and-spenders.  Bolingbrook, Woodridge, and Lombard at Yorktown are there or past 1%, so DG would stay in the pack for tax on retail sales.

Natural Gas Utility Tax- Our current tax is .015/therm (that’s 1.5 cents).  The state allowed max is 5 cents, .05/therm.  No one was sure how much a therm was, but a .015/therm increase would generate maybe an additional $489,000 for the village.  Utility taxes have no or very few additional administrative costs and are kind of a stealth tax that you don’t always notice.

I checked my bill for December, and the entire Thoman Compound used 215.98 therms, so an increase of .015/therm would raise my Municipal Gas Use Tax for Downers Grove from $3.24 to $6.48 for that month.

Electricity Tax- Current rate is 3.5%, max is 5%.  Each half percent increase adds $276,000 to the coffers.  A lot of communities max this out.

Hotel Tax- Now it’s at 4.5%, and 50% of that funds the EDC.  Another 8% goes to Community Grants to dole out.  Each .5% increase generates $85,000 for the village.  Adding a mid-priced Marriott brand might help, too; a ton of business travelers like Hampton Inn.

Food & Beverage/Liquor Tax- We don’t do this, mainly an extra tax on prepared foods and drinks at restaurants.  I don’t like the idea of an extra tax on every McCarthy Red I knock back or every Boxty, but a 0.5% tax would pull in $650,000.

Vehicle Stickers- A $20 sticker raises $729,000 for the village.  The state just raised vehicle stickers by $20; that starts in October.

Real Estate Transfer Tax- We don’t have this either.  Based on 2008 sales, a $3 per $1,000 of house value would add $553,000 to the coffers.  How much do you want that DG dream house?  Enough to pay $900 in transfer taxes for that $300,000 attainable middle class home?  Mandatory referendum almost guarantees a no.

Here’s a cheerful Full Bore Implementation Chart (FBIC), which no council member seemed to relish in the slightest:

Commissioner Sean Durkin zeroed in on costs.  After just officially losing his leaf pickup program after a one year run, he made it pretty clear he was not pleased with the idea of tax increases, and expecting redoubled efforts to find some way to chop (buses), slice (buses), and dice expenses (buses).  And lay down some common sense props to Commissioner Bob Barnett for flatly stating fees are taxes and he doesn’t like to play hide-and-seek; if we need to raise taxes let’s raise taxes and be done with it.

Which of course is the main thing that can be done, and is recommended first off by staff.

Rea Estate Taxes- Every $20 increase per $100,000 in EAV (roughly a $300,000 home) would increase revenues by $500,000.  Steady predictable revenue with no added administrative costs.

That might jack the rate way up, but there’s no PTELL limit on municipal tax rates for Home Rule communities,  and declining real estate values don’t effect the village.  Unlike taxing bodies that figure out what the maximum increase in the rate can be, and then figure out how much money that gives them (think school districts), the village figures out what the levy needs to be and derives the real estate tax rate as needed.

Here’s a couple extra ideas:

Teardown Tax- Hinsdale has one.  You want to tear down that house; $10,000, please.  DG has one of the highest teardown rates in the Chicago area, and the teardowns are being replaced by expensive luxury homes.  When times were good, DG saw over 140 tear downs each year for four straight years.  2007 had almost 100, and 2008 had 55. It was a hot topic then, and when times get better it will be again.  Face it, the homes being built are high priced luxury homes, the higher end communities all have something like it, and another $10,000 to a $1 million plus home isn’t going to kill the project.  I can’t wait for my builder buddies to show up with tar and feathers.

Raise fees for permits- Parades, picnics, beer tents, races, remodeling, house additions, you name it, raise them 10%.

Red Light Cameras- I know what you’re saying, “Mark, you are against RLC!”  I am implacably opposed to leasing out law enforcement to for-profit mercenaries, I am opposed to a violation of every person’s Fourth Amendment Right to Due Process, and I think everyone should be troubled by how RLC breeches consent of the governed (a binding referendum vote should be a requirement) , but…

Damn those things generate big bucks, and I have always maintained so long as that was the driving motivation-generating revenue-and everyone is honest about that being the real reason for putting them in, let’s have at it.  Belmont & Ogden, Ogden & Fairview, 75th & Main, will all generate a ton of cash for BS right-turn-on-red tickets.  Every study agrees on that: RTOR is the holy grail of cash cows.  As a bonus, council members will be able to reach out and talk with a much larger cross section of the community.  Angry drivers will reach out to them with helpful opinions about where they can go.

Wrapping it up, if you’re paying attention, you’ll notice staff is saying we need and extra $2,500,000 for 2010 ($3M annualized), an extra $1,500,000 on top of that for 2011, and another $1,000,000 on top of the first two for 2012.  The likely scenario is real estate taxes go up as indicated, so everyone’s $300,000 home sees the village portion of their real estate tax bill go up $20 each year for three years.

Increase other revenue sources means a $2,000,000 annual increase year one (it only happens the last six months, so it collects $1,000,000 the first partial year), anther $1,000,000 on top of that in 2011, and another $500,00 on top of both of those in 2012.

Add in the fudge factor, and look again at the Full Bore Implementation Chart.  $5,500,000 plus or minus…

The final Long Range Financial Planning meeting is scheduled for Tuesday August 18th after the regular council meeting.

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