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6 Council Memo # Appendix A City of Joliet Maintenance & Operating General 152,780,852 Water & Sewer 26,972,708 Parking 1,448,984 Subtotal 181,202,544 Reserves General 25,114,661 General - Evergreen Terrace 3,500,000 Water & Sewer 16,247,685 Parking 185,483 Subtotal 45,047,829 Capital Projects General 3,261,506 Water & Sewer 7,620,000 Parking 405,109 Subtotal 11,286,615 Special Revenue Funds Water & Sewer Bond Funds 1,928,270 Water & Sewer Debt Service 7,199,875 Motor Fuel 4,593,480 1 Federal and State Grants 7,872,495 1 Multi-Modal Grant 30,000,000 2 Special Revenue Funds 12,057,138 Subtotal 63,651,258 Total All Funds 301,188,246 Notes: 1 See Document, Appendix H, Pages 3-8 for detail listing. 2 Includes: Special Service Areas Fund, Tax Increment Financing (TIF) Funds, General Obligation Debt Service Fund, Police Special Revenue Funds, Neighborhood Improvement Program Fund, etc. See Document, Appendix H, Pages 9-15 for detail listing.

7 City of Joliet Table of Contents Narrative Section: Page # Understanding the 2 Fund Balance Review 3 o General Fund 3 o Water & Sewer Fund 4 o Parking Fund 4 General Fund o Operating Review and Analysis 6 o Revenues 9 o Expenses 11 Water & Sewer Fund o Operating Review and Analysis 14 o Revenues and Expenses 16 Parking Fund o Operating Review and Analysis 17 o Revenues and Expenses 18 Motor Fuel Tax Fund 19 Other Funds 21 Post-Employment Benefits 24 o Pensions 24 o OPEB 25 Appendixes: Appendix 2012 General Fund Deficit Reduction Options for Consideration A Summary of Cost Cutting Measures Since 2008 B Vehicle Replacement Schedule C General Fund Account Detail D Water & Sewer Fund Account Detail E Parking Fund Account Detail F 2012 Joliet Public Library G Other Funds Detail H o Part I Motor Fuel Tax Fund o Part II Federal and State Grants o Part III Special Revenue Funds 1

8 Understanding the The City of Joliet 2012 budget is presented with four primary components: the General Fund, the Water & Sewer Fund, the Parking Fund and Special Funds. Within each of these funds as appropriate, there are two sections: Operations and Fund Balance (which provide for reserves and capital investments). Since 2008, the City, similar to most governmental entities across the United States, has experienced a sustained period of financial instability and difficulty. Declining revenues and rising personnel related costs have been a significant challenge for the City. In anticipation of the 2012 budget process, the Finance Committee of the City Council requested the 2012 budget be in balance from an operating perspective. The goal in preparing this document from the beginning was to ensure that 2012 revenues were in balance with 2012 operating expenses. The 2012 budget balances revenues and expenses without using its Fund Balance. One item which is not covered in this budget is a projection of future operating revenues and expenditures beyond The Administration recommends that immediately after this budget is adopted, the Finance Committee and Administration work together during the first quarter of 2012, to formulate long-term objectives to ensure future budgets are in balance and strategic long-term goals and policies are in place. Without a long-term strategic policy in place, and with discussions taking place with the City s six bargaining groups, assumptions used for such projections would be difficult to make and their projections could provide false expectations. Items for discussion will include tax policy, long-term capital investment requirements for building, infrastructure, equipment and technology, reserve requirements, compensation and debt. The Administration believes this document fairly represents the financial operations of the City, is fiscally conservative and is responsive to the economic conditions of our community. This document is based on prioritized recommendations from the Department Heads, as it relates to the policies and programs previously established by the Mayor and City Council. The budget was presented and discussed during public meetings held in November and adopted in December. The Administration welcomed public participation and comment during this period. The budget is available at the City of Joliet website The 2012 Public Library was approved by their Board on October 20, in the amount of $6,387,252. 2

9 Fund Balance A municipality s long-term financial health is composed of several principles. These principles include proper planning, balanced annual budgets, and an adequate Fund Balance. This budget primarily deals with the annual budget, but it also reports on Fund Balances for the various funds of the City. A healthy Fund Balance has reserves for sudden unexpected events that allow a municipality time to react to those economic events and is the primary source for capital investments. A healthy Fund Balance can only be created when annual budgets produce surpluses. Therefore, annual budgets in the long-run need to be producing surpluses if capital projects and adequate reserves are to be in place. In the succeeding paragraphs, the Fund Balances for the General Fund, Water & Sewer Fund and Parking Fund are discussed. A chart follows with a summary of the three funds. For each of the funds, an operating reserve of 60 days has been established to provide economic stability. Funds available after the operating reserve are then generally available for capital investment. General Fund The City s General Fund is projected to begin 2012 with a Fund Balance of approximately $31.4 million. This is higher than anticipated from the budget due to slightly higher revenues and continued cost cutting measures. The Fund Balance is composed of several parts. First, $25.1 million is set aside for the City s Operating Reserve which represents 60 days of the 2012 budgeted operating expenses. This amount is available for those unexpected events for which the City cannot reasonably anticipate. Examples for using these funds include natural disasters, unanticipated and significant lawsuits, unfavorable legislative action between budget cycles, and other unusual significant events. The second portion of Fund Balance relates to specific known items. For the 2012 budget, $3.5 million has been set aside to address the future outcome of the Evergreen Terrace litigation. The third and final portion of the Fund Balance represents remaining funds which are available for capital improvement or $3.3 million. At this time, there are no specific recommendations for these funds. It is anticipated that the Finance Committee during their long-term strategic planning process in the first quarter of 2012, will address potential uses for these funds. Long-term the Fund Balance can only provide funds available for future capital investments if the annual operations are able to produce an annual operating surplus. For this reason, while 2012 projects a surplus, it will be necessary to generate more significant surpluses in the future if capital investments in the community are to be provided through the General Fund. 3

10 Water & Sewer Fund The Water & Sewer Fund is projected to begin 2012 with a Fund Balance of approximately $22.0 million. This is a sufficient amount to fully fund the 60 day operating reserve as well as the Bond Reserve. The Bond Reserve is an amount set aside due to bond requirements and ensures funds are on hand should the operating portion of the budget fall short of financing the upcoming year s bond payments. The City s ability to have these amounts on hand demonstrates a solid financial picture to current and potential future bondholders. The City s Water & Sewer system is old and quite complex. Along with an aging infrastructure requiring constant capital improvements, new regulations often require even more capital investment. In order to fund these improvements, the operating portion of the budget must consistently create a surplus to fund these investments. The 2012 budget projects an operating surplus of approximately $17.5 million before administrative transfers and debt service payments. Parking Fund The Parking Fund is projected to begin 2012 with a Fund Balance of approximately $600 thousand. After accounting for a 60 day operating reserve of $185 thousand and a projected 2012 deficit of $16 thousand (including administrative transfers), $405 thousand will be available for capital investments. The primary on-going challenge for the Parking Fund will be determining which long-term investments need to be implemented to reduce operational expenses while providing better customer experience. It is anticipated that technology will be an essential element of this solution. Annual budgets containing deficits or those without sufficient surpluses will not be able to fund future capital requirements. Since this fund contains the parking operations as well as Joliet Union Station, the capital needs are significant and diverse. 4

11 Exhibit 1 - Fund Balance Table General Fund Water & Sewer Fund Parking Fund Balance as of 1/1/ 37,527,591 22,776, ,510 Estimated Revenues 144,773,940 39,050,851 1,454,615 Transfer In Administrative Fee 4,031, Subtotal - Revenues 148,805,807 39,050,851 1,454,615 Estimated Operating Expenses (150,833,346) (20,742,704) (1,113,258) Water & Sewer Debt Service - (7,155,250) - Transfer Out Administrative Fee - (3,749,874) (281,993) Subtotal - Expenses (150,833,346) (31,647,828) (1,395,251) Operating Surplus / (Deficit) (2,027,539) 7,403,023 59,364 Available for Capital Improvements 35,500,052 30,179, ,874 Capital Expenses (4,063,077) (8,177,510) (40,000) 2012 Estimated Beginning Balance 31,436,975 22,001, , Bond Reserve - 12,549,851 - Evergreen Terrace 3,500, Operating Reserve (60 days) 25,114,661 3,697, ,483 Total Reserves 28,614,661 16,247, , Available Balance 2,822,314 5,753, , Estimated Revenues 148,421,864 39,955,600 1,432,702 Transfer In Administrative Fee 4,798, Subtotal - Revenues 153,220,043 39,955,600 1,432, Estimated Operating Expenses (152,780,852) (22,495,159) (1,128,354) Transfer Out Administrative Fee - (4,477,549) (320,630) Water & Sewer Debt Service - (7,199,875) - Subtotal - Expenses (152,780,852) (34,172,583) (1,448,984) 2012 Operating Surplus / (Deficit) 439,191 5,783,017 (16,282) Available for Capital Improvements 3,261,505 11,536, ,109 Capital Carry Over - (3,916,939) 2012 Capital Expenses - (7,620,000) (50,000) Total Capital - (11,536,939) (50,000) 2012 Estimated Ending Balance 3,261, ,109 5

12 The General Fund The General Fund of the City is where most of the City s primary core operations are budgeted. Police, Fire, Public Work and City Hall operations are all accounted for in the General Fund. The primary revenues for this fund include the following taxes: property, sales, income, utility and gaming; as well as the following fees: municipal waste, ambulance, fines and other miscellaneous revenues. Over the past several years these revenue streams have either declined or remained stagnant. At the same time, the requests for service from our community have remained fairly constant. Exhibit 2 General Fund Historical Revenues General Fund Historical Revenues Estimate $100 $110 $120 $130 $140 $150 $160 Values shown in millions The drop in the revenues began in 2008 (Housing Industry revenues started to drop in 2006) and while the pace of the revenue drop has declined, the revenues have not returned. To address this challenge of decreasing revenues without a reduction in demand, the City over the past four years has aggressively adjusted its operations. A more complete listing of these adjustments can be found in Appendix B. Operational adjustments have included reducing and reorganizing staff, negotiating variances within collective bargaining agreements, and deferring capital investments. While the 2012 budget is in balance, the Administration will continue to look for future savings opportunities. In preparing the 2012 budget, a process of addressing the imbalance between expected revenues and expenses really began immediately following the budget approval. During the budget process, it was determined that significant measures were necessary to balance 2012 operations. Therefore, throughout, the Administration continued its cost cutting measures. Then during the City s mid-year review in August, a projected budget deficit of $17 million was estimated. In response, the Finance Committee asked the Administration to prepare a plan addressing this issue. The Administration prepared two different options (these options are presented in their 6

13 entirety in Appendix A). Option 1 presented a scenario in which only cuts would be implemented. This option included pension re-amortization, personnel reductions including the closure of fire stations, layoffs of police officers, exempt personnel and other staff reductions, discontinuing subsidies for several long-term community cultural institutions, and operational reductions. Option 1 included no revenue adjustments. Option 2 presented a more balanced approach, which included significant cuts with some tax increases. This option included pension re-amortization, increases in utility and sales taxes, a smaller number of layoffs, as well as reductions in several community cultural institutions and operational reductions. Each option was discussed with the Finance Committee. Overall, Option 1 scenario was seen as reducing basic city services and affecting cultural institutions beyond an acceptable level. Option 2 with its more balanced approach was viewed as the better of the two scenarios, but there was not a clear acceptance of either approach. Subsequently, Option 3 was presented by Mayor Thomas Giarrante (this option is presented in the entirety in Appendix A). Utilizing many of the ideas from Option 2, it had significant differences. First, it modified the extent of concessions requested from the City s six bargaining groups. It asked that 4% general wages in five of the six groups be renegotiated to zero and several operating variances in effect be carried forward. Second, the utility tax increases from Option 2 were increased. Third, the City Manager was asked to find additional cost cutting measures. Option 3 provided the road map for maintaining reasonable levels of service to the community and minimized staff reductions. Option 3 was discussed at length by the City Council. The overall tone was the option had elements that generally were accepted by all, but there were also elements of disagreement. It was decided upon through discussion to move forward with the plan as a whole. However, there was no formal vote and it was decided that individual items would be voted upon as formally presented. Since discussions occurred regarding the various options during August, several significant actions have taken place. First, in September, the Council by split votes approved several tax increases. Utility taxes for telecommunications were increased from 5% to 6%, natural gas from 2% to 3%, and the sliding rates for electric were increased from a rate producing approximately 2% to 3%. A new separate natural gas tax was imposed on purchasers of natural gas from providers other than NICOR at a rate of 2 cents/therm. The City s Home Rule Tax was increased from a rate of 1.25% to 1.75%. These tax increases were estimated to bring in approximately $6 million of new revenues for The City Council also approved an increase in ambulance billing rates which should raise revenues another $300,000 annually. 7

14 Option 3 included several other items which have been and still need to be addressed. The City has met with both the Police and Firefighter Pension Fund Boards and its actuary to re-amortize the City s future pension obligations. Allowed through State legislation, the City s two public safety pension funds will be amortizing their current unfunded liability over a period of 35 years rather than the current schedule of 22.5 years. This will allow the City to better balance its current and future obligations. Option 3 included a substantial reduction in subsidies for cultural institutions that have long been supported by the City. The Administration has notified each of these organizations of the pending reductions and stands ready to work with each entity to ensure they are as well prepared for these reductions as possible. The Administration has prepared a list of personnel and other reductions that have been included in this budget. One item for the Council s consideration is the elimination of the annual mosquito spraying. It is not in this budget. Finally, the Administration continues to work on implementing the reductions reflected under the area of City Provided Services in Option 3. 8

15 General Fund Revenues and Expenses In reviewing Exhibit 3, revenues as whole are projected to increase about 3.0% from $148.8 million in to $153.2 million in Expenses are to increase approximately 1.3% from $150.8 million in to $152.8 million in is expected to have a deficit from operations of $2 million. During 2012, a $0.4 million surplus is in the budget. However, the 2012 surplus only occurs if the items in Option 3 are addressed and implemented. Any items which are not fully implemented will decrease the surplus and may extend to an overall deficit. Exhibit 3 General Fund Revenues Description 2009 Actual 2010 Actual Estimate 2012 % Change Property Taxes $ 29,462,308 $ 33,037,337 $ 33,000,000 $ 32,760, % Gaming Revenue 23,703,056 23,173,150 22,000,000 21,500, % Home Rule Tax 14,702,380 15,002,383 15,400,000 19,450, % State Sales Tax 17,660,141 17,777,505 18,300,000 18,550, % Municipal Waste Pick-up Fees 10,517,340 12,111,441 12,361,100 12,353, % State Income Taxes 10,309,194 10,207,269 12,050,000 10,500, % Utility Taxes 7,026,017 6,832,188 6,800,000 9,250, % Admin Fee - Enterprise Funds 4,256,314 4,189,263 4,031,867 4,798, % Ambulance Fee 3,563,226 3,743,374 3,400,000 3,688, % Replacement Tax 2,334,634 2,516,122 2,500,000 2,500, % Food & Beverage Tax 2,370,984 2,367,906 2,487,000 2,487, % Fines & Fees 2,907,010 3,104,695 2,535,390 2,469, % Out of State Use tax 1,931,355 1,880,183 2,206,000 2,206, % Hotel/Motel Tax 1,662,525 1,765,107 1,815,000 1,815, % Miscellaneous Revenues 1,239,871 1,343,969 2,359,101 1,619, % Franchise Fees 1,509,652 1,683,686 1,569,491 1,570, % Emp. Healthcare Contributions 377,221 1,394,831 1,469,900 1,460, % Reimbursable Support 2,990,676 1,707,372 1,500,000 1,300, % Other Taxes 1,623,435 1,216,642 1,257,600 1,197, % Licenses & Permits 1,184,115 1,735,366 1,171,025 1,171, % Gasoline Privilege Tax 542, , , , % Interest 984, ,364 91,833 75, % Revenue Total 142,858, ,520, ,805, ,220, % 9

16 Significant revenue increases over the prior year include: Home Rule Sales Taxes from $15.4 million to $19.5 million. This increase is primarily due to the increase in the tax from 1.25% to 1.75% as well as a small overall increase in sales of about 1% over the prior year. Utility Taxes from $6.8 million to $9.3 million. This increase is primarily due to increasing the telecommunications, natural gas and electric taxes by approximately 1%, as well as a new tax on natural gas for those customers with a provider other than NICOR. Administrative Fees from the Enterprise Funds These chargebacks for expenses paid out of the General Fund on behalf of the Water & Sewer Fund and Parking Fund will increase from $4.0 million to $4.8 million. These reflect additional expenses incurred by the General Fund for items such as health insurance, worker s compensation payments, and overhead on their behalf. Ambulance Fees Fees charged for services provided will increase from $3.4 million to $3.7 million. This reflects adjustments in the fee schedules that were approved by the City Council effective October 1,. Significant revenue decreases over the prior year include: State Income Taxes will decrease from $12.1 million to $10.5 million. This decrease is primarily due to the State of Illinois payment schedule. At the beginning of the City s calendar/budget year, the State owed the City for 5 months of payments in arrears. As of October, the state has reduced this arrear from 5 months to 3 months. The 2012 budget assumes that during, 14 months of payments will be collected, whereas, during 2012, 12 months are assumed. Until the State s financial situation improves, the City will assume one month at a time for the future. Gaming revenues will decrease from $22.0 million to $21.5 million. This decrease is primarily attributable to the opening of the new DesPlaines casino during and its negative impact on Joliet s casinos. This revenue source will be watched very closely during 2012 for several reasons. First, the new casino has only been in operation for several months and measuring its impact without a past history is difficult. Second, any downturns in the economy are likely to further erode this previous $36 million (2007) revenue source. Finally, the State legislature has passed legislation increasing significantly the number of gaming positions by authorizing five new casinos and allowing gaming at race tracks and Chicago s two airports. While the legislation has not been approved and Governor Quinn has threatened to veto the legislation, it is still considered probable that some expansion will take place. Any expansion in the Chicago metropolitan area is likely to negatively impact Joliet s revenues. 10

17 Significant expense (Exhibit 4) decreases over the prior year include: Payroll Buyouts This amount is in the budget to pay out accrued time on the system for employees retiring who have unused vacation, comp or sick time in accordance with the various collective bargaining agreements and City policies. It is expected the rate of attrition will begin to slow. Over the past several years many long-term employees left and generally were not replaced. This amount is estimated to decrease from $1.7 million to $0.9 million. Community Support/Programs include subsidies to local cultural institutions such as Billie Limacher Bi-Centennial Park, the Rialto Theatre and the Joliet Area Historical Museum. As part of Mayor Giarrante s Option C, these institutions will all see their allocations reduced. This expense will decrease from $2.5 million to $2.1 million. Significant expense increases over the prior year include: Pensions Total pension related expenses include contributions towards the Joliet Police Officer s Pension Fund, the Joliet Firefighter s Pension Fund, the Illinois Municipal Retirement Fund, Social Security and Medicare. These payments in total will go from $27.6 million in to $28.3 million in Overall, there was an increase in the Police Officer s Pension Fund contribution of approximately $896 thousand and decreases in the Firefighter s Pension Fund of $234 thousand and other funds were $12 thousand less. The fund contributions remained fairly constant due to the re-amortization of the public safety funds from a 22.5 year to 35 year amortization. Municipal waste expense represents payments for garbage and recycling. This expense increased from $10.6 million to $11.0 million due to a 4% annual fee increase due the vendor. This payment would have been closer to $11.4 million had the contract not been renegotiated by the City & Waste Management during

18 Exhibit 4 General Fund Operating Expenses Description 2009 Actual 2010 Actual Estimate 2012 % Change Payroll 63,810,743 61,718,810 63,321,654 64,093, % Insurance 22,165,552 21,209,247 23,255,051 23,712, % Pensions - Police 9,383,279 10,064,352 10,858,422 11,754, % Municipal Waste Pick-up 10,220,569 10,587,990 10,551,575 10,980, % Pensions - Fire 8,182,156 9,479,152 10,754,040 10,520, % Pensions, FICA, Medicare 7,440,966 5,691,456 6,004,262 5,992, % Overtime 5,993,967 5,462,976 5,626,508 5,822, % Utilities 3,171,369 3,206,925 3,261,800 3,256, % Outside Services 2,494,570 1,957,069 2,297,413 2,180, % Community Support 2,305,590 2,203,770 2,499,895 2,081, % Technology Maintenance 75, ,124 1,347,517 1,492, % Payroll - Other Compensation 1,558,188 1,511,620 1,355,019 1,357, % Fuel - Unleaded 829, ,593 1,210,000 1,210, % Chemicals & Road Salt 853, , , , % Retiree Buyouts 2,347,249 1,678,029 1,650, , % Other Expenses 453, , , , % Maintenance - Equipment 660, , , , % Rebate Programs 521, , , , % Maintenance - Vehicles 622, , , , % Fuel - Diesel 338, , , , % Legal Claims 417, , , , % Supplies - Motor Vehicle 362, , , , % Phones & Cellphones 344, , , , % Clothing & Uniform Rental 278, , , , % Supplies - Street Repair 5,951 6,893 42, , % Maintenance - Buildings 95, , , , % Radio Maintenance 211, , , , % Training & Related 171, , , , % Supplies - Other 186, , , , % Supplies - Public Safety 54,983 43,368 91, , % Memberships & Subscriptions 110, , , , % Supplies - Shop 106,846 80, , , % Snow Removal Contracts 58,159 92, , , % Supplies - Office 82,660 80,171 81, , % Rent 198, ,829 90,000 64, % Postage 112,842 58,681 59,554 57, % Staff Education 165, ,276 45,000 45, % Debt Service 43,891 43,891 43,891 43, % Program Development 55,976 59,703 59,100 35, % Loan Payment 152, , , % Operating Expenses Total 146,646, ,006, ,833, ,780, % 12

19 The following departments/activities are incorporated in the General Fund: Mayor and City Council Accounts for the activities associated with the Mayor, three At-Large Councilpersons, five District Councilpersons, City Clerk s office and the Liquor Commissioner s office. City Manager Accounts for the activities of the Manager, marketing, communications and the operation of Billie Limacher Bi-Centennial Park. Management & Accounts for the activities of finance, purchasing, accounting, collections, motor maintenance, technology, human resources, Police and Fire Board, business services, and building and grounds. Special accounts are included in this budget area. Customer services are managed by this department, but their activities are accounted for within the Water & Sewer Fund. Community and Economic Development Accounts for the activities of economic development, planning, permits and inspections. Legal Accounts for activities relating to legal services. Police Accounts for activities of policing the community, dispatch, and school crossing guards. Fire Accounts for activities of fire suppression, disaster preparedness and ambulance service. Public Works Accounts for engineering, design, construction and maintenance of city streets; street lighting, and snow plowing. The City s parking operations and Joliet Union Station are managed by this department, but their activities are accounted for within the Parking Fund. Pensions Accounts for the City s contributions towards the Joliet Police Officers Pension Fund, Joliet Firefighters Pension Fund, Illinois Municipal Retirement Fund, Social Security and Medicare. Exhibit 5 - General Fund Expenses by Department Police Pensions Fire Management & Public Works Community & Economic Development Legal City Manager Mayor & Council 13

20 The Water & Sewer Fund The following funds are incorporated in the Water & Sewer Fund: Water & Sewer Operating Fund (451) This fund accounts for the operations of the City s Water & Sewer Utility System. Water & Sewer Improvement Fund (452) This fund accounts for improvements to the City s Water & Sewer Utility System. Bond Funds (Various) These funds support capital improvements to the system. EPA Loan Funds (Various) These funds support the Black Road Lift Station expansion and the improvements to the East-side Sewer Treatment Plant. Exhibit 6 Water & Sewer by Expense Category Description Estimate Maintenance & Operating 20,742,704 22,495,159 Transfers Out Admin Fee 3,749,874 4,477,549 Capital Projects & Debt Service 15,332,760 14,819,875 Improvement Projects (Bond Funds) 2,966,126 1,928,270 Expansion Projects (EPA Loan Funds) 12,007,253 Total Water & Sewer Funds 54,798,717 43,720,853 The City of Joliet s Water & Sewer utility system services approximately 45,000 customers. It is considered an Enterprise Fund and is run like a private sector business as it is self-supporting. It is the largest combined municipal water and sewer system in the state of Illinois. Beginning in 2007, the Water & Sewer Fund experienced significant decreases in its revenues. Tap-on fees received from new customers (residential, commercial and industrial) fell from a high of over $9 million in 2005 to roughly $600,000 in A subsidy from the gaming fund of $1.2 million per year was cut from the 2009 budget. Interest received on investments fell from over $3.5 million in 2007 to less than $600,000 in To ensure long-term stability for the system and address these issues, the City Council approved a series of measures to add more stable reliable revenues to the budget. These increases were approved by the City Council in September of 2009 and included the following adjustments effective with the first bills issued in October 2009: Water and sewer rates were increased 35%, and then an additional 5% in October 2010 and in October a final 5%. Rebates for Daily Water & Sewer Charges were eliminated for all customers. 14

21 Rebates for Sewer Separation were eliminated. Fees and Penalties were adjusted to cover costs. A new Senior Rebate of $.1787/day, or $5.36 for a 30 day bill cycle was enacted. City of Joliet Exhibit 7 - Water and Sewer Historical Revenues Water & Sewer Fund Historical Revenues Estimate $0 $10 $20 $30 $40 $50 Values shown in millions These adjustments were necessary to wean the system off of one-time developer contributions and subsidies from the Gaming Fund. The City also has taken measures to control costs including: Utilizing on-line reverse auction bidding for the procurement of natural gas and electricity to ensure the lowest possible prices for these commodities Restructuring of the 2002A Bond during 2010 which realized a cost savings of approximately $400,000 in future borrowing costs Restructuring a portion of the 2003 and 2004 bond issues during the months of November and December with anticipated savings of $650,000 to $1,000,000 in future borrowing costs. Negotiating a variance with a collective bargaining unit to defer raises and gain other cost cutting measures. Outsourcing of the printing of water bills to reduce costs. Continuation of the City s radio read program for water meters to gain better information with less employees. Over the next few months instituting an interactive voice telephone system to better and more efficiently receive customer credit card payments. 15

22 As mentioned above the City is currently in the process of refinancing a portion of its 2003 and 2004 Bond Issue. As part of this process, the City s Water & Utility System was recently reviewed by Standard & Poors (S&P). S&P has rated the Bonds AA-, which is a strong rating indicating stability and will allow the City to maintain low borrowing rates. The 2012 budget includes funding for maintaining the system, reducing operational costs and improving overall customer service. ed items include expanding the Meter Replacement & Radio Read and Work Order Automation systems, as well as On-line Billing and Web-site development. Exhibit 8 - Water and Sewer Revenues Description 2009 Actual 2010 Actual Estimate % Change Customer Receipts 29,677,544 38,537,823 38,577,100 39,396, % Fines & Fees 679,821 1,056, , , % Miscellaneous Revenues 280, , , , % Interest 604,802 62,962 20,000 20, % Customer Discount (1,846,469) (373,733) (360,014) (364,000) 1.1% Revenues Total 29,396,518 39,746,221 39,050,851 39,955, % Exhibit 9 - Water and Sewer Operating Expenses Description 2009 Actual 2010 Actual Estimate 2012 % Change Payroll 6,944,617 6,642,090 6,794,783 7,247, % Utilities 4,813,398 4,741,501 4,549,600 4,838, % Outside Services 1,513,336 1,593,991 2,254,436 2,511, % Pensions, FICA, Medicare - 2,040,287 2,022,540 2,232, % Overtime 1,290,841 1,377,984 1,376,112 1,484, % Chemicals & Road Salt 931, ,908 1,015,500 1,133, % Supplies - Street Repair 417, , , , % Maintenance - Equipment 389, , , , % Supplies - Shop 369, , , , % Payroll - Other 349, , , , % Other Expenses 529, , , , % Operating Expenses Total 17,549,946 19,509,354 20,742,704 22,495, % 16

23 Parking Meter Fund Parking Meter Fund (401) This fund accounts for the operations of the City s two parking decks, seven parking lots, over seven hundred on-street meters, and the operation of Joliet s Union Station. The City s Parking Meter fund is one of two Enterprise Funds maintained by the City. An Enterprise Fund is a fund which is self-supporting and is maintained and accounted for like a business in the private sector. Prior to the 2010, the City s Parking Meter Fund budgets did not entirely reflect this principle. While salaries and most direct operating expenses were budgeted within the fund, there were examples of indirect expenses which were not budgeted. These indirect expenses included overhead such as health insurance, pensions, accounting, purchasing and other expenses paid for in the General Corporate Fund. During the first five months of 2010, a series of rate adjustments were implemented to better reflect current market conditions. These adjustments included: Monthly parking deck passes from $25/month to $40/month. This prior rate had been in effect since Meter violations from $3 to $10. The prior rate had been in effect since Parking meter fees from $.25/hour to either $.50/hour or $1.00/hour dependent upon location. Exhibit 10 Parking Fund Historical Revenues Parking Fund Historical Revenues Estimate $0 $500,000 $1,000,000 $1,500,000 The rate increases imposed have helped stabilize the Fund as well as allow it to cover its administrative costs generated by the General Fund. The Fund is estimated to have a beginning Fund Balance of approximately $421,000 at January 1, For the years ended December 31, and 2012, respectively, the Fund s operations are expected to have a surplus of $59,364 and a deficit of $16,

24 Long-term challenges lie ahead for the assets of the Fund. Joliet Union Station is in need of significant capital repairs and requires a repurpose of its use with the addition of the new multimodal transportation center. Within the parking system, opportunities for advances in technology, especially within the City s two parking decks need to be achieved in order to reduce costs and add efficiencies for customers. A long-term plan for the maintenance and improvement of city lots is required and will continue to be addressed during The 2012 budget includes $1.43 million in revenues generated from parking fees, lot rental, fines, and other miscellaneous sources. Exhibit 11 Parking Meter Revenues Description Estimate Parking Deck Receipts 506, ,000 Parking Lot Receipts 351, ,500 Street Parking Receipts 287, ,312 Fines & Fees 143, ,000 Rental Income 94,837 95,980 Parking Permits 53,160 53,160 Miscellaneous Revenues 18,506 18,500 Interest Income Total Revenues 1,454,615 1,432,702 Expenses for the Parking Fund are estimated at $1.44 million for and $1.50 million for 2012, which is approximately a four percent increase. Exhibit 12 Parking Meter by Expense Category Description Estimate Maintenance & Operating 1,113,258 1,128,354 Transfers Out Admin Fee 281, ,630 Capital Projects 40,000 50,000 Total Expenses 1,435,251 1,498,984 18

25 Motor Fuel Tax Fund Motor Fuel Tax Fund (111) This fund accounts for expenditures associated with State of Illinois Motor Fuel Tax proceeds. The program is administered by the Department of Public Works to ensure all expenditures meet the guidelines for these funds. The 2012 budget includes $3.9 million in new revenues and $3.8 million in Fund Balance to support $7.2 million of roadway improvement projects. Exhibit 13 Motor Fuel Tax Fund Balance Estimate Beginning Balance 7,956,472 3,759,228 New Revenues 4,561,216 3,896,000 Capital Expenses (8,758,460) (7,234,303) Ending Balance 3,759, ,925 Since the annual funding of the City s Neighborhood Improvement Fund was discontinued in 2009, the Motor Fuel Tax Fund has become the primary funding source for the construction and maintenance of the City s roadway system. The 2012 budget was prepared with the assumption Motor Fuel Tax funds will remain fairly flat from to Additional, the City was recently notified that it is the recipient of an Illinois Jobs Now Capital Grant for Motor Fuel projects in the amount of $663,614 for the second consecutive year. These additional funds have been incorporated within the budget. Since this fund is a capital fund, unexpended funds in one year are carried over project completion or future projects. Project selection is the result of the Department of Public Works working with the City Council to select those projects most in need within the City. Significant projects in progress and/or budgeted for 2012 include: Roadway Reconstruction Pavement Marking Illinois Route 59/Interstate 55 IDOT Construction Deteriorating Road Overlay Caton Farm (Illinois Route 59/Countyline) Crowley Streetscapes (Ottawa/Chicago Street) Glenwood (Barney/Infantry) Vine (Ruby/Douglas) 19

26 Exhibit 14 Historical Motor Fuel Tax Fund Revenues Motor Fuel Tax Fund Historical Revenues Estimate $0 $1,500,000 $3,000,000 $4,500,000 20

27 Other Funds The City also receives revenues from State and Federal Grants as well as other restricted revenues that are limited in use and inconsistent in receipt. The following funds are some of those incorporated in the Other Funds: Community Development Block Grant Fund (113) This fund accounts for revenue and expenditures of the United States Department of Housing and Urban Development (HUD) administered Community Development Block Grant Funds. The program aids lower income portions of the City by improving housing conditions for the residents. Community Development Block Grant funds are received from HUD will mark the 37th year the City has participated in the program. The program is administered by the Neighborhood Services Division, within the Department of Community & Economic Development. Eligible expenditures of these funds include code enforcement, demolitions, graffiti removal, neighborhood newsletters, local homestead and other programs, which benefit the community. Corporate Bond & Interest Fund (201) This fund accounts for the payment of principal and interest of general obligation bonds. The City currently has one general obligation bond outstanding. The budget included a principle and interest payment of $1,142,869, which was used to reduce the overall principle balance down to $9,255,000. The 2012 budget includes a principle and interest payment of $1,153,169, which will be used to reduce the overall principle balance down to $8,500,000. The bonds are schedule to be retired in Special Service Area (SSA) Fund (202) This fund accounts for special projects around the City benefiting neighborhoods and other special projects such as development of the Target shopping center, and City Center development. In 2010 a SSA was established for the Park Hill Subdivision to aid the neighborhood with common area maintenance. Tax Increment Financing Fund (TIF) (205) - The City currently has one active TIF district which was established to develop the City s downtown City Center district. This TIF has aided the successful renovation of several pieces of property. During, the City established a second active TIF district for the Cass Street Corridor immediately east of the City Center railroad tracks. It is expected that in future years many commercial establishments will take advantage of the incentives created by the district. 21

28 Exhibit Federal and State Grants Revenues Actual Actual Estimate 911 Grant - State 150, , , , , Telephone Grant - Fire 103, , , , ,254 Block Grant 870, ,255 1,670, ,209 1,438,244 Buffer Zone Grant ,000 31, ,000 DARE Program Grant 11,646 13,069-4,121 20,110 Energy Efficiency & Conservation Block Grant - 561,502 1,303, , ,359 Fire Station Grant - - 1,160, , ,369 Grants & Other 882, ,466 50, ,605 - HOME Grant 80, ,327 1,350, ,381 1,662,901 IL Tobacco Enforcement Grant 11,990 11,330-12,100 Infrastructure Grants - 25,000-5,303, ,912 JAG - Federal Grant Program 582, , ,924 75,938 Metra Commuter Parking Facility - - 1,322,210-1,322,210 Neighborhood Stabilization Program - HUD 1,379,390 2,033, , , ,126 SMART Policing Grant , , ,705 Tri-County Auto Theft Grant 753, , , , ,305 Multi-Modal Center 30,000,000 Total Revenues 4,827,003 5,465,059 9,077,235 9,818,126 37,488, Expenses Actuals Actuals Estimate 911 Grant - State 127, , , , , Telephone Grant - Fire 108,052 63, , , ,000 Block Grant 704, ,241 1,670, ,209 1,438,244 Buffer Zone Grant , ,000 DARE Program Grant 11,944 11,561 7,885 1,040 20,110 Energy Efficiency & Conservation Block Grant - 585,115 1,280, , ,359 Fire Station Grant - 75,246 1,684, ,631 1,028,369 Grants & Other 142, , ,025 50,500 - HOME Grant 80,000 75,000 1,350, ,381 1,662,901 IL Tobacco Enforcement Grant 3,003 1,509 14,482 1,500 Infrastructure Grants ,303, ,912 JAG - Federal Grant Program 55, , ,078 75,938 Metra Commuter Parking Facility 990,137 87,653 1,322,210-1,322,210 Neighborhood Stabilization Program - HUD 1,504,693 1,959,181 1,360, , ,126 SMART Policing Grant - 1, , ,853 88,000 Tri-County Auto Theft Grant 858, , , , ,326 Multi-Modal Center ,000,000 Total Expenses 4,587,278 4,949,950 10,697,896 9,760,471 37,872,495 22

29 Exhibit Special Revenue Funds Revenues Actual Actual Estimate Article 36 Seizure Funds 2,164 10,411-20,129 28,945 Child Passenger Safety 2,530 1, ,781 DUI - Camera Fines 8,803 10,265-8,791 34,866 Forfeiture Fund - Federal 23, ,379-62, ,837 Forfeiture Fund - State 127, , , ,652 G.O. Bond Debt Service 1,136,152 1,140,599 1,148,544 1,148,544 1,153,169 Intermodal Initiatives 5,654,843 1,664,945 1,630,000 1,645,000 1,645,000 Neighborhood Improvement Prog. 3,500, ,265-1,885,269 Police Vehicle Fund 82,546 64,648 40,000 50,018 66,825 Sex Offender Registration 1,925 1,930-9,570 14,166 Special Service Areas 2,236,075 1,553,485 1,713,668 1,597, ,390 TIF #2 - City Center 326, , , , ,000 Unclaimed Funds - Evidence 2,269 2, ,253 Total Revenues 13,104,874 5,809,160 5,174,046 6,981,462 4,448, Expenses Actuals Actuals Estimate Article 36 Seizure Funds ,759 28,945 Child Passenger Safety 2,384 1,004 8,534 1,000 6,781 DUI - Camera Fines - 1,330 23,795-34,866 Forfeiture Fund - Federal 37,131 61,874 84,856 17, ,837 Forfeiture Fund - State 223,416 22, ,175 24, ,652 G.O. Bond Debt Service 1,136,144 1,142,869 1,148,544 1,148,544 1,153,169 Intermodal Initiatives 39, ,883 8,704, ,000 9,380,079 Neighborhood Improvement Prog. 6,902,370 1,165,732 1,885,269 1,885,269 Police Vehicle Fund , ,380 - Sex Offender Registration , ,166 Special Service Areas 1,561,116 1,489,556 1,713,668 1,548, ,390 TIF #2 - City Center 399, , , , ,000 Unclaimed Funds - Evidence 2,895 2,979 14, ,253 Total Expenses 10,305,494 4,416,379 14,997,327 6,264,511 12,057,138 23

30 Post-Employment Benefits The City of Joliet like many governmental units across the county has the challenge of funding long standing retirement related liabilities. The two primary retirement related liabilities are Pensions and Other Post-Employment Benefits (OPEB). Pensions The City contributes to three pensions. Sworn police and fire each have their own pensions, which are separately run as the Joliet Police Officers Pension Fund and the Joliet Firefighters Pension Fund. All other eligible City employees are covered under the Illinois Municipal Retirement Fund (IMRF), which is composed of many Illinois governmental units. Pension Fund Actuarial Accrued Liability Actuarial Value of Assets Unfunded Actuarial Accrued Liability Funding Position Firefighters' Pension Fund * 192,271,318 83,852, ,418, % Police Officers' Pension Fund* 256,768, ,877, ,891, % Illinois Municipal Retirement Fund ** 95,132,199 40,030,326 55,101, % *Estimates based upon the January 1, Draft Actuarial Reports prepared by Gabriel Roeder Smith & Company. Draft reports are still subject to review. ** Information from the IMRF GASB Report as of 12/31/10. Exhibit 17 Historical Pension Costs Police Fire IMRF $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $ Est Est. IMRF values shown in the chart above include Medicare and Social Security values along with actual payments to the municipal pension fund. 24

31 Other Post-Employment Benefits (OPEB) Other Post-Employment Benefits (OPEB) are retirement benefits given to vested employees in the areas of health care and life insurance. OPEB benefits are on a pay-as-you-go system at the City of Joliet. Presently no funding has been set aside for these future benefits. The current portion of the benefits are budgeted and paid as part of the City s annual budget. Until January 1, 2006 these benefits were never required to be measured by governmental entities. However, the Governmental Accounting Standards Board (GASB) made this measurement mandatory. Therefore, the City now measures these future expenditures and discloses these amounts in its audited Comprehensive Annual Financial Report (CAFR). The City s January 1, 2010 OPEB valuation estimated the present value of all future payments as of January 1, 2012 to be $234,793,000 and estimates this value to rise to $358,949,000 by the year This assumes the pay-as-you-go funding remains intact with the same benefits as currently extended to City retirees. Any adjustments in the current policies with respect to prefunding and/or a change in benefits could adjust this amount. This budget does not contain any contributions towards this liability and maintains the pay-as-you-go policy currently in place. Current GASB rules do not require a contribution be made to a separate fund, but this may change in the future. However, GASB does mandate that the current portion of expected contributions over a 30-year amortization of the liability be recognized. The liability on the financial statements is expected to be approximately $84,711,000 by December 31, This could have an adverse impact on future borrowing capacities of the City. 25

32 City of Joliet Finance Committee August 25, Stabilization Option 1 - Expense Reductions Only Pension Reform Pension Reamortization (22.5 yrs to 35 yrs) $ 4,226,000 Personnel (with estimates for benefits) Savings from Payroll Attrition & Hiring Freeze $ 1,500,000 Sunsetting of Operational Concessions $ (1,500,000) Close 3 Fire Stations $ 5,400,000 Police Reorganizations $ 1,500,000 Eliminate Crossing Guards $ 450, Management Layoffs $ 1,000,000 Staff Reductions (Layoffs/Outsourcing) $ 1,700,000 City Provided Services 5 Police Officers in the High Schools $ 300,000 Eliminate Mosquito Spraying $ 228,000 Paratransit Program $ 160,000 Animal Control Contribution $ 140,000 Community Subsidies Rialto Subsidy $ 700,000 Bi-Park Operations $ 116,000 Museum Subsidy $ 300,000 Visitor's Bureau $ 175,000 Splash Station Subsidy $ 175,000 Operational Reductions Close Washington Street Office $ 200,000 3rd Party Provider for Street Lighting Energy $ 30,000 Reduce Travel/Training $ 100,000 Reduce Memberships $ 100,000 TOTAL $ 17,000,000 Includes Estimates for Evaluation Purposes Appendix A - 1

33 Stabilization Option 2 - Expense and Revenue Adjustments Phase I Pension Reform Pension Reamortization (22.5 yrs to 35 yrs) $ 4,226,000 Personnel Savings Savings from Payroll Attrition & Hiring Freeze $ 1,500,000 Sunsetting of Operational Concessions $ (1,500,000) Revenue Enhancements Ambulance Billing Rate Adjustments $ 250,000 Addition of Natural Gas Tax on 3rd Party Provider $ 650,000 Raise the Home Rule Sales Tax by.50% $ 3,800,000 City Provided Services Privatize Crossing Guards $ 150, Management Layoffs $ 1,000,000 5 Police Officers in the High Schools $ 300,000 Eliminate Mosquito Spraying $ 228,000 Community Subsidies Bi-Park Operations $ 116,000 Visitor's Bureau $ 175,000 Operational Reductions Close Washington Street Office $ 200,000 3rd Party Provider for Street Lighting Energy $ 30,000 Phase I Adjustments $ 11,125,000 Phase II Personnel (with estimates for benefits) Close 2 Fire Stations $ 3,600,000 Police Reorganizations $ 650,000 Staff Reductions (Layoffs/Outsourcing) $ 1,200,000 Community Subsidies Rialto Subsidy $ 100,000 Museum Subsidy $ 50,000 Splash Station $ 175,000 Operational Reductions Reduce Travel/Training $ 50,000 Reduce Memberships $ 50,000 Phase II Adjustments $ 5,875,000 Total Adjustments $ 17,000,000 Includes Estimates for Evaluation Purposes Appendix A - 2