With the second half of the calendar year underway, Naperville officials recently reviewed the city’s 2023 financial performance thus far, and offered a sneak peek into planning next year’s budget document.
Deputy Finance Director Raymond Munch went before the City Council at its latest meeting and gave a mostly upbeat report on both sides of the city’s financial ledger.
“Generally good conditions in the local economy are generating revenues that support services at a very high level,” Munch said. “That said, we’ve seen weakness in some very specific revenues, but those are balanced out by other overperforming areas.”
2023 revenues on pace with targets — with one exception
In addition to property taxes, Naperville receives revenue from a number of other sources to fund the myriad expenses within each of the city’s departments.
Most of the revenue sources are outperforming 2022 figures in year-over-year comparisons, Munch said. Motor fuel tax revenues, for instance, are up 17.6% in alignment with the resumption of the state’s gas tax increases.
But there is one notable line item that Munch said is down sharply in yearly comps that points to a larger national trend.
“The one area of weakness that we see in those consumer-driven revenues is the real estate transfer tax, which is down 40% over 2022,” Munch said. “The weak real estate market is not unique to Naperville. It’s high mortgage rates that resulted in weak supply and demand nationwide.”
Commercial real estate transactions are down markedly, Munch said. Residential real estate also has been pinched with less volume as mortgage interest rates have risen to tamp down on inflation, though sale prices remain elevated.
“I should note that some of this decline was expected, and budget projections were lowered in this category for 2023,” Munch said. “However, we’re still about 20% below those expectations.”
City expenses under budget overall
The rising cost of goods and services in recent years was incorporated into Naperville’s 2023 municipal budget last year when decision-makers finalized it. Munch said the cautious approach has been fruitful at the halfway point of the year.
Salaries and benefits remain under budget from preliminary estimates. So, too, is overtime pay, which has been attributed to a mild winter that relied on less-than-anticipated overtime staffing within the public works department.
But weather has driven up costs in another area — purchased water — as a result of harsh conditions at the outset of summer.
“(It’s) primarily due to the increase in water sales that we’ve been seeing from the drought conditions that set in early this season,” Munch said. “The price of purchased water from the DuPage Water Commission is also higher.”
Planning on 2024 budget to begin next month
In his report to the City Council, Munch also discussed the timeline for assembling next year’s municipal budget.
Munch said the process for this year’s budget planning exercises is being tweaked in the hopes of generating more robust discussion between city staffers and the council and general public.
“The city’s budget is large, and it’s complex,” Munch said. “We’re taking a slightly different approach this year, with a series of four different budget workshops, as opposed to the three we conducted last year.
The first of the four budget workshops will take place in August as the city’s capital improvement program is reviewed. In September, a workshop focused on city operations and resource allocation is scheduled.
The city’s timeline includes official publication of the preliminary budget Oct. 13, having the council act on the budget Dec. 5 and approving the property tax levy Dec. 19.
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