Des Plaines weighs freezing property tax levy

When Des Plaines city officials resume budget talks next week, the city council will consider whether to stick with the nearly 2 percent property tax increase proposed by staff for 2011 or opt for no increase by reducing expenditures by $450,000.

The proposed 1.95 percent tax increase is expected to generate $450,000 to cover the city's obligations toward the rising costs of police and fire pensions, which by state statute must be fully funded by 2033. No other tax or fee increases are proposed in the $97.9 million budget for the 2011 calendar year.

“What we tried to do is propose a budget without a lot of significant expenditures that would affect the general fund, acting City Manager Jason Slowinski said. “Obviously, this year there are no proposed layoffs of any positions. It differs drastically (from) what we did last year.

The city eliminated 38 employee positions through layoffs, attrition and early retirement incentives this year, and laid off 12 employees in 2009.

At the request of city aldermen during three days of budget hearings in September, city administrators came up with an alternate plan to ensure a 0 percent tax increase next year.

City staff originally proposed shifting the current 8 percent actuarial rate an estimate of the expected value of future earnings on the invested funds for police and fire pension funding to 7.5 percent in 2011.

That would have increased the city's pension contributions by $720,000 next year. In 2010, the city funded police pensions at $3.1 million and fire pensions at $3.2 million.

“If we went to a 7.75 percent rather than a 7.5 percent, we would save the city about $365,000 just from that quarter point difference, Slowinski said. “We would still be making progress over the 8 percent we use now. We would be funding the police and fire pensions to a greater extent, and it's what we need to do in order to fully fund them by 2033.

The city also would have to reduce its corporate levy by $85,000 to achieve a 0 percent tax increase next year, Slowinski said.

“That would have a very small, one-tenth of a percent .04 percent reduction affect on our reserve fund balance, Slowinski said. “So essentially your fund balance would absorb that remainder of the amount.

City staff members have identified roughly $10,000 in expenditures that could be eliminated and are trying to find a way to preserve $40,000 in funding for the Des Plaines History Center, which initially was targeted to be cut.

“They (the city council) need to make some decisions whether 0 percent is really what they want, Slowinski said. “I think there's fairly good consensus on that.

Officials are projecting a $2.2 million overall deficit in 2011, primarily due to expenditures in the city's water and sewer fund and within the city's five tax increment financing districts.

The general fund is projected to have a $248,000 deficit. Yet, officials still anticipate having a cash balance of 14.6 percent of operating expenditures by the end of the 2011. Ideally, 25 percent is considered a healthy fund balance.

Budget discussions continue Oct. 20 and 25.