URBANA — City administrators on Monday night presented to council members a balanced budget proposal with no major changes from last year, but they say it is the next few years that present the greatest risk to city finances.
As the city comes out of the recession, officials now look toward rising personnel costs, diminishing fund balances, and an 11 percent reduction in property tax base because Carle Foundation Hospital was given tax-exempt status from the state.
Higher fees or taxes could be in the future; for instance, residents' U-Cycle rate will rise from $30 to $33 annually to keep the program's finances stable and to keep leaf pickup going.
City officials also said they might be willing to entertain a sales tax increase should the city of Champaign follow through with that plan, as has been floated on the west side of Wright Street.
The city of Urbana will also spend down some of its reserve funds this year. Budgeters expect the city's available cash to drop from $20 million to $14 million by the end of the year.
That is not necessarily bad news, said interim comptroller Bill DeJarnette, but rather a result of big capital projects moving forward this year, like the Olympian Drive project at $7.5 million and the Boneyard Creek beautification at $5.2 million. Using that money this year has enabled the city to get good project bids, he said, but continuing to spend down that cash would not be sustainable into the future.
Day-to-day operating expenses are proposed at 5.3 percent less than the current fiscal year, but the total budget — $73.3 million — is more than 25 percent higher than last year. The increase is primarily because of those capital projects.
The coming year's budget has not presented the city with any major problems, DeJarnette said, but when Urbana launches into a new fiscal year on July 1, administrators and city council members will already have to start thinking about the next.
"We're not in bad shape, but we really can't take a step backward," DeJarnette said.
City officials will need to look at personnel costs. While Mayor Laurel Prussing has been adamant about not laying off employees, DeJarnette said city officials may have to start looking at alternative options, like reducing overtime, offering 32-hour work weeks to employees or restructuring or combining positions when employees leave.
At $24 million annually, personnel costs are about 80 percent of the city's general fund expenses. The city's health insurer, Health Alliance, this year will raise its rates 15 percent, a $344,060 spike.
"This year is not a problem. There's a lot of capital improvements going; there's a lot of positive things happening. We're covered," DeJarnette said. "Next year is very important to us."
Carle Foundation Hospital's tax-exempt status will present a problem for all Champaign County taxing bodies. The city expects to take a $820,000 hit, and the Urbana school district is expecting a drop-off of more than $3 million.
Unless something changes, Prussing said, that will put extreme upward pressure on tax rates.
"That has a very harmful long-term effect on the city that it makes us uncompetitive over time," Prussing said.
Immediately following the budget discussion on Monday night, Alderwoman Carol Ammons, D-Ward 3, asked other council members to consider ways to get residents involved in the budgeting process moving forward, especially as the city prepares to potentially charge more or do less.
"We will probably really need the help of the citizens in the coming year," Ammons said.
A previous version of this story contained inaccurate information about the cause of the city's diminishing property tax base. The correct information appears here.