Prussing: Proposed budget holds the line
URBANA — Mayor Laurel Prussing says her budget proposal for the fiscal year beginning July 1 is another "hold-the-line" financial plan, made particularly difficult this year by a relatively new state law that exempts some hospitals from paying property taxes.
A quarter-cent sales tax increase from the beginning of 2014 is helping, she said, and the state and federal governments have come through on paying for big road projects. That, combined with budgeting for no increases in employee health care costs and wages, is keeping city finances under control.
"I think we're managing to provide a good level of services by the steps we've taken to tighten the budget and the new revenues we've had to rely on," Prussing said.
But the mayor still blames Carle Foundation Hospital's property tax-exempt status for putting the city in a tighter bind than it otherwise would have been in.
The proposed $34.27 million operating budget, which covers the city's day-to-day expenses, is nearly 4 percent higher than the current fiscal year's spending plan. City officials are expecting to collect $34.14 million in operating revenue, which is about 4.4 percent higher than this year.
That means budgeters are again planning to spend down some of the city's cash reserves. Comptroller Rich Hentschel said the $4.82 million general fund balance — essentially the city's rainy-day fund — at the end of this year is an "adequate" amount.
City officials are again budgeting to spend some of that money — $131,055 next year — but Hentschel said he hopes conservative projections will move that number closer to zero. It's a "pretty balanced budget," Hentschel said.
On the other hand, the city's total budget — which includes capital, equipment and other special programs — will drop by about $9.4 million, from $70 million this year to $60.6 million next year. A number of factors force that number to tend to fluctuate from year to year more than typical day-to-day expenses. Total revenues will drop, too — from $58 million to $57 million.
"We've been through many years of very tight budgets," Prussing said. "It was the big recession that hit us, the Great Recession. We've been trying to hold the line on budgets for quite a few years, and just when our other revenues were starting to recover, like the sales tax and the income tax, then we got hit with this property tax from Carle."
Prussing was talking about a 2012 state law that exempts hospitals from paying property taxes if their "charity care" exceeds the amount they owe in taxes. The relatively new exemption for Carle has prompted several Urbana taxing bodies to raise their rates — the city last year chose not to raise property taxes.
The city is fighting the constitutionality of that law in court through its ongoing lawsuit with Carle.
"We expect to win that lawsuit," Prussing said.
Carle spokeswoman Jennifer Hendricks-Kaufmann said in a statement that the effect of the Carle tax exemption is not as significant as the mayor makes it seem.
"We're focused on doing what's right for our patients by protecting the community's health care resources, and that's why we sought an exemption for former clinic properties," Hendricks-Kaufmann said. "The exemptions granted resulted in a $300,000 impact to the city against a $60 million budget, which doesn't explain the continued budget challenges."
The Urbana school and park districts, which had been holding years' worth of Carle property tax money in escrow, have settled with the hospital. The school district kept about $5.1 million of the $10.9 million in escrow, and the park district kept about $900,000 of $1.9 million.
"It's unfortunate city officials repeatedly point to Carle when they could reach an agreement like Urbana school and park districts that could relieve any burden for taxpayers," Hendricks-Kaufmann said in the statement. "This problem is, in fact, the city's choice."
Despite the ongoing feud, Urbana will see some major capital projects. The plan for next year includes $7.1 million for the construction of Olympian Drive in north Urbana and a $7.7 million widening of High Cross Road between U.S. 150 and Florida Avenue. Both projects are being financed entirely with state and federal funds, not local tax money.
City officials are also planning to rebuild Windsor Road between Philo Road and Race Street. The project will cost in excess of $5 million, but $2.5 million will come from the state. Budgeters plan to issue $2.8 million in bonds to cover the rest. The bonds will cost $320,000 annually during the next 10 years to pay off.
"The big highway projects are thanks to the state and federal government because we would never be able to afford those," Prussing said.
City officials also plan to stave off big increases in employee health insurance costs, and they are not budgeting any wage increases. They are in negotiations with the city's labor unions right now.
"We don't know what the outcome's going to be," Prussing said. "If it goes to arbitration, it's completely out of our hands."