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S7-94 (2) Ordinance No. S7-94 AN ORDINANCE ESTABLISHING A HOME RULE MUNICIPAL RETAILERS ' AND SERVICE OCCUPATION TAX EXEMPTING CERTAIN FOOD, DRUGS AND MOTOR VEHICLES BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS: Section 1 . A tax is hereby imposed upon all persons engaged in the business of selling tangible personal property, other than an item of tangible personal property titled or registered with an agency of this State' s government, at retail in this municipality at the rate of 0 . 75% of the gross receipts from such sales made in the course of such business while this ordinance is in effect; and a tax is hereby imposed upon all persons engaged in this municipality in the business of making sales of service, at the rate of 0 . 75% of the selling price of all tangible personal property transferred by such serviceman as an incident to a sale of service. Such "Home Rule Municipal Retailers ' Occupation Tax" and the "Home Rule Municipal Service Occupation Tax" shall not be applicable to the sales of food for human consumption which is to be consumed off the premises where it is sold (other than alcoholic beverages, soft drinks and food which has been prepared for immediate consumption) and prescription and non-prescription medicines, drugs, medical appliances and insulin, urine testing materials, syringes and needles used by diabetics . The imposition of these home rule taxes are in accordance with the provisions of Section 8-11-1 and 8-11-5, respectively, of the "Illinois Municipal Code" ( 65 ILCS 5/8-11-1 and 5/8-11-5 ( 1992 State Rev. Edition) ) . Section 2 . The taxes hereby imposed, and all civil penalties that may be assessed as an incident thereto, shall be collected and enforced by the Department of Revenue of the State of Illinois . The Department of Revenue shall have full power to administer and enforce the provisions of this ordinance. Section 3 . The City Clerk is hereby directed to file a certified copy of this ordinance with the Illinois Department of Revenue on or before the first day of October. Section 4 . This ordinance shall take effect on the first day of January next following the adoption and filing of this ordinance with the Department of Revenue. s/ George VanDeVoorde George VanDeVoorde, Mayor Presented: September 28, 1994 Passed: September 28, 1994 Vote: Yeas 5 Nays 1 Recorded: September 29, 1994 Published: September 29, 1994 Attest : s/ Dolonna Mecum Dolonna Mecum, City Clerk E Illinois Department of Revenue E ti 101 West Jefferson Street E Springfield, Illinois 62794 September 29, 1994 City of Elgin CiV Clerk 150 Dexter Court Elgin, Illinois 60120-5555 Attention: Dolonna Mecum Dear Ms. Mecum: This is to acknowledge receipt of the Cittyy of Elgin's Ordinance No. S7- 94, which imposes a Home-Rule Municipal Retailers' Occupation Tax and Home Rule Municipal Service Occupation Tax, each at a rate of 3/4 of one percent (.75%). The Illinois Department of Revenue shall collect, administer and enforce such Home Rule Municipal Retailers' Occupation Tax and Home Rule Municipal Service Occupation Tax effective January 1, 1995, in accordance with the provisions of Sections 8-11-1 and 8-11-5 of the Illinois Municipal Code (65 ILCS 5/8-11-1 and 5/8-11-5). If you have any questions regarding this matter, you may contact our office at the number listed below. Very truly yours, /jdi $411,4, Phillip i. McCollum, Jr. Associate Counsel Office of General Counsel Phone: (217) 782-7054 PRM: cc: B. Henry, LTAD • �n Agenda Item No . . g�rrn r • September 7, 1994 TO: Mayor and Members of the City Council FROM: Richard B. Helwig, City Manager SUBJECT: Local Sales Tax Summary PURPOSE The purpose of this memorandum is to provide information to the Mayor and members of City Council relative to the local sales tax option. Background information regarding the City of Elgin immediate and five-year financial goals is also provided. The local sales tax option is an agenda item for the City Council September 14, 1994 Committee of the Whole meeting. BACKGROUND The Mayor and Members of City Council met on May 18, 1994 to provide early input for the 1995 Budget and the 1995-1999 Financial Plan. Since then, 3 7 meetings have been held to gain community input. Based on this extensive dialogue, staff have developed a preliminary list of Immediate and Five-Year Plan Financial Goals. These goals are presented as background information so that the discussion of the local sales tax option occurs to the broadest extent possible. A paragraph summary of each goal appears as Appendix A. • IMMEDIATE FINANCIAL GOALS • Balanced 1995 Budget • Start replenishing the General Fund cash reserve • No reductions in present level of service • • No increase in the property tax rate • Maintain the 'AA'bond rating for the 1994 Bond Sale • Pay off and not renew the short-term $3 million borrowing • Repay the $1 million note to the Working Cash Fund with 4th Quarter 1994 riverboat gaming receipts Local Sales Tax Option • Page 2 • Award contracts by December 16 to build the law enforcement facility • Provide small increases in equipment and personnel to Public Works for basic services FINANCIAL GOALS FOR THE FIVE-YEAR PLAN • Balanced annual budgets • Maintain General Fund cash reserves at minimum level established by City Council • Adopt a debt policy • Maintain service levels • No increase in the property tax rate • Maintain the 'AA' bond rating • Smaller, more regular, and justifiable increases in user fees • Use riverboat proceeds for one-time expenses • Provide flexibility for needed capital improvements and expansion of services • No short-term cash flow borrowing ADOPTING A LOCAL SALES TAX Something must change in the City's revenue and expenditure mix in order to provide current services in a dependable manner for the remainder of the decade. The local sales tax has been discussed by the City Council for the past year. The local sales tax is a sound option for bridging the gap between revenues and expenditures. We have assembled information, attached, that will aid the City Council in reviewing the alternatives for meeting the community's needs (Other sales tax information was provided to the City Council in an August 4 memorandum from Finance Director Jim Nowicki, and preliminary budget projections for 1995 under present trends was discussed by the City Council at the August 10 Committee of the Whole meeting). The state mandated timeframes for adoption of a local sales tax necessitates the City Council's review of this matter now. In order for the local sales tax to be collected in 1995, the City Council must pass an.ordinance by October 1, 1994. Local Sales Tax Option Page 3 State statutes allow cities to levy local sales taxes on retail sales within their • jurisdictions at 1/4% increments. The City Council can enact the local sales tax by passing an ordinance to be forwarded to the State of Illinois. The State of Illinois Department of Revenue would collects on the same taxable goods base used for the statewide tax, except for automobile sales. If the City were to levy the local sales tax on vehicle sales, the City would have to administer the tax themselves. The automobile option is not included in the revenue projections and is not recommended. Currently the sales tax rates are as follows in the Kane County and Cook County portions of Elgin: KANE COOK State 5.00 5.00 City# 1.00 1.00 RTA* .25 1.00 County .25 .75 6.50 7.75 * - Includes food and drugs in Kane County # - Distributed by State of Illinois to every municipality based on local sales Adoption of the local sales tax would provide several positive benefits including: • Diversification of the taxing structure, relieving the burden on the property tax and spreading the tax burden to others outside the city. • Large revenue effect. The tax is projected to generate $900,000 for each 1/4% increment. • The sales tax is somewhat discretionary in that one can alter spending. • • Paid in part by nonresidents who buy goods in Elgin and enjoy municipal services such as streets and police/fire protection. • Not very noticeable as an incremental cost to consumers in their purchasing decisions. Even with the purchase of a $1,000 household item such as a refrigerator, a 3/4% local sales tax would add only $7.50 to the cost. • Many other larger surrounding communities have also adopted the local sales tax, minimizing the competitive disadvantage for local merchants. Local Sales Tax Option Page 4 Disadvantages of the local sales tax include: • Increased sensitivity to local economy. Sales tax receipts fluctuate more with the ebb and flow of the economy than other revenues such as the property tax. • Not deductible from State and Federal Taxes as is the property tax. • Tax rates vary between municipalities causing confusion to consumers. • Tax burden is passed on to the consumer; local businesses share almost none of the burden. REVIEW OF OPTIONS AND 1995-1999 PROJECTIONS Appendix B contains a summary of various means of bridging the gap between revenues and expenditures for the period 1995-1999. Included are the following revenue sources: • Local Sales Tax - 1/2%, 3/4%, 1% • Electric Utility Tax - 2%, 3% • Gas Utility Tax - 2%, 3% • Telephone Utility Tax - 2%, 3% • Real Estate Transfer Tax - to 4% • Local Motor Fuel Tax - 2%, 3% • User Fee for Waste Hauling - 100%, 50% • Property Tax Increases - $0.34 to $0.49 above $1.92 Also in Appendix B are three scenarios for 1995-1999 depicting: (1) Sales Tax increase (3/4%) only; (2) Sales Tax increase (1/2%) and User Fee for Waste Hauling (50%); and (3) Sales Tax Increase (1%) and Property Tax Rate Decrease ($0.22, $0.32, $0.26, $0.28, and $0.20 from $1.92). Five other documents are included as Appendix C and will be discussed at City Council's September 21, 1994 retreat and at budget meetings in the Fourth Quarter. Local Sales Tax Option Page 5 I MMUNITY RO P /INTERESTED PERSONS CONTACTED At a number of the 37 community input sessions the proposition of a local sales tax was suggested as a means of sustaining critical basic services. Also at many meetings, an aversion to additional property taxes was stated. FINANCIAL IMPACT The local sales tax at $0.0075 of taxable sales is projected to produce $2.7 million to help balance the 1995 Budget, provide a $500,000 infusion into the General Fund cash balance, and provide an estimated $500,000 for service enhancements. RECOMMENDATION Each of these scenarios presented in Appendix B is workable. Ideally, we would adopt a revenue source or combined revenue sources which will achieve the Five-Year Plan Financial Goals. It would seem preferable to not have to revisit the subject of taxes again during the period 1995-1999, but unforeseen economic circumstances may require us to do so. After listening to Council and citizens extensively, reviewing your prior discussions concerning the local sales tax option, and much discussion among staff, we recommend that a 3/4% local sales tax option be adopted (Scenario 1). This recommendation should, as indicated in the financial projections, adequately cover operating levels for the entire 1995-1999 period, including sustaining new initiatives. If City Council wishes to enact a local sales tax option, a resolution must be adopted and delivered to State of Illinois officials prior to October 1, 1994. Respectfully submitted, r/ , • 4//...,Clay J. Pearson Budget Officer Richard B. Helwig City Manager Local Sales Tax Option Page 6 APPENDIX A Immediate and Five-year Plan Financial Goals IMMEDIATE FINANCIAL GOALS Balanced 1995 Budget. Expenditures should not exceed the available revenues. • Start replenishing the General Fund cash reserve. The City has bad operating deficits severe enough that there no longer exists the cash reserve necessary for cash flow purposes, let alone for any contingency that may arise. An appropriate cash balance is a minimum of six to ten weeks of expenditures (12% to 19%). No reductions in present level of service. On the contrary, more resources are needed to meet a growing community's needs. No increase in the property tax rate. With the schools in Illinois left with no other local means for financing other than the property tax, the City needs to plan on receiving no more than its current rate for the remainder of the decade. Maintain the 'AA' bond rating for the 1994 Bond Sale. A bond sales of $6.5 million is planned in 1994 to complete funding for the law enforcement facility (balance from riverboat proceeds) and a portion of the capital improvement program. Pay off and not renew the short-term $3 million borrowing. The City's cash flow borrowing of$3 million is due in October. This debt will be paid with the budgeted 1994 revenues. Only the $1 million borrowed from the Working Cash Fund cannot be repaid this year without the aid of riverboat money. Repay the $1 million note to the Working Cash Fund with 4th Quarter 1994 riverboat gaming receipts. Repayment from the first riverboat proceeds will provide needed one-time relief to the General Fund and will assist the funding of new initiatives to solve community problems. Award contracts by December 16 to build the law enforcement facility. Funding is proposed by existing bond proceeds ($6.61 million), late 1994 Bond Issue ($6.50 million), and a Local Sales Tax Option Page 7 portion of 1995 gaming revenues ($2.69 million) for a total $15.80 million project. Provide small increases in equipment and personnel to Public Works for basic services. 4th Quarter Gaming revenues are proposed to be used in part to acquire two additional snow plows and five more salt spreaders. Two additional laborers for Public Works will enhance all operations, including snow and ice control, street sweeping, and street maintenance. However, these added personnel should be funded from operational revenues such as the sales tax. FINANCIAL GOALS FOR THE FIVE-YEAR PLAN Balanced annual budgets. Expenditures should not exceed the available revenues. Maintain General Fund cash reserves at minimum level established by City Council. An appropriate cash balance is a minimum of six to ten weeks of expenditures (12% to 19% or $6.1 to $9.7 million by the year 1999). Specific policies should be developed for minimum fund balances in all of the city's major funds (i.e., General, Risk Management, Capital Equipment Replacement, Water, Sewer). Adopt a debt policy. This policy should include appropriate levels for outstanding debt, debt service, and types of projects to be funded by debt in all funds. Until further review with the City Council, we have projected $6.5 million bond sales in 1994 and 1995. Once the Community Needs. Statement has been reviewed, a capital improvement program for the Five-Year Financial Plan can be developed, including debt funding as necessary. Maintain service levels. Basic critical services the city is providing must continue. No increase in the property tax rate. With the schools in Illinois left with no other local means for financing other than the property • tax, the City needs to plan on receiving no more than its current rate for the remainder of the decade. Maintain the 'AA' bond rating. This rating provides the city an improved interest rate when borrowing for capital improvements and also serves as an indicator of sound financial condition and Local Sales Tax Option Page 8 management. Special long-term projects (Community Facility) will need funding from bond proceeds. Debt issuance for the Water and Sewer Enterprise Funds will still need to be addressed as part of the master plans for those operations. Smaller, more regular, and justifiable user fee increases. As part of the normal review of operations, evaluate user fees as to the cost of service and the fee charged. If a subsidy exists, this must be identified and justified. Use riverboat proceeds for one-time expenses. The potentially unstable nature of gambling revenues requires that operations not become dependent on the riverboat. These limited uses include cash infusions into fund balances, paying off interfund debts, and capital improvements. Provide flexibility for needed capital improvements and expansion of services. The streets, parks, and equipment needs of the organization should be met, resisting the deferment of regular maintenance. The budget should be capable of adding new initiatives proposed by the community and the organintion and should have the resources available to meet unexpected opportunities or problems. No short-term cash flow borrowing. The city's internal financial resources should be able to accommodate cash flow needs throughout the year. 1995 1996 1997 1996 1999 • PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED Net General Fund Total (2,720,155) (954,499) . (798,785) (138,840) (300,526) REVENUE/EXPENDITURE OPTIONS Local Sales Tax- 1/2% $1,800,000 $1,854,000 $1,909,620 $1,966,909 $2,025,916 O Local Sales Tax-3/4% $2,700,000 $2,862,000 $3,005,100 $3,125,304 $3,250,316 L Local Sales Tax- 1% $3,600,000 $3,657,686 $3,716,297 $3,775,847 $3,836,350 r 4- Electric Utility Tax- 2% $1,010,000 $1,040,300 $1,071,509 $1,103,654 $1,136,764 O• Electric Utility Tax-3% $1,515,000 $1,560,450 $1,607,264 $1,655,481 $1,705,146 0 Gas Utility Tax - 2% $400,000 $412,000 $424,360 $437,091 $450,204 Gas Utility Tax- 3% $600,000 $618,000 $636,540 $655,636 $675,305 O Telephone Utility Tax - 2% $500,000 $515,000 $530,450 $546,364 $562,754 4 Telephone Utility Tax- 3% $750,000 $772,500 $795,675 $819,545 $844,132 eti b Real Estate Transfer Tax- to 4% $133,000 $136,990 $141,100 $145,333 $149,693 , Local Motor Fuel Tax- 2% $507,500 $517,650 $528,003 $538,563 $549,334 Local Motor Fuel Tax- 3% $761,250 $776,475 $792,005 $807,845 $824,001 0 6 User fee for Waste Hauling- 100% $3,000,000 $3,090,000 $3,213,600 $3,342,144 $3,475,830 '• User Fee for Waste Hauling-50% $1,500,000 $1,545,000 $1,591,350 $1,639,091 $1,688,263 5 5� Property Tax Increase/Decrease to Balance net above OR Rate above$1.92 to generate amount below 0.4353 0.1418 0.1104 0.0179 0.0362 Ow' Amount $2,720,155 $954,499 $798,785 $138,840 $300,526 td Q+ OR e.di cn e+ rir to • y Q IX,d 0 igge�a P" �,,s2� isse j991 ricto Ages PA x,185 0�►8 iggs © PA 9,01 .�13 o r►Ce ° g 2;1205Bads 4g5.� 3 Zyp. 1 OVe Ces�4G.338 1, , 3,5`'1. � 0 3, �td„� Or`y,��p �l 3�,1oa $3,532'5'6 N,�t��l,F �,��eS la*am Pay'ts 1.�'�� �2 g�62 $2;191. 5 ,00° 1 ked a� S3.83g �Np�rt��0 �to�o'R`A���'°rce Z�c'�°'� �e S►��rt�f��Aepaid �q79. 5 96 Std kt C+a� eta ,�� �,t io LOGSI Sale,� .3!�°�FOcA PiO BPt-p'NC� (tile. O O0 sin a .n 9 o1i �''; -t+ o .4 Zm = o� o IP t a44. 11 (g -It, to .o A N •► i i n „4, -. 43, t1� � �d► tO -01 ' O p _ It iit ' i .• ' . J m . ta ' a 13 1g ° % jWS 44 Asa N % O W /114 i N zo Sts 4t As sate$ ArN 4.0V0""`"14.0V0""`"1xey 1995 1998 1997 1998 1999 PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED Net General Fund Tota (2,720,155) (954,499) (798,785) (138,840) (300,526) SCENARIO 3 - Sales Tax Increase/ Property Tax Decrease S. Grove TIF Fund able to make Debt Service Pay'ts 446,338 485,330 546,113 602,048 Working Cash Fund Repaid from Riverboat 1,000,000 Local Sales Tax- 1% 3,600,000 3,657,686 3,716,297 3,775,847 3,836,350 Property Tax Rate Reduction -0.2208 -0.3193 -0.2629 -0.2813 -0.1972 Property Tax Levy Reduction ($1,379,845) (2,149,525) (1,902,842) (2,183,119) (1,637,872) BALANCE FOR UNALLOCATED $499,999 $999,999 $1,499,999 $1,999,999 $2,500,000 New Property Tax Rate 1.6992 1.6007 1.6571 1.6387 1.7228 % Change in Rate -11.5% -16.6% -13.7% -14.6% -10.3% Note: Balance for unallocated increases over time to sustain programs begun in earlier years of the plan • 0) N✓ CD U, y w0 (IP r 0 110 C Local Sales Tax Option Page 13 Appendix C CATEGORY SUMMARY FOR GENERAL FUND Percentage Changes From Previous - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ACTUAL ACTUAL ACTUAL ACTUAL ESTIMATE PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED MEANS OF FINANCING REVENUE Property Tax -0% 21% 19% 8% 11%see comparison of tax rates and tax levies table Road and Bridge11% 3% 9% 3% 4% 5% 5% 5% 5% 5% Real Estate Transfer Tax 3% 3% 3% 3% 3% Other Taxes (Hotel/Motel; Hemmens Ticke 8% 6% -1% -13% 0% 3% 3% 3% 3% 3% Sales/Use/Photo Process. Tax 4% -8% 5% 13% 5% 6% 5% 4% 4% 4% Licenses 3% -2% 3% 4% -1% 2% 2% 2% 2% 2% Permits 41% -6% -15% -11% 11% 4% 4% 4% 4% 4% Fines 14% -1% 13% 1% 2% 5% 5% 5% 5% 5% Income Tax 48% 2% -8% 4% -14% 3% 3% 3% 3% 3% Intergovernmental -11% -8% 22% 20% -4% 4% 4% 4% 4% 4% Charges for Services/Sale of Commod. 14% -6% -8% 12% 5% 4% 4% 4% 4% 4% Misc. Rev (Franchise Rees) -15% 7% 18% 19% -12% 4% 4% 4% 4% 4% Other Rev. (Investments) -0% -24% -37% -19% -15% 0% 0% 0% 0% 0% Transfers In 13% 29% 18% -0% 16% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% TOTAL REVENUE 10% 5% 6% 7% 6% From Working Cash Fund for'95 Repay't Means of Financing 10% 5% 6% 7% 9% EXPENDITURE Earnings and Benefits 10% 13% 10% 9% 5% 5% 5% 5% 5% 5% Commodities & Supplies 12% -2% -3% 14% 7% 5% 5% 5% 5% Contractual Services 34% 64% -0% 0% 5% 5% 5% 5% 5% . Insurance 9% -71% -9% -0% 1% 3% 3% 3% 3% Other Charges 21% 90% 11% -19% 51% 5% 5% 5% 5% Transfers Out 1% -55% -4% -80% 165% 5% 5% 5% 5% Capital Expenditures 13% -67% -32% -40% -22% 5% 5% 5% 5% Repayment of Interim Financing TOTAL EXPEND. 13% 10% 7% 4% 6% CATEGORY SUMMARY FOR GENERAL FUND - PRESENT SERVICE LEVEL 1990 1991 1992 1993 1994 1995 1998 1997 1998 1999 .. ACTUAL ACTUAL ACTUAL ACTUAL ESTIMATED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED • MEANS OF FINANCING _ REVENUE Property Tax $8,087,135 $7,381,579 $8,785,541 $9,514,861 $10,581,642 $11,012,319 $12,327,568 $13,815,311 $15,559,740 $16,755,979 Road and Bridge 285,389 274,301 298,192 307,962 320,000 320,000 336,000 352,800 370,440 388,982 Real Estate Transfer Tax 0 0 0 0 250,000 400,000 412,000 424,360 437,091 450,204 Other Taxes(Hotel/Motel) • 241,592 255,554 252,806 219,072 219,450 200,000 206,000 212,180 218.545 225,102 Sales/Use/Photo Process.Tax 6,720,797 6,210,674 6,524,540 7,368,394 7,736,885 8,123,729 8.611,153 9,041,711 9,403,379 9,779,514 Licenses 1,307,466 1,287,313 1,324,743 1,381,389 1,370,095 1,41 1,198 1,433,811 1,456,786 1,480.130 1,503,847 Permits 852,653 799,682 681,693 604,481 670,500 690,615 717,567 745,570 774.667 804,899 Fines 493,000 488,317 553,858 560.423 571,500 588,645 618,077 648,981 881.430 715,502 Income Tax 4,335,777 4,440,177 4,095,361 4,254,138 3,672,745 3,782,900 3,896.387 4,013,279 4,133,677 4,257,687 Intergovernmental 500,133 457.866 558.978 670,334 642,195 642,195 665.314 689,265 714,079 739,785 Charges for Services/Sale of Commod. 1,804,696 1,693,812 1,565,773 1.756,844 1,841.360 1,841,360 1,906.808 1.974,583 2.044,766 2,117.444 Misc. Rev(Franchise fees) 535,054 575,064 680,488 812,221 715,400 715.400 741,290 768,117 795.915 824,719 Other Rev. (Investments) 1,113,733 849,827 536,304 432,489 385.745 400,000 400,000 400,000 400,000 400,000 Transfers In 2,890,673 3,729.449 4,408,146 4,405.677 5,108,060 5,110,000 5,110,000 5.110,000 5,110,000 5,110,000 TOTAL REVENUE $27,148,098 $28,443.615 $30,266,423 $32.288,085 $34,065,577 $35,238,361 $37,381,974 $39,452,943 $42,123,859 $44.073,645 From Working Cash Fund for'95 Repay't $0 $0 $0 $0 $1,000,000 $0 $0 $0 $0 $0 Moans of Financing $27,148,098 $28,443,615 $30,266,423 $32,288,085 $35,065,577 $35,238,361 $37,381,974 $39,452,943 $42,123,859 $44.073,645 EXPENDITURE Earnings and Benefits $18,260,028 $20,700,736 $22,861,029 $25,015,315 $26,256,428 $27,559,117 $28,937,073 $30,383,926 $31,903,123 $33,498,279 Commodities&Supplies 782,548 764,347 739,214 839,549 900,000 950,000 950.000 997,500 1,047,375 1,099.744 Contractual Services 3,909,778 6,422,900 6,419,522 6,432.558 6,740,083 7,000,000 7,000,000 7,350,000 7,717,500 8,103,375 Insurance 281,405 82,930 75,212 74,841 75,390 78,400 78,400 80.752 83,175 85,670 Other Charges 271,805 517,305 576,556 464,345 700.000 550,000 550,000 577,500 606,375 636.694 Transfers Out 1,777,928 795,205 762,880 155,000 410.490 421,000 421,000 442,050 464,153 487,360 Capital Expenditures 1,887,889 628,632 425,456 256,528 200,000 400,000 400,000 420,000 441,000 463,050 Repayment of Interim Financing 1,000,000 0 0 0 0 TOTAL EXPEND. $27,171,379 $29,912,055 $31,859,869 $33,238,136 $35,282,391 $37,958,517 $38,336.473 $40,251,728 $42,262,700 $44,374,171 NET GENERAL FUND TOTAL ($23,281) ($1,468,440) ($1,593,446) ($950,051) ($216,814) ($2,720,155) ($954,499) ($798,785) ($138,840) ($300,526) Please note' Because the Five-Year Financial Plan has not been finalized,there are no assumptions about future debt issuance beyond 1995. Such issues for large capital improvements would reduce the property tax available for General Fund operations UNENCUMBERED CASH RECAP - WITH TRANSFERS FROM RIVERBOAT NO CHANGE 1990 1991 1992 1993 1994 1995 1996 1997 1996 1999 ACTUAL ACTUAL ACTUAL ACTUAL ESTIMATED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED January 1 Unencumbered Cash $4,861,849 $4,897,390 $3,380,741 $1,810,754 $1,016,804 $1,404,970 $1,684,815 $1,730,318 $2,931,531 $3,792,691 Revenue 27,148,098 28,443,615 30,266,423 32,288,085 35,065,577 35,238,361 37,381,974 39,452,943 42,123,859 44,073,645 Expenditure (27,171,379) (29,912,055) (31,859,869) (33,238,136) (35,282,391) (37,958,517) (38,336,473) (40,251,728) (42,262,700) (44,374,171) Riverboat Repayment of Working Cash 1,000,000 Cash Infusion from Riverboat Proceeds 604,980 2,000,000 1,000,000 2,000,000 1,000,000 2,000,000 December 31 Unencumbered Cash $4,838,568 $3,428,950 $1,787,295 $860,703 $1,404,970 $1,684,815 $1,730,316 $2,931,531 $3,792,691 $5,492,165 Jan 1 UC as%of Expend 17.9% 16 4% 10 6% 5.4% 2 9% 3 7% 4 4% 4.3% 6 9% 8 5% September 2, 1994 TO: Richard B. Helwig Robert 0. Maim James R. Nowicki FROM: Clay Pearson SUBJECT: Property Tax/Debt Service Detail Attached are worksheets addressing the property tax levy with more detailed explanation of the debt service levy. The rate of growth in Assessed valuation is assumed to moderate over time. The debt service calculations assume a $6.5 million issue in late 1994 and another $6.5 million issue in 1995. No increased debt service is assumed for the purposes of these worksheets. Comparison of Tax Rates* and Tax Levies • City of Elgin,Illinois 1991 - 1999 1991 Advil 1902 Actual 1963 Actual 1984 Protected 1995 Protected 1999 Protected 1907 Protected 1999 Protected for 1992 Budget for 1993 Budget for 1994 Budget for 1995 Budget for 1996 Budget for 1997 Budget for 1998 Budget for 1999 Budget Tax Rate Tax Levy Tax Rete• Tax Levy Tax Rafe• Tax Levy Tax Rate* Tax Levy Tax Rate' Tax levy Tax Rete• Tax Ley Tax Rete• Tax Levy Tax Rate Tax Levy GENERAL PROPERTY TAX General Fund $1.1187 $8,788,253 $1.0750 $9,522,394 SI 1017 $10,592.589 $1 0602 $11.012,319 $1.1015 $12,327,586 $1 1317 $13,815,311 $1 2050 $15,550.740 $1.2138 $16755.979 Public Benefit Fund 00306 293.3.79 00459 477,000 00428 477,000 00398 477,000 00370 477,000 00345 477,000 IMRF Pension 02297 1,800,332 0.1820 1,612.043 01589 1.504,252 01540 1,800.000 01519 1,700.000 01579 1.900.000 01550 2,000.000 0.1521 2,100,000 Police Pension 0 0256 200,468 0 0285 252,313 0.0106 101,345 0 0102 106.412 0 0098 110.000 0 0125 150.000 0 0124 160.000 0 0123 170,00 . Firefighter's Pension 01587 480,052 0 0548 483,013 0.0388 371,837 0 0376 390,429 0 0357 400.000 0 0353 425.000 0 0337 435,000 0 0322 445.000 Bonds 8 Interest 0.4799 3,795,473 06067 5,439,250 0.5872 5,629,808 06120 8,356,665 • 05764 8,473,828 05430 6,532,713 04761 8,143.035 04752 8,581,030 TOTAL TAR LEVIED SI 9126 $15,175,576 519488 $17,309,593 $1 9257 $16,413,150 519200 519,942.625 $1920 $21,488,394 $19200 $23,10,024 $1 9200 $24,774,775 SI 9201) 526.509.009 Net Over(Under)levy, Kane County' 0.0035 159.330 -00201 ,$138.460) 0.0087 $49,977 i Taxes Billed $19161 $15,104,906 St9287 $17,171,102 $19324 $18.513,127 $1920 $19.942,825 $19200 $21,488,394 $1920 $23,100,024 $19200 824,774,775 $19200 $28.509,009 ASSESSED Change Amount Change Amount Change •Amount Change Amount Change Amount Change Amount Change Amount Change Amount VALUATION Kane County 12.92% 621,401,517 10.87% 980,957,367 8 27% 745,932,441 800% 805.607,038 7 75% 686.041,582 750% 933.144,70 7.25% 1.00.797.691 7.00% 1,070,853,529 Coot County 6.42% 150.919.643 20 39% 101,096,541 620% 192.957,128 600% 204534,554 600% 216.606.627 500% 227,648.958 500% 239.029,30 400% 248.590.478 TOTAL 11.59% $772.321,30 1273% $874655.931 784% 5938,889.567 759% $1,010,141.590 740% $1.084.846,2081 700% $1,166791,858 681% $1,239.626.997 642% 51.319.444.009 TAX EFFORT Kane Co (Ad)unlet) 77 56% 77 64% 77 79% 77 56% 77 58% 77 56% 77 56% 77 58% Cook Co. 22.44% 22 16% 22 21% 22 44% 22 44% 22 44% 22 44% 22 44% OTHER TAXES Road 8 Bridge(Township) 50 0351 $282.012 $236,00 . Special Service Area 42 $34,952 50.5598 5.17.040 Assessed Valuation $5,840,354 $8,175,373 Special Service Area 84 $9.7268 5342.875 Assessed Valuation $4,049,289 •=All tax rates refer to Kane County portion of Elgin ••=The Kane County tax effort was over(under)estimated In 1990(179%;and 1991- 92%resulting In an over(under)tax extension amount These amounts are added or subtracted to the following year's tax bill •=Assumes$8.5 million GO Bond Issue In late 1994 and a$6 5 million Issue In 1995(estimated 5438.042 debt service in 1994 Levy,$826750 In 1905 Levy) 07-Sep-94 City of Elgin, Illinois Interest and Principal Payments through 2002 Existing Debt Service Schedule Original Auth- IIssue orized Issue 1994 1995 1996 1997 1998 1999 2000 2001 2002 GENERAL PURPOSE Corp Purpose 1985 S Grove TIF 4,300,000 118,875 134,375 Portion refunded by 1991A Corp. Purpose 1986 2,150,000 229,700 319,500 302,500 285,250 267,750 Corp. Purpose 1989 3,240,000 1,820,600 1,065,000 Corp. Purpose 1989A Dundee TIF 2,500,000 147,068 146,508 150,600 148,998 147,048 149,750 146,758 148,418 141,383 Corp. Purpose 1990 2,170,000 531,550 806,750 1,063,000 Corp. Purpose 1991 4,665,000 299,030 1,099,030 1,638,230 2,617,830 1991A Refunding Issue 5,920,000 for 1980A Parking 246,343 231,738 222,085 207,268 242,588 22.4,980 207,480 for 1984 G.O. Bonds 169,040 for 1985 S. Grove TIF Bonds 300,363 298,385 446,338 485,330 546,113 602,048 672,985 702,265 737,435 Corp. Purpose 1992 20,620,000 1,517,400 1,500,900 1,484,400 1,487,900 3,549,750 3,560,000 3,362,500 3,218,750 1,575,000 Corp. Purpose 1993(New$) 4,300,000 201,150 201,150 201,150 401,150 392,150 483,750 670,550 1,648,050 1,676,800 Corp. Purpose 1993 (Refund 1989A) 1,365,000 124,429 69,341 84,341 83,573 82,898 82,268 81,608 80,933 80,220 Corp. Purpose 1993(Refund 1986) 840,000 48,459 47,946 52,434 51,665 50,990 300,360 283,700 262,000 TOTAL $5,754,005 $5,920,623 $5,645,078 $5,768,963 $5,279,285 $5,403,155 $5,425,580 $6,060,415 $4,210,838 Proposed 1994 Issue $6,500,000 0 436,042 373,750 373,750 423,750 570,875 459,375 453,625 397,875 Proposed 1995 Issue $6,500,000 455,000 390,000 440,000 587,000 575,000 563,000 401,000 Subtotal $0 $436,042 $828,750 $763,750 $863,750 $1,157,875 $1,034,375 $1,016,625 $798,875 NEW TOTAL $5,754,005 $6,356,665 $6,473,828 $6,532,713 $6,143,035 $6,561,030 $6,459,955 $7,077,040 $5,009,713 SEWER SYSTEM Sewer Purpose 1991 3,860,000 $440,100 $524,900 $502,100 $483,800 $565,200 $540,000 $514,400 $488,400 $462,400 Sewer Purpose 1992A 2,530,000 237,355 230,755 239,155 246,318 177,243 193,118 217,588 211,838 231,088 TOTAL $677,455 $755,655 $741,255 $730,118 $742,443 $733,118 $731,988 $700,238 $693,488 WATER SYSTEM Water Purpose 1980 18,900,000 $1,381,900 REFUNDED (1993B) Water Purpose 1988 2,025,000 240,175 233,775 233,775 220,675 313,975 300,175 686.375 669.375 Water Purpose 1990 5,550,000 544,650 532,250 519,750 507,150 494,350 481,350 1,268,350 1,202,850 1,136,850 Water Purpose 1991 3,035,000 291,976 284,376 276,776 270,676 264,476 258,176 451,776 432,276 612,776 Water Purpose 1992A 5,260,000 396,100 389,500 402,900 394,650 386,400 378,150 620,250 550,125 932,875 Water 19938 Refunding 8,280,000 409,750 1,796,600 1,806,685 1,814,335 1,715,543 1,735,763 TOTAL $3,264,551 $3,236,501 $3,239,886 $3,207,486 $3,174,744 $3,153,614 $3,026,751 $2,854,626 $2,682,501 Above does not include abatements from TIF Districts, Special Service Areas, etc. applied to those issues CITY OF ELGIN, ILLINOIS 28-Aug-94 SCHEDULE OF EXISTING OUTSTANDING DEBT Principal Bonds Out- Jan. 1, 1994 Bonds Interest Amount of Retired standing as of Principal Outstanding Rates Original Issue to 12/31/93 Dec. 31, 1993 Payments 1/2/94 GENERAL PURPOSE Parking Series of 1980A 7.5-9.0% $2,600,000 $2,450,000 $150,000 $150,000 $0 Corp. Purpose - 1983 7.75- 8.30% 2,180,000 1,880,000 300,000 300,000 0 Corp. Purpose - 1985 S.'Grove TIF 7.5-9 5% 4,300,000 4,000,000 300,000 75,000 225,000 Corp. Purpose - 1986 6.8 -8.8% 2,150,000 900,000 1,250,000 100,000 1,150,000 Corp. Purpose - 1988 6.1 -8.1% 2,925,000 1,300,000 1,625,000 1,625,000 0 Corp. Purpose - 1989 6.4 -6.5% 3,240,000 390,000 2,850,000 200,000 2,650,000 Corp. Purpose - 1989A 6.70- 7.05% 2,500,000 1,535,000 965,000 80,000 885,000 Corp. Purpose - 1990 6.15-6.30% 2,170,000 0 2,170,000 70,000 2,100,000 Corp. Purpose - 1991 6.1 -7.6% 4,665,000 0 4,665,000 0 4,665,000 Corp. Purpose - 1991A Refunding (1984, 1985, 1980 5.0-6.6% 5,920,000 145,000 5,775,000 90,000 5,685,000 Corp. Purpose - 1992 6.12% 20,620,000 0 20,620,000 0 20,620,000 Corp. Purpose - 1993 4.91% 4,300,000 0 4,300,000 0 4,300,000 Corp. Purpose - 1993 (Refund 1986) 4.91% 840,000 0 840,000 0 840,000 Corp. Purpose - 1993 (Refund 1989A) 4 91% 1,365,000 0 1,365,000 0 1,365,000 TOTAL $47,175,000 $2,690,000 $44,485,000 SEWER SYSTEM Sewer Purpose - 1991 6.1 - 7.6% $3,860,000 $0 $3,860,000 ' $0 $3,860,000 Sewer Purpose - 1992 6.12% 2,530,000 0 2,530,000 0 2,530,000 TOTAL $6,390,000 $0 $6,390,000 WATER SYSTEM Water Purpose - 1980 5.5- 7.0% $18,900,000 $16,400,000 $2,500,000 $1,200,000 $1,300,000 Water Purpose - 1988 6.1 -8.1% 2,025,000 0 2,025,000 0 2,025,000 Water Purpose - 1990 6.1 -6.7% 5,550,000 100,000 5,450,000 200,000 5,250,000 Water Purpose - 1991 6.1 - 7.6% 3,035,000 0 3,035,000 100,000 2,935,000 Water Purpose - 1992 • 6.12% 5,260,000 0 5,260,000 0 5,260,000 Water Purpose - 1993B (Refund of 1980) 3.99% 8280,000 0 8,280,000 0 8,280,000 TOTAL $26,550,000 $1 ,500,000 $25,050,000 NOTE: All interest payments are made on January 1 and July 1 of each ear except for the 1989A issue which is made on April 1 and October 1 " Source: Schedule of Bonded Debt, p. 134, CAFR for 1991, Official Statements for 1993 Bond Issue Debt Service Payments 1994 - 2002 7 0 3 2-- -- - —--- - --- ------ 1 -I0 -+---- -----1- -4--- +- -± - +- - --_+-_--I-- 0 r r t r r ► r i 1994 1995 1996 1997 1998 1999 2000 2001 2002 City Budget Year for Payment —�— General Purpose -- Sewer System L Water System September 6, 1994 TO: Richard B. Helwig Robert O. Ma1m James R. Novicki FROM: Clay Pearson . I SUBJECT: General Fund Revenue Enhancements / Cost Reduction Options All of our forecasts for the upcoming budgets in the five-year financial plan forecast a continuation of the operating deficits we've experienced since 1990. As we've indicated, there are no longer sufficient reserves available to subsidize these losses. Therefore, we must look at alternatives for maintaining the existing level of services. Discussion of various alternatives for making possible a balanced 1995 Budget follow. The Options Calculations were made at various selected rates and forecasted for the 1995-1999 Five-year financial plan. Pertinent assumptions have been documented as well as characteristics of these revenue sources. In addition, a survey of surrounding communities has been compiled, relying on existing surveys and our own research. The revenues looked at include: • Home Rule Sales Tax • Utility Tax • Real Estate Transfer Tax • "Local" Motor Fuel Tax The only expenditure reduction alternative with significant impact on the Budget explored at this point is imposing a user fee to recoup some or all of the cost of garbage pick-up. Revenue / Expenditure Alternatives Page 2 Revenue Option 1 - Home Rule Sales Tax Rate per 1995 1996 1997 1998 1999 1% of Sales 0.50 $1,800,000 $1,854,000 1,909,620 $1,966,909 $2,025,916 0.75 $2,700,000 $2,889,000 $3,062,340 $3,215,457 $3,376,230 1.00 $3.600,000 $3,852,000 $4,083,120 $4,287,276 $4,501,640 Definition: A tax imposed upon all person engaged in the business of selling tangible personal property, other than an item titled or registered with an agency of the State of Illinois (vehicles, boats, motorcycles, etc.), and all person engaged in the business of making sales of service. This tax also exempts the sale of food for human consumption which is to be consumed off- premises where it is sold, prescription and non- prescription medicines, drugs, medical appliances, insulin, and syringes. If this option is chosen, the City must act by October 1 for the State to begin collecting in 1995. Economic Characteristics:: The sales tax is an elastic source of revenue, expanding and contracting with the local economy. It is less volatile than the State Sales Tax since it exempts vehicle sales. Increases or decreases in sales activity and prices will impact this revenue accordingly. Distribution of Tax Burden: The distribution of this tax burden lies with the consumer. However, there is an exportation of the tax burden by importing retail shoppers in our business community. The business community passes on the tax to the consumer. The sales tax is considered more regressive than other taxes such as the income tax although the exemptions for food and medicine moderate this regressiveness. Imposition of the tax on vehicle sales is an option but the City of Elgin would have to track and follow up on the sales of automobiles ourselves. The City of Springfield is one of the few in the State that has undertaken this responsibility. Cash Flow Characteristics: The cash flow of this revenue flows with business activity, disbursements are monthly from the State of Illinois. As such, receipts for the December holiday season are high while the liability for January is anemic. Administration of Tax Collection: The cost and effort of administering this tax is nil as the State makes it a process of their normal process. Major Assumptions Used in Calculation: The revenue has been forecasted based on the experience with the existing State Sales Tax, less vehicle sales. Future years revenue assume growth of 7% in 1995, 6% in 1996, and 5% from 1997 to 1999. • • Revenue / Expenditure Alternatives Page 3 Revenue Option 2 - Utility Tax Rate 2% 3% 4% 5% Electric $1,010,000 $1,515,000 $2,020,000 $2,525,000 Gas $400,000 $600,000 $800,000 $1,000,000 Telephone $500,000 $750,000 $1,000,000 $1,250.000 Definition: A tax imposed upon persons engaged in the business of transmitting messages by means of electricity and persons engaged in the business of distributing, supplying, or selling gas and electricity for use or consumption within the corporate limits. Economic Characteristics:: The revenue can literally fluctuate with the weather for natural gas and electricity. Normally, this revenue is fairly stable since utilities are basic to our needs. Distribution of Tax Burden: Categorized revenue from each of the utility companies for 1992 billings reveals the following: Commercial Residential Industrial Comm Ed. Electricity $19,335.110 $19,145,973 small $8,973,371 large NI Gas Natural Gas $14,064,504 $6,358,592 Ameritech Telephone ? ? Cash Flow Characteristics: Controlled by ordinance. Can be billed and collected in one month and disbursed the following month for the best cash flow. Administration of Tax Collection: Negligible since the tax is passed through to the consumer by each utility company. The utility bills and collects, remitting the tax to the City. Major Assumptions Used in Calculation: Without the detail from Ameritech, a $25 million billing base is assumed, based on information from surrounding municipalities. Revenue / Expenditure Alternatives Page 4 Revenue Option 3 - Real Estate Transfer Tax Rate 1995 1996 1997 1998 1999 Change 1% to 4% $133,000 $136,990 $141,100 $145,333 $149,693 2% to 5% $266,000 $273,980 $282,199 $290,665 $299,385 Definition: A tax imposed upon the transfer of the beneficial interest in real estate within the corporate limits. Used also to insure payment of outstanding fines, liens, etc. levied by the City. Economic Characteristics: Volatile and sensitive to general economic indicators, especially interest rates. Distribution of Tax Burden: Imposed upon those selling their property. Cash Flow Characteristics: Somewhat seasonal, payment occurs before or immediately after each closing. Administration of Tax Collection: Already being incurred through the City's $3/ $1,000 sale price transfer tax adopted in 1994. Any change in the rate would not affect the administration costs. Major Assumptions Used in Calculation: 1995 Revenue using the existing rate is projected at $400,000, meaning transactions of $133 million in the city. Each $1 increase / decrease would then be worth $133,000 to the City. Each year after 1995 assumes 3% growth. • Revenue / Expenditure Alternatives Page 5 Revenue Option 4 - Local Motor Fuel Tax Cents per 1995 1996 1997 1998 1999 Gallon $0.01 $253,750 $261,363 $269,203 $277,279 $287,657 $0.02 $507,500 $522,725 $538,407 $554,559 $571,195 $0.03 $761,250 $784,088 $807,610 $831,838 $856,794 $0.04 $1,015,000 $1,045,450 $1,076,814 $1,109,118 $1,142,391 $0.05 $1,268,750 $1,306,812 $1,346,017 $1,386,397 $1,427,989 Definition: A tax imposed upon the purchase of motor fuel at retail within the City. Economic Characteristics: This source of revenue is relatively inelastic since it is reliant on the number of gas stations operating within the City. Gas taxes at a rate structure of "x" cents per gallon are insensitive to price given that most motorists will not drive the extra miles to purchase gasoline in search of a small savings. More fuel efficient vehicles keep this source to relatively small growth. Distribution of Tax Burden: Most of the tax would be borne by the residential community. Most businesses that consume large quantities of fuel purchase at wholesale. There are naturally sales to those who fill up while traversing through the City. Cash Flow Characteristics: Good cash flow on a monthly basis. Administration of Tax Collection: Although the tax would have to be administered by the City, the effort and cost associated would be relatively small for the monthly administration. Major Assumptions Used in Calculation: Presently there are approximately 29 retail gas stations in the City. Assuming the industry standard of 875,000 average gallons sold per year per retailer, this would assume 25,375,000 gallons per year sold within the City. Each year after 1995 assumes 3% growth, based on increasing fuel efficiency of automobiles. • Revenue / Expenditure Alternatives Page 6 Revenue Option 5 - Real Estate Property Tax Levy 1995 1996 1997 1998 1999 increase for each rate increment 0.01 $103,869 $112,438 $121,433 $130,844 $140,657 0.05 $519,344 $562,190 $607,166 $654,221 $703,287 0.10 $1,038,689 $1,124,381 $1,214,331 $1,308,442 $1,406,575 Definition: A tax levy imposed upon all real estate subject to taxation within the corporate limits according to the value of property. Economic Characteristics: The City continues to experience high growth from both in-fill development and newly annexed land which is developed. Distribution of Tax Burden: Records show on the Kane County side of Elgin. 71% of the City's Assessed Valuation is in Residential, while only 28% came from commercial and industrial uses. The balance 1% was rural and railroad uses. Cash Flow Characteristics: Poor cash flow from the Property Tax as payments are passed through from each county in bulk payments late in the year. Administration of Tax Collection: No additional administrative cost to the City from changing the rate. Major Assumptions Used in Calculation: Assumptions above are based on Assessed valuations of: Assessed 1995 • 1996 1997 1998 1999 Valuation Kane Portion $805,607.036 $872.069.617 $941.835.186 81.014.827,413 $1,090,939,469 Cook Portion $204.534.554 $216.806.627 $227.646.958 $239.029.306 $248.590.478 Total City A.V. $1.010.141.590 $1.088.876.244 $1,169.482.144 81.253,856.719 $1,339,529.478 Change from + 7.59% + 7.79% + 7.40% + 7.21% + 6.83% Prey. Revenue / Expenditure Alternatives Page 7 Expenditure Option 1 - Garbage User Fee Definition: A user fee is possible for all or a portion of the waste hauling and recycling program. Economic Characteristics: The cost to City of program in 1994 is $2.750 million. Distribution of Burden: The burden of this user fee would rest entirely with residential users as commercial establishments already pay for their own waste hauling. Of course, the nature of a user fee is that those receiving the benefit should pay for some portion of the service being provided. Cash Flow Characteristics: Payments to the waste hauler are currently fairly consistent on a monthly basis. Administration of Collection: No additional administrative cost to the City as an agreement with the waste hauler would be negotiated for their billing of customers. September 2, 1994 TO: Richard B. Helwig Robert O. Malm James R. Nowicki FROM: Clay Pearson SUBJECT: South Grove TIF Fund Obligations Before beginning a discussion of use of gaming proceeds, a recap of the South Grove TIF District Fund (#260) obligations is in order. An accounting of debts owed by the South Grove TIF District to other funds follows: South Grove TIF Fund Obligations 1) $2,850,489 To General Fund -- Debt Service payments on TIF District prior to 1/1/94 2) 277,118 To General Fund -- 1/1/94 Debt Service Payments 3) 280,000 To General Fund -- 2nd 1994 Debt Service Payment Est. 4) 150,521 To Motor Fuel Tax Fund 5) 479,502 To Risk Management -- Loans for clean-up 6) 225,000 To Risk Management -- Newly authorized loan for environmental clean-up 7) 127,000 To 1992 GO Bond Fund -- Acquisition of Property in TIF District $4,389,630 TOTAL Please note the subject TIF Fund owes the General Fund $3,407,607 of the total. Also, the above does not include future obligations for the completion of environmental remediation/ site work. Remaining debt service on the TIF Bonds (issued for $4.3 million in 1985) goes through 199 • • E1 ' in Memorandum August 4 , 1994 zl ,d TO: Richard B. Helwig, City Manager FROM: James R. Nowicki, Finance Directo /v SUBJECT: Home Rule Sales Tax Pursuant to your request I have reviewed the sales tax informa- tion that was discussed during the 1994 budget hearings , as well as additional pertinent information relative to the home rule sales tax. Please find below a summary of that information. CURRENT SALES TAX BREAKDOWNS Kane County ( % ) Cook County ( % ) State 5 5 City 1 1 County 1/4 1* RTA 1/4 3/4 Total 6 1/2 7 3/4 * 1/4% given to RTA Home Rule Sales Tax 1) May be imposed by Home Rule municipalities in increments of 1/4% . The rates currently vary between 1/4% and 1 1/4% . 2) The tax increase must be approved by City Council and received by Illinois Department of Revenue by October 1 , 1994, for implementation on January 1, 1995. 3) The State collects from the taxpayer and remits to the local jurisdictins . No city involvement is necessary in the process and essentially works exactly the same as the current remittance process . 4) Only general merchandise (no food & drugs ) is subject to the tax with the exception of licensed, registered or • titled property eg: automobiles , motorcycles , motorhomes, trailers, boats . However, the state permits the taxing of licensed, registered or titled property, but leaves it up to the local governmental to adminis- ter/collect the tax. Only three municipalities to my knowl- edge have decided to administer the home rule sales tax option in licensed, registered, and titled property. 5) Projected annual income for each 1/4% is estimated to be $ . 9 million. 6 ) Attached please find an inclusive list of home rule units of government that impose a home rule sales tax. If you have any questions please give me a call . . - 1 Lel '12._ -7-1-i 1 1.0.1 1 =1 Sales Tax Rates in Home Rule Units of Local Government The following Chart outlines the sales tax rates for general merchandise effective January 1, 1994,for Bach of the horn' rule • • units in t*nois that impose sales tax. You will find the combined rate preprinted on your Forms ST-1 and ST-2 for each reporting period. Municipalities that have newsy imposed home rule sales tax (effective January 1, 1994) are identified as 'N•w•' Home Rule Home Rule ST-1/ST-2 Sales Tax Rale Sales Tax Combined Rate Effective 1/1/94 Rate Change Effective 111/94 Alton 0.5% No change 7% Arlington Heights 0.25% No change 8% -K. Aurora (Du Page County) 0.5% No change 7% • -X Aurora (Kane County) 0.5% No change 7% Belleville 025% No change 6.75% Bloomington 0.5% No change 6.75% Bolingbrook (Du Page County) 1% +0.75% 7.5% Bolingbrook(Will County) 1% +075% 7.5% 4- Buffalo Grove (Cook County) 0.5% No change 825% -) Buffalo Grove (Lake County) 0.5% No change 7% Burnham 1% No change 8.75% ' Calumet City 0.5% No change 825% Carbondale 0.75% No change 7% Champaign 1% No change 7.25% Channahon 1% +1% 7.5% (New) Chicago (Cook County) 1% No change 8.75% Chicago (Du Page County) 1% No change 7.5% - Cioero ' 1% No change 8.75% Danville 1% No change 7.25% . Decatur 1% No change 7.25% De Kalb 0.75% No change 7% • Das Plaines 0.5% +0.5% 8.25% (New) Dolton 0.5% • *0.5% 825% (New) East Hazel Crest 0.5% No change 8.25% East St Louis 1% • No change 7.5% Elk Grove Village(Cook County) 0.5% No change 125% ICElk Grove Village (Du Page County)0.5% No change 7% Elmhurst 025% No change 7% &wood Park • 1% No change 8.75% Evanston 025% +025% 11% (New) • Fairview Heights 0.25% 10.25% 8.75% (New) . Galesburg 0.76% No change 7% Granite City • z% No change 7.5% Home Rule Home Rule ST-1/ST-2 Sales Tax Rate Sales Tax Combined Rate Effective-1/1/94 Rate Change Effective 1/1/94 -_ • 4 Hoffman Estates 0.5% No change 825% Joliet 1.25% No change 7.75% Moline 0.5% • No change 6.75% Morton Grove 0.5% No change 8.25% - Mount Prospect 025% No change 8% Mount Vernon 0.75% No change 7% Niles 0.5% No change 8.25% Normal 0.6% No change 6.75% . Nomdge 1% No change 8.75% * Palatine 0.5% No change 825% Pekin (Peoria County) 1% +1%. 7.25% (New) Peidn (Tazewell County) 1% +1% 725% (New) Peoria . 1% No change 7.25% Peoria Heights 0.5% No change 6.75% Quincy 0.75% No change 7% Rock Island • 0.5% No change 6.75% Rolling Meadows 0.25% No change 8% Rosemont 125% +0.25% 9% Sauget 0.5% +0.5% 7% (New) Schaumburg (Cook County) 0.5% No change 825% lit Schaumburg (Du Page County) 0.5% No change 7% - Sesser 1% No change 7.25% Slookie 0.75% . No change 8.5% + South Barrington 1% +1% 8.75% (New) • Springfield 1% No change 7.25% Stone Park . 1% No change 8.75% - Streamwood 0.5% No change 8.25% Urbana 1% No change 7.25% Watseka - 0.75% .o.75% 7% (New) - west Dundee 0.5% No change 7% Wheeling(Cook County) 025% .025% e% . .'deW) wheeling (Lake county) 025% +025% 8.75% (New) Cook County (Countywide) 0.75% No change • —AtEx+5Fv2S or THE f/ocTK6✓E5r A'lc(, 44.- co�fc`Rhvc- ANt110 41T/GS` • Cook County imposes a 0.75%county home rule sales tax.For unincorporated areas in Cook County,the ST•1/ST-2 combined rate remains at 7.75 6. For horns NI* municipaittles within Cook County that impose home rule sales tax,the ST-1/ST-2 combined rate varies (see the entries for each municipality.) S(M i L/}g- /N S i 2 E oil Act:A R/ 41 c- Pi40,o _ i rst. JU.._;E4'" ,0(/7. 1i1I1 Iia" �.7 i�lRM75: ' 1.."1^' Rii`.*.r7"�.ir�.. 1:1 !. *';` ,:iii J'.•::e•+:.4. ':"�;: .J.i:ur+: :riR't1:t v4-.7:7 . a -. ':G September 6, 1994 TO: Richard B. Helwig Robert O. Malm James R. Nowicki FROM: Clay Pearson SUBJECT: Proposed Use of Fourth Quarter 1994 Gaming Receipts, Initial plan for use of future Gaming Revenues We can anticipate approximately $3 million in unbudgeted, unrestricted 1994 revenue with an October 15 riverboat opening. This estimate is based on the City's share of admissions tax ($1/ticket) and gaming taxes. The operation is expected to enjoy heavy grand opening traffic in its first months. The revenue due the City for fourth quarter will be disbursed by the State of Illinois in January, 1995. A separate fund needs to be established for these revenues and subsequent expenses. Please accept the following outline of use of riverboat proceeds as a draft for discussion purposes. This outline, however, is in keeping with City Council direction to this point and achieves many of the financial goals we have disucssed. Use of 4th Quarter 1994 Gaming Receipts Use of the $3 million is proposed as follows, this outline is meant as a draft for discussion purposes. Use of 4th Quarter 1994 Gaming Revenue 1) $1,000,000 Repayment of Working Cash Fund 2) 240,000 Payment to Equipment Replacement Fund 3) 100,000 EACVB Start-up 4) 200,000 Six Additional Police Officers 5) 704,500* Repayment. to Risk Management 6) 150,520* Repayment to MFT Fund 7) 604,980* Repayment to General Fund $3,000,000 TOTAL * = Repayments or partial repayments from the South Grove TIF District Fund (#260) • Use of Gaming Revenues Page 2 Explanation of items follows: 1) The City borrowed $1 million from its own Working Cash Fund to help balance its 1994 General Fund Budget. By state statute, this money must be repaid within twelve months. If it is not repaid here with gaming revenues, it will have to be repaid with general tax dollars in 1995. Repaying it with First Quarter Gaming Revenues reduces the projected 1995 operating deficit by $1 million. 2) The Equipment Replacement Fund, which buys vehicles, computers, and telephones, has been brought to an extremely low balance ($492,620 Unencumbered Cash on 1/1/94) due to the fiscal problems of the funds which rent equipment. Therefore, many capital equipment replacements and additions have been deferred. The Public Works Department continues to provide snow removal services for a growing city without any additional or newer equipment. It is proposed to purchase two additional trucks which can be used for snow plow operations. The low bidder for a replacement truck earlier in the year has agreed to keep the same prices through September 29, 1994. Delivery of the trucks would be made by December 31, 1994. 3) Costs associated with the start-up of staffing the space of a Welcome Center at the Elgin Riverboat Resort Pavilion. 4) In order to provide the full six additional ROPE and patrol officers with the $350,000 from the Elgin Riverboat Resort Development Agreement, there will be additional costs for equipment and housing. 5) Repayment of loans made by Risk Management Fund to the South Grove TIF District Fund. 6) The MFT Fund completed some road improvements within the TIF District in 1988. 7) Partial payment of the $3,407,607 owed by the South Grove TIF District Fund to the General Fund. • Use of Gaming Revenues Page 3 Use of 1995 Gaming Revenue In 1995 Gaming revenues are estimated at $10 million. Estimates have ranged between $8 and $12 million but a midpoint estimate is used because of the lack of history from an Elgin operation, mixed recent results from other gaming operations in the state, the uncertainty about the saturation point for riverboat or any gaming. Copy of the minutes from the July 6, 1993 City Council Committee of the Whole meeting are attached for your reference. This meeting was held prior to the awarding of the Riverboat License Use of 1995 Gaming Revenue 1) $1,800,000 Property Acquisition 2) 200,000 Demolition of Acquired Property 3) 2,000,000 Repay't from S. Grove TIF Fund to General Fund 4) 2,700,000 Law Enforcement Facility Construction 5) 100,000 Tourism Promotion 6) 3,200,000 Capital Improvements $10,000,000 TOTAL Use of Gaming Revenues During Remainder of Financial Plan During the remaining period of the five-year Financial Plan (1995-1999), use of gaming revenue is designated for broad categories. Future Years' Gaming Revenue Use 1996 1997 1998 1999 1) Repay S. Grove Debt to GF 802,627 0 0 0 2) To Equipment Replacement 250,000 500,000 0 0 3) To Risk Management 1,000,000 0 0 0 4) To GF Cash Balance 1,000,000 2,000,000 1,000,000 2,000,000 5) Communications Center 2,500,000 2,500,000 0 0 6) Capital Improvements 3,547,3 73 4,097,500 8,100,000 7,100,000 7) Tourism Promotion 200,000 200,000 200,000 200,000 8) Arts 200,000 200,000 200,000 200,000 9) Social Service Grants 500,000 500,000 500,000 500,000 TOTAL $10,000,000 $10,000,000 $10,000,000 $10,000,000 1) The projected final reimbursement for the South Grove TIF District's debts to date for the General Fund. As of 1/2/94 the original 1985 TIF Debt Issue had $225,000 outstanding. In addition, beginning in the 1995 Budget, the 1991A Refunding issue has $6 million remaining in debt service through 2004 attributable to the TIF District. These bonds are not callable until 2002. Use of Gaming Revenues Page 4 2) Payments to recoup some of the reductions from the 1994 Budget. 3) To begin establishing an improved cash balance in the Risk Management Fund. 4) To begin establishing an improved cash balance in the General Fund. 5) Purchase of necessary city-wide communications system hardware. 6) Annual capital improvements program. Note that currently the City undertakes almost $3 million in neighborhood street rehabilitation alone. 7) Support for efforts to capitalize on visitors drawn to the city from the riverboat gaming operation. 8) Support for the arts. 9) Grants, likely administered through a third party such as the United Way to receive proposals. Includes gambling counseling. Impact on General Fund The proposed uses of gaming revenues will also relieve the General Fund from having to repay the $1 million to the Working Cash Fund, making balancing the 1995 Budget a much simpler proposition. The steps described above, use of 1994 and 1995 Gaming Revenues, will constitute transfers to the General Fund in the amount of $2,604,980. Given the current projections for the financial plan (which include a deficit budget)., the following table illustrates Unencumbered Cash over the life of the plan: (All amounts in 1.000s of dollars) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 U.C. on Jan. 1 $4,862 $4,897 $3,381 $1,811 $1,017 $1,405 $1,685 $1,730 $2,932 $3,793 Total Expend. $27,171 $29,912 $31,860 $33,238 $35,282 $37,958 $38,336 $40,252 $42,263 $44,374 U.C.as%of Total Expend 17.9% 16.4% 10.6% 5.4% 2.9% 3.7% 4.4% 4.3% 6.9% 8.5% Not included above are any transfers to fund balance from the General Fund due to new revenue sources such as the local sales tax. 8M The summary provides a benchmark comparison of Unencumbered Cash as a % of Total 6M Expenditures. Many measures of Unencumbered Cash call for reserves of at least six to ten weeks 4M (11.5% to 19.2%) of expenditures. This benchmark depends greatly on the local situation, 2M particularly the City's dependence on revenues subject to wide variations in the economy such as UNENCUMBERED CASH sales tax, building permits, and riverboat monies. 1990 Actual to 1999 Estimated The table above shows how a Unencumbered Cash can be replenished over the life of the financial plan. Use of Gaming Revenues Page 5 ATTACHMENT A City Council Discussion on Allocation of Riverboat Proceeds - July 6, 1993 • COMMITTEE OF THE WHOLE SPECIAL MEETING JULY 6, 1993 The special Committee of the Whole meeting was called to order by Mayor VanDeVoorde at 5:05 p.m. in the Council Conference Room. Present: Councilmembers Fox, Gilliam, Popple, Schock, Walters, Yearman, and Mayor VanDeVoorde. Absent: None. Continued Discussion on Allocation of Riverboat Proceeds Various proposals for distribution of the proceeds from riverboat gaming if the City receives a license were discussed by the Council. Mayor VanDeVoorde again emphasized that the legislative intent of the riverboat gaming act was to assist economic development and promote tourism. Councilman Gilliam rade a motion, seconded by Councilwoman Yearman, to approve the Mayor's proposal for distribution of the gaming receipts, to develop the proposal, and to present it to the Illinois Gaming Commission. Essentially, the proposal is as follows : Profits for the first six months to one year would be used to pay off the TIF bond and reimburse the City for its TIF debt. Thereafter, for the next two years (the balance of the State license) , 70 percent of the proceeds would include an allocation to the Elgin Area Convention and Visitors Bureau and be used to implement the Center City Plan. Some of the proposed projects include new police communications and CAD, reopening Grove Avenue, constructing the esplanade, improve Center City lighting, Walton Island improvements, develop an economic package to retain and attract merchants, construct a recreational center, riverfront acquisition to develop new park north of Kimball Street, etc. Distribution of the remaining 30 -percent is to be determined later. Teas: Councilmembers Fox, Gilliam, Popple, Schock, Walters, Tearman, and Mayor VanDeVoorde. Nays: None. Adlournsent Councilman Walters sada a motion, seconded by Councilwoman Tearman, to go into executive session for the purpose of discussing appointments to boards and commissions and personnel appointment, dismissal, and employment. Yeas : Councilmembers Fox, Gilliam, Popple, Schock, Walters, Tearman, and Mayor Use of Gaming Revenues Page 6 ATTACHMENT B ELGIN LAW ENFORCEMENT FACILITY ESTIMATED COSTS AND MEANS OF FINANCING EXPENSES Construction $12,989,261 Architect 953,892 Furnishings # 1,000,000 Other services 206,720 Construction Contingency 649,463 TOTAL $15,799,336 # - Does not include communications equipment MEANS OF FINANCING 1992 G.O. Bond Fund for Architect $914,454 1992 G.O. Bond Fund for Construction Manager 696,205 1992 G.O. Bond Fund for construction (estimated) 5,000,000 SUBTOTAL $6,610,659 Late 1994 G.O. Bond Issue 6,500,000 1995 Gaming Revenues 2,690,000 TOTAL $15,800,659