By Ted Schnell • BocaJump | Nov, 28, 2011
A fourth 2012 budget proposal is expected to emerge this week in which the city administration will suggest a reduction in Elgin property taxes, with the decline in revenues to be offset by new revenues from other areas.
Mayor David Kaptain said Wednesday that the newest proposed budget would seek a balance that ultimately would mean “a net change of zero” in taxes paid by area residents. In theory, based on comments made by city officials at the Nov. 19 interactive public budget hearing, nonresidents would shoulder some of the burden of the city’s operational costs through some new taxes, such as a food and beverage tax or a gasoline tax.
The idea, Kaptain said, is to reduce Elgin’s reliance on just a few revenue streams to fund its operations.
The largest portion of city revenues comes from the property tax, which is just one of 11 revenue streams available to the city. Elgin only taps four — property, hotel-motel tax, home-rule sales tax and the telecommunications tax.
The Great Recession hit hard several of those revenue streams at once, pushing the city’s structural budget deficit, which was projected at $4.5 million entering 2011, to as much as $13 million by the end of the third quarter. City officials believe diversifying the types of taxes and fees the city collects would help minimize the impact of such an occurrence in the future.
Kaptain has likened the budget deliberations to deciding whether to take the bandage off slowly and spread the pain out over time or to rip it off and get the painful part over with quickly. After the Nov. 19 public hearing, City Manager Sean Stegall said he would submit a new budget that “rips the bandage off quickly.”
Stegall originally submitted three proposals to the council:
- A “balanced approach” 2012 budget that would balance the budget by mixing spending cuts and revenue increases;
- Alternative A, which would balance the budget solely with revenue increases;
- And Alternative B, which would balance the budget with draconian layoffs, the closure of the Parks and Recreation Department facilities and Hemmens Cultural Center.
“One of the things that I’ve talked about for a number of years is the fact that our property taxes are too high and that we needed to lower our property tax to bring it more in line with guidelines that were proposed by previous councils,” Kaptain said. “Previous councils had stated they would like to see no revenue stream be more than 25 percent of the city’s annual budget … and at no time did they think that it should go over 35 percent.”
For the past three or four years, however, property taxes have generated more than 40 percent of the city’s revenue, Kaptain said.
“It’s been my thought that we need to level this out,” Kaptain said. That has not happened, he added, because the Great Recession of 2008 threw things into “a rapid state of flux here, and now we’re starting to see some of the problems of having a budget that is too dependent on one revenue stream.”
Striking that balance is what the council must do, Kaptain said.
“We still have to pay to do business in the community,” Kaptain said. “We still have to plan to move forward with the (new) 911 system. How are we going to pay for that? How are we going to pay for this shortfall?”
“… We can’t just look at today to solve today’s revenue problem,” he said. “We have to look to the future. Our infrastructure is getting old … and we don’t have the funds to do it. … You just can’t forget the future of the community.”